Turmoil at MySpace blamed on News Corporation
Days after MySpace, the struggling social network site, replaced its chief executive, a leading media pundit has said that interference from its owner, Rupert Murdoch, has left the business in a state of “total desperation”.
Last week the site, which was bought by Murdoch’s News Corporation in 2005, made the shock announcement that Owen Van Natta was stepping down as chief executive after less than a year in the job.
Since then, reports have suggested that his departure was the result of tension between Van Natta and Jonathan Miller, the former chief executive of AOL who now operates as the head of News Corp’s digital businesses.
But Michael Wolff, author of The Man Who Owns the News, a biography of Murdoch, said that the roots of MySpace’s problems were much deeper. “It certainly is not [Van Natta’s] fault—he inherited a business in which you could only manage decline,” he said.
Instead, he suggested, the reshuffle is indicative of a wider panic over the way in which News Corp deals with its online businesses.
“The thing that’s going on at News Corp right now is total, total desperation over this digital stuff,” he added.
“Rupert is saying, ‘What’s going on with MySpace? What’s happening? Why isn’t this working?’ It’s impossible to explain to him that it’s not working because it’s over, because this is the way the technology business goes.
Once it’s past, it’s really past. There is almost no way to get that back.”
Five years ago, Murdoch surprised the media industry by spending $580-million on MySpace, at that time an up-and-coming force in the rapidly expanding business of social networking. With the acquisition, News Corp believed it had acquired a significant lead in online media through a site that boasted a huge following and good relations with the music industry.
While the site has generated plenty of cash for News Corp—at one point, advertising on the home page alone was valued at $1-million a day—a series of missteps has left it in turmoil, struggling for success and flailing in the wake of its rivals.
Competition has chiefly come from Facebook, which first overtook MySpace in popularity last summer and has gone on to significantly extend its lead since then.
Figures from comScore, the internet traffic analysts, suggest that MySpace has about 57-million users in the US, down from a peak of more than 75-million. Facebook, meanwhile, has experienced incredible expansion in the past 18 months and now boasts more than 400-million users worldwide.
Shift of powerWhile that shift of power has left the site looking like second-best, it has had other, material implications: last year Google chopped the value of a contract with MySpace to provide search services by $100-million after the social network missed its traffic targets.
Faced with this growing litany of problems, Murdoch brought in Miller, who left AOL in 2006, to oversee MySpace and News Corp’s other digital businesses. Once installed, Miller acted quickly, first removing the website’s co-founder Chris DeWolfe as chief executive, then bringing in Van Natta—a former Facebook executive—to refocus the business.
With a new executive team in place, the company sold off a number of smaller properties that it had acquired and slashed more than 700 jobs worldwide, nearly half its total workforce.
One person familiar with Miller’s approach is Jason Calacanis, who sold his online publishing company to AOL in 2005. He says that, under the circumstances, bringing in a new chief executive with a reputation for deal-making was a mistake, but that the company could still rebound.
“Jon is a really great manager of product people, and the people MySpace needs right now are product people,” Calacanis said.
“It was probably, in hindsight, a misstep to put a deal person into a company that needs product leadership. But they took quick action to reverse that, which I give them credit for.”
However, history is not on the side of MySpace. Social networking has been a graveyard for the media industry, with users happy to leave behind sites that fail to continue innovating, in favour of younger, faster rivals. Friends Reunited, bought by ITV in 2005 for £120-million, was sold off last year for a mere £25-million, while AOL is said to be looking to offload Bebo, which it bought for $850-million in 2008.
Faced with struggles across News Corp’s digital businesses, Murdoch and his lieutenants have begun taking an aggressive approach, calling for news sites to charge readers for content and labelling Google a “parasite”. He aims to put his newspapers, including the Times and the Sun, behind a paywall, something described by the co-founder of Twitter, Biz Stone, as a vain attempt to “put the genie back in the bottle”.
Wolff said that this was a result of Murdoch’s fundamental misunderstanding of the differences between the technology and media industries. While the 78-year-old mogul craves leadership in the digital world, Wolff suggested that a career spent building traditional media businesses has left Murdoch struggling to understand the speed and innovation required on the internet.
“He absolutely has no idea,” he said. “If people really quite understood how little feeling he has for this business, they would fall down laughing—or crying.” - guardian.co.uk