The advertising contract began in 2006 after News Corp. chose Google’s offer over Microsoft’s and Yahoo’s. Google agreed to make payments to News Corp. that would total $900 million for the right to sell advertising space on MySpace as well as other websites owned by the corporation. At that time, MySpace was an Internet sensation. Such is not the case now, however, and that means that the next advertising deal will likely be for much less than the current one. There were several benchmarks set in the Google contract for things such as web traffic that MySpace has failed to reach, making the site now seem less attractive and profitable than it once was.
MySpace is not only experiencing trouble with decreasing traffic numbers and the prospects of a less lucrative advertising deal. In the past few months, former CEO Owen Van Natta was forced out after just ten months on the job, and Co-President Jason Hirschorn has also left the company. Thirty percent of the MySpace’s workforce has also been let go. To add insult to injury, News Corp. took a $450 million hit last year due to MySpace’s decreasing popularity, along with some of the company’s other struggling websites.
The main reason for MySpace’s current slump is the growing popularity of its social networking competitor, Facebook. According to comScore Inc., a market research company, MySpace’s traffic in May 2010 was down 13 percent when compared to the previous year. Facebook, meanwhile, saw an increase in traffic of 74 percent, with 548 million unique visitors around the globe. MySpace had just 109 million unique visitors. Many analysts blame MySpace for not running with Facebook and finding ways to make the site better and more innovative in terms of features and design. MySpace refuses to go down without swinging, however, and is currently in a renovation stage.
At the heart of the MySpace renovation is a demographic focus on users between the ages of 13 and 34. MySpace has usually been seen as a social networking site for the younger crowd, and they hope they can capitalize on that niche. In addition to the focus on the younger demographic, MySpace hopes to capitalize on complaints by many that Facebook lacks sufficient privacy features. They also vow to make the site a place for entertainers such as musicians and other artists by giving them ways to interact with fans and receive feedback.
Although it should be interesting to see what changes are instituted on MySpace, it is highly questionable whether the site can regain its status once again. Facebook is the hot item right now, and other sites like Twitter are taking pieces of the pie that once belonged to MySpace. Add in smaller advertising revenue from the upcoming contract with Google, Microsoft, or Yahoo, and MySpace has quite a lot of climbing to do to get back to the top.
For more on this, visit the Wall Street Journal article.