Rupert Murdoch feels the pinch

Hard as it must be for Rupert Murdoch to swallow, News Corporation’s acquisition of the social networking site, MySpace has been a colossal failure. 

It was the US’s most popular networking site in 2006, then something happened.  Something that all the business brains at Harvard can identify, but still can’t quite harness or reverse.  Facebook – set up by Harvard student Mark Zuckerberg, ironically – stole its crown.

There was a time when you couldn’t open a newspaper without finding a chart-topping band or artist whose raw talent had been uploaded and immediately discovered like the Arctic Monkeys, Lily Allen, and legions of other ingénues who’ve since fallen by the wayside.  MySpace was literally a goldmine and News Corp. quickly set up MySpace Records to capitalise on the undiscovered talent still waiting to reveal itself.

Like teenagers falling out of love, there was never a backward glance as MySpace hemorrhaged users to the thrusting new Facebook.  By 2008, Facebook had surpassed MySpace and a year later twice as many people were members there compared with MySpace.

MySpace was still clocking 124 million monthly unique visitors, a decline of 2%, according to the marketing research company comScore, while Facebook was cruising with 276 million unique visitors, an increase of 16.6%.

Loss of status as the cool place to be is an object lesson that corporations, intent on turning digital ephemera into gold have yet to master.

When Murdoch paid $580m for MySpace in July 2005, the acquisition was seen as a masterstroke as membership continued its seemingly inexorable rise, with celebrities and politicians joining the craze.  Once the shine had worn off, the deal was akin to driving a brand new car out of the showroom and watching the value collapse in bigger and bigger slices– the only difference being that cars don’t cost half a billion dollars.

blockquote>The point of all this is, long term investment doesn’t sit easily with short-term digital success stories. No matter how many unique visitors a website may get one month, there’s every possibility fickleness will get the better of users and change wholesale to an entirely different location the next.

Bebo was another social networking site that took up some of MySpace’s slack, but Facebook’s alchemy has eluded them, too. Bought by AOL in March 2008 for $850 m.  AOL announced in April that they are planning to sell or shut down Bebo – possibly as soon as May 2010.  Not exactly a match made in heaven, then.

Skype is another.  The company was acquired by eBay in September 2005 for $2.6 billion and was never heard of again.  …Except for an acrimonious dispute from the online telecommunications founders when eBay offloaded Skype at another half-billion loss last September to a group of investors led by Silver Lake.

Of course, the madness isn’t exclusive to the US.  In the UK, Friends Reunited was set up in 1999 by Steve and Julie Pankhurst wanting to get in touch with their old school classmates.  Within two years the site had 2.5 million users.  By December 2005, TV Company ITV were willing to shell out for £120 million for the idea. Strange then  that by August ITV had  announced that Friends Reunited had been sold for £25 million.

The point of all this is, long term investment doesn’t sit easily with short-term digital success stories.  No matter how many unique visitors a website may get one month, there’s every possibility fickleness will get the better of users and change wholesale to an entirely different location the next. 

One day you’re hot, the next day you’re not, in the words of callow youth.  It’s why pop music sits much better with fast buck impresarios like the late Malcolm McLaren, Colonel Parker, or Simon Cowell rather than seasoned investors like Guy Hands who’s struggling over at EMI. 

Did nobody ever tell corporate raiders the lesson about not jumping on the bandwagon?