Bidders Gather For Sale Of Ailing MySpace

News Corporation owned by media mogul Rupert Murdoch, is divesting itself of the troubled social network site MySpace. The site cost the organisation $580 million (£347m) in 2005 but is only expected to realise $100 million (£60m) in the sale.

MySpace first appeared in 2003 and, by the time Facebook (known as thefacebook.com) launched the following year, it already had a million members. By the end of 2004 Facebook reached the million mark but MySpace had rocketed to five million members.

MySpace Lead Eroded By Facebook

When Facebook reached the five million milestone, it trailed MySpace, which had been acquired by News Corp (July 2005), by over 15 million users . It took Facebook another two years to reach this density of users, by which time MySpace was claiming 100 million unique visitors per month. Visitor rate is a more accurate measure of a sites popularity as user numbers usually include dead and duplicated pages which may never be visited.

It seemed as though MySpace had reached saturation because Facebook made up ground rapidly and overtook MySpace in popularity in April 2008. This started a major development programme by News Corp which started to pile in features to make music more accessible and to allow customisation of its pages.

Rather than popularise the social network, the extra features started to slow down page access speeds and, gradually, people began to leave MySpace and switch to Facebook.

Since 2008, Facebook has surpassed 500 million members, comScore reporting 648 million unique visitors in November 2010, but MySpace has remained pinned around the 125 million mark. According to comScore, this is eroding fast and the unique visitor rate has decreased in the past year to around 60,000 last February.

Layoffs Decimate Workforce

The dramatic drop was partly due to a perception that the site was dying, following a staff reduction in April 2010 which reduced the employee numbers by 30 percent to around 1,000. Also, In January this year a further cut of 47 percent started talk of trimming down the organisation for the imminent sale of MySpace.

News Corp has tried to put a positive spin on some alarming figures, despite MySpace still being the second most popular social networking site. The social network is not in the best of health whichever way the figures are diced. Revenue for this year is expected to be $109 million (£65m) but expenses are estimated at $274 million (£164m).

According to web analytics service Quantcast figures, MySpace unique visitor totals have been dropping by an estimated 12 percent per month throughout the last year which is diluting its attraction as its advertising reach is reduced.

Facebook is now visited by 38 percent of global internet users (590 million unique visitors), making it the second most popular site behind Google, whereas MySpace reaches 2.2 percent (34 million), according to Google’s DoubleClick Ad Planner.

Desirable Property In Need Of Improvement

Investors have been informed by News Corp that revenues are expected to rise to $139 million (£83m) by 2015. However, before this rise will come a fall to $84 million (£50m) next year, News Corp has said. MySpace will offset that with an expected drop in expenditure to $69 million (£41m) which would make the site profitable.

The high expenditure predicted for this year follows layoffs of around 500 staff last January. The layoffs followed an unsuccessful repositioning of MySpace as a music and movies entertainment site in November 2010.

There are several companies rumoured to be looking to bid for MySpace. These include a group led by MySpace co-founder Chris De Wolfe, Redscout Ventures, Thomas H Lee Partners, Criterion Capital Partners (owners of the social networking site Bebo), and Chinese Internet holding company Tencent.

This will ensure a healthy auction because MySpace has everything to gain and virtually nothing to lose – but whether News Corp’s hoped-for price will be realised remains to be seen.