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MySpace: Time To Show Us The Money

MySpace has taken the world by storm.  With more than 70 million registered users, huge pageview and traffic growth, and ubiquitous and usually gushing PR, the company is now tipped as the vanguard in a new Internet portal revolution.  The company’s success has also restored Rupert’s status as a brilliant visionary, one who saw its promise early and picked it up for a song.

And, yes, the company’s growth is amazing.  But so, it seems worth observing, was the early growth of user-driven companies like Geocities and Tripod, neither of which proved to be particularly good businesses.  So with the MySpace hype-cup overflowing, it seems worth taking a peek at where MySpace stands as a business (as opposed to a cultural phenomenon), and where it might eventually go.

On the first score, based on Newscorp’s recent 10Q, we can first note that MySpace is so irrelevant to the financial performance of the larger entity that it doesn’t even merit describing.  In the MD&A, the company describes in detail the performance of each of its other businesses, including its small book business, but it doesn’t so much as mention MySpace.

Judging from the year over year comparisons in the “Other” category, in which MySpace and the rest of Fox Interactive Media have been unceremoniously dumped, we can assume that the company might have contributed somewhere up to $100 million in revenue in the last quarter ($400 million run-rate), while losing up to about $50 million.  Although these revenue numbers are not tiny, they pale in comparison to those of Yahoo, Google, and other Internet leaders.  Unlike the revenue at the other Internet leaders, moreover, they appear to come with significant losses, suggesting that the MySpace business model is nowhere near as leverageable as those of its larger brethren.  Geocities and Tripod, if memory serves, had a similar problem.

These estimates are imprecise, and MySpace’s staggering traffic growth has obviously far outpaced its ability to monetize itself.  The company has been a part of News for more than six months now, however, so it the profitable-monetization engine is ever going to really kick in, it ought to kick in soon.  If it doesn’t, and if News Corp. doesn’t provide more insight into the company’s business model, it will probably be prudent to conclude that, in MySpace’s case, as with some of the first-generation user-generated sites, traffic should not necessarily be viewed as a good proxy for business value.  The MySpace revolution, in other words, may not, in fact, revolutionize News Corp.’s bottom line.


An excellent story from Julia Angwin at the WSJ on MySpace’s push to create “safe” areas that mainstream advertisers can embrace without appearing to subsidize teen pornsters.  Although this sounds like a promising move, Julia points out at the end of the piece that users have yet to really embrace the new areas, preferring to remain in the user-generated jungle that scares the bejesus out of Disney, et al.  The site’s tremendous audience no doubt creates numerous monetization opportunities that don’t include traditional advertising (data-gathering, for one).  Again, however, it remains to be seen how large and profitable these will be.

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