MySpace slashes workforce as users flock to Facebook

MySpace, the networking site that helped launch the careers of Lily Allen and Arctic Monkeys, said today it would cut two-thirds of its workforce outside the United Statew, in a stark reminder of how quickly internet phenomenons can burn out.

The company is cutting 300 jobs from a workforce of 450 and closing at least four offices. The retrenchment also illustrates how media bosses, apart from a fortunate few, are still struggling with the conundrum of how to make money from the internet, even when a site has millions of users.

The job losses follow an announcement from MySpace last week that it would cut about 420 jobs inside the US, about 30% of the workforce in its domestic and most successful market.

Analysts blamed the decline of MySpace on the inexorable rise of the rival social networking site Facebook, as well as the broader difficulty in attracting advertising online, a situation made worse by the global recession.

While MySpace had been successful among younger users, Facebook has proven adept at attracting a wider audience spanning demographic groups.

The rise and fall of MySpace delivers a blow to Rupert Murdoch, the News Corporation chief, who bought the business for $580-million in 2005 in an apparent Damascene conversion to the internet, buying a clutch of other sites around the time.

MySpace has 127-million users around the world and built a reputation for being a showcase for new music and a springboard for careers. But recent data has shown that it has gone into decline. The metrics firm comScore shows that Facebook overtook MySpace in Britain by number of users early last year and has continued to move ahead.

According to comScore, MySpace’s unique users in this country fell by 18%, from 8,5-million in April 2008 to seven million just a year later. Facebook during the same period has seen growth of 63% and as of April had 23,5-million unique users in Britain and 200-million worldwide, according to the company. The influential Silicon Valley blog Techcrunch recently said it was “game over” for MySpace.

Murdoch’s online nemesis, Mark Zuckerberg, is still only 25, and founded Facebook from his Harvard dorm room in 2004. Twitter, the latest online craze, has expanded rapidly from a low base and has about 2,5-million unique users a month in Britain. In April, in a sign that all was not well at MySpace, News Corp replaced the chief executive, Chris DeWolfe, who had been with the site since the beginning.

A month later, Facebook overtook MySpace as the leading site in the US.

In a statement on Wednesday News Corp said it was “refining” its international MySpace business, focusing on offices in London, Berlin and Sydney.

“It was clear that internationally, just as in the US, MySpace’s staffing had become too big and cumbersome to be sustainable in current market conditions,” said the chief executive, Owen Van Natta, who replaced DeWolfe.

MySpace is facing the possibility of a plunge in revenue. Shortly after buying MySpace, Murdoch did a deal with Google to sell advertising on the site that would guarantee $900-million in advertising revenue over three and a half years, provided certain targets were met. But that deal comes to an end in June next year and is unlikely to be replaced by anything remotely as generous.

MySpace is not the only social networking site to have suffered a decline. Bebo, bought by AOL in March 2008 for $850-million, is also suffering. The site, which is more commonly used by school-age children, lost 24% of its unique users in the year to April, falling to nine million. Friends Re­united, bought by ITV for £120-million less than four years ago, was recently valued at just £20-million and has 1,8-million users, a decline year-on-year of 24%.



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