Ouch – News Corp sells MySpace at a $545m loss…not a good ROI

Yesterday, News Corp announced it had finally unloaded the asset, MySpace to Specific Media for a whopping $35m! I think the equity valuation for the interns at Facebook might be worth more than that. That represents a $545m loss on the amount News Corp doled out in 2005 for, at the time, #1 social media site. Rupert Murdoch certainly did not bargain for this in 2005 when he thought he was filling out his media giant with the missing piece – social, which at the time was loosely defined as online communities. I am sure the father of Fox News is not smirking today as he absorbs a lovely 93% loss on his original investment and he really is no further ahead in the game when it comes to tying social channels into his portfolio, than he was in 2005.

So what happened? To me this feels very similar to when Time Warner and AOL decided to tie the knot. At the time you had an “old school” media company, Time Warner, associating its vast empire of assets with the new media kid on the block – AOL. What it represented was a company trying to latch on to the dot com craze of the time. Much like the News Corp – MySpace move, it also ended bitterly and not how any of the parties envisioned it ending. What lessons can we take from these?

  • Acquisition is not always the answer for entering new markets. Time Warner and News Corp both might have been better served in growing online and social assets organically. Rather than acquiring a new technology company look to poach some of their personnel and give them the tools to develop organically. I cannot see companies such as News Corp and Time Warner having the appropriate cultures to allow the new kids on the block to continue to flourish.
  • The deal you walk away from is just as important as the one you embrace. Groupon pointed to this as to why they turned down the whopping offer from Google. Funny how Google is viewed as potentially stifling environment! While the half billion in cash looked good to the MySpace team, it is peanuts compared to what Linkedin hit in valuations after IPO and what is predicted for Facebook’s IPO. Granted no one could predict what would have happened with MySpace had they stayed independent, hindsight is 20/20.
  • Timing or luck or something else? “Luck is where preparation meets opportunity.” MySpace used to be the #1 social site. What happened? Luck? Opportunity? Or combination of all of the above. Interesting how the explosion of sites like Facebook coincide with the rise of the iPhone and better smart phones. In 2005, our social experience remained tethered to our computers. Yes blackberry was around and some of us had Treos or other version of a smart phone, but where were the apps? And no wide spread Wifi…Maybe it was bad timing for the likes of MySpace, but that is the Darwinian reality of business and high tech.

So the page turns for MySpace, not sure what the future holds for the one time front runner. Could they follow AOL and redefine themselves? Or will the go the way of Friendster and fade away to background of social media?

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