When Rupert Murdoch’s News Corp. purchased MySpace three years ago, many Internet experts believed it was just a matter of time until the multinational figured out how to properly monetize the popularity and huge user base of the social networking site.
MySpace now has over 118 million users worldwide, but to date, News Corp. has been unable to monetize the site in any significant way. In fact, shares of News Corp. fell 5% in April after the company announced that its projected revenue target for MySpace (an estimated $1 billion profit) would not be met this year. Perhaps because of this most recent disappointment, and its effect on the company’s stock, MySpace is now being redesigned, with an eye toward increased advertising, including adding a splash page on the site’s homepage to advertise big-budget Hollywood films and other major industry players.
News Corp. has announced that the redesigned MySpace will debut in early fall, and the homepage will now include an expanded search tool, video player and redesigned navigation bar. There will also be a variety of cosmetic adjustments made to the site, designed to increase the appeal of user pages, while seamlessly incorporating relevant contextual advertising.
But some analysts believe that News Corp’s goal of one billion in revenue annually from MySpace is overly ambitious. In fact, despite all the hype, the jury is still out on whether social networking sites can actually become profitable “cash cows.” MySpace, Facebook and even Bebo all have announced ambitious business plans for monetizing their sites, but so far there is little proof that they are paying off.
If you simply consider the amount of Web traffic a site like MySpace receives, it would seem easy to monetize the site, and create a huge recurring source of income with relatively little maintenance and infrastructure. In April, for example, MySpace claimed approximately 150 million users online; and statistics show that the average user spent several hours on the site.
But when it comes to Web businesses, traffic does not always equal money. Both MySpace and Facebook have struggled to come up with user-acceptable advertising schemes to monetize their sites. One of the biggest problems is the difficulty in selling contextual advertising on personal profile pages. Both MySpace and Facebook consist of hundreds of thousands of personal pages; some are quite elaborate and well designed, while others resemble a worn-out high school gym locker.
The challenge for MySpace (and their competitors) is to effectively advertise on personal profile pages, without alienating the site’s members. It’s a fine line to walk, and News Corp. is quickly discovering that the sales techniques that work in broadcasting and old media, do not always apply online.
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