New reports have fuelled speculation that failing social network MySpace will be sold off by News Corp within the next few months, while hundreds of job cuts are also expected to be announced as the company struggles to recover from plummeting traffic figures.
Recent figures from ComScore show MySpace unique visitors dropped by 26.4% from 110.8 million in September 2009 to 81.5 million by November 2010, while traffic in Britain fell from 5.1 million to 2.3 million uniques over the same period.
If the layoffs occur and a sale goes ahead, it would represent one of the most disappointing business deals of the past few years – News Corp paid over $US500 million for the site back in 2005.
New reports from publications including All Things Digital have published separate reports indicating at least half the company’s 1,100 staff may be laid off by the end of the month, although no final decision has been made.
MySpace has already made huge layoffs, dropping 30% of its workforce last year, along with international employees.
These reports follow a separate claim from CNBC that News Corp wants to lay off workers with the intention of selling off the company by the end of the year.
It is understood that News Corp is looking to make “drastic cost-cutting measures” due to the site’s falling traffic and subsequent drops in advertising revenue, inadvertently admitting the recent redesign has been a failure.
But the Wall Street Journal has reported that although selling the company is a possibility, no deals have been made just yet.
While the site still counts about 60 million users, this is a far cry from the several hundred million it had during its heyday back in 2007-08. Facebook has since taken the dominant market position, with a member base of over 500 million.
Analysts say MySpace’s failure is mainly due to its inability to develop new services, along with its youth-oriented focus – Facebook initially targeted young adults but has expanded into other demographics.
The WSJ has also reported that in the quarter ending September 30, Fox Interactive, (the division under which MySpace is based), reported an operating loss of $156 million mostly due to the site’s poor performance. Advertising revenues have also fallen by $US70 million over the year to that date.
It has been well known that News Corp was aware of MySpace’s failures, with chief operating officer Chase Carey telling investors on a conference call last November that the site had “quarters” rather than years in order to turn itself around.
This speculation comes although MySpace launched a redesign six weeks ago that was designed to bring more users back with a renewed focus on entertainment. The site has always been seen as a breeding ground for independent music artists, and the company wanted to focus more on sharing and viewing videos and music files.
But so far that strategy hasn’t worked, with traffic numbers remaining thin. The company even announced a method for users to integrate their accounts with Facebook, realising the site’s popularity was waning.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
