Rupert Murdoch’s News Corporation acquired Myspace in July 2005 for $580 million. Myspace was the largest social networking site in the world at the time and by June 2006 it had overtaken Google as the most visited website in the United States. At its peak in 2007, Myspace was valued at $12 billion but by April 2008 it had been overtaken by Facebook in unique worldwide user numbers and was sold in June 2011 for a relatively paltry $35 million.
Myspace initially became popular within the teenage and young adult demographic. In February 2005 the then CEO Chris DeWolfe held talks with Mark Zuckerberg over acquiring Facebook, but DeWolfe rejected Zuckerberg’s $75 million asking price.
News Corps then purchased Myspace in one of its first major internet acquisitions. The company had beaten Viacom to the deal by offering a higher price and the purchase was generally seen as a good investment at the time. Within a year, Myspace’s value had tripled from its original purchase price as News Corps viewed the acquisition as a way to capitalize on the ever-developing Internet advertising marketplace and to drive traffic to other News Corporation platforms.
News Corps originally pledged not to disrupt anything with Myspace but over time, corporate policies began to creep in and an ever increasing focus was placed on raising revenues rather than the more user friendly approach that the fledgling Facebook was taking.
The then VP of online marketing for Myspace Sean Percival recalled a particularly infamous advert that was carried on the site called Punch The Monkey. The ad invited people to click on an animated monkey and win a prize, but usually it just linked through to surveys and requirements to sign up for credit cards in order to qualify for the prize.
“It was one of the most annoying things you could do with an ad, but they just didn’t care: they had no respect for the users. It was all about monetisation. Making money and squeezing every dollar out of it,” Percival said.
“And think about Facebook, the ultimate winner here. No focus on monetisation early on. Very few ads. And when they do ads they actually do very nice ads. They do more native, more inline advertising, things that feel a little more natural. Not Punch The Monkey.”
By 2009, Myspace was still the number one website in terms of traffic, but Facebook was growing quickly and according to Percival the atmosphere was defeatist when he joined the company.
“I remember the first meeting they had me set up with the whole team, and it was the saddest, most awkward meeting I’ve ever been in, in my life. And I’ve been in some really sad meetings. Literally sat there and everyone was so defeated,” he said.
Percival said that one of the main failings Myspace was guilty of at this point was bloat, with verticals that covered celebrity, fashion, sport and even books.
“I can tell you, literature nerds were not going to MySpace to debate the latest John Grisham book! They [MySpace] just went everywhere, and that was a big, big mistake,” he said.
“Facebook has done a really good job of not doing that – lesson learned: do one thing great, not do many things good. Or in our case, we were doing many things kinda crappy.”
Myspace’s $900 million three-year advertisement deal with Google, was a short-term cash windfall for the company but also a handicap in the longer term as the deal required even more ads to be placed on its already crowded inventory real estate. This slowed the site down, made it more difficult to use and less flexible in terms of development. Myspace could not experiment with their site without forfeiting revenue while Facebook was repeatedly rolling out new site designs. MySpace CEO Chris DeWolfe said that he had to repeatedly push back against News Corporation’s sales team who monetized the site with little regard for user experience.
As Facebook continued to focus on creating a platform that allowed outside developers to build new apps, Myspace continued to build everything in-house. The products division had tried to introduce many features such as instant messaging tools, a classifieds program, a video player, a music player, a virtual karaoke machine, a self-serve advertising platform, profile-editing tools, security systems, privacy filters and Myspace book lists among others, but the features were slow and had repeated bug problems due to the insufficient testing, measuring, and iteration that was done.
A judicial investigation into children’s exposure to pornography on Myspace also resulted in a media frenzy and the site’s inability to build an effective spam filter gave it a reputation as a “vortex of perversion”. Around the same time, specialized social media companies such as Twitter formed and began targeting Myspace users, while Facebook started to roll out communication tools that were seen as safe compared to Myspace.
News Corp CEO Rupert Murdoch himself said that his company’s $580 million purchase of Myspace was a mistake.
Murdoch said that MySpace was chronically mismanaged “in every possible way. We could have sold it for $6 billion a month later,” Murdoch said, according to an Associated Free Press report.
It’s not completely clear what ultimately doomed Myspace after the News Corps purchase, but some experts argue that a combination of poor management, a need to hit revenue targets, a bottleneck in the technology department, a lack of resources given to their division and a poor public relations effort, all conspired to precipitate MySpace’s downfall.
“I suppose we’ll never know for sure. It is most likely a combination of these factors, along with a ‘low attention span’ public. It probably didn’t help to be doing business and trying to grow along with all of these issues in the midst of a global economic crisis,” said one executive who worked at the company during its demise.
On June 29, 2011, Myspace announced that it had been acquired by Specific Media for $35m and since then it has been relaunched and was sold again to Time Inc in 2016.
In our opinion Mr. Murdoch shouldn’t be too alarmed at spending $580 million on Myspace, he could have bought The W1nners’ Club for the same amount of money at the time but we no doubt would have insisted on taking payment in News of the World shares.