The dominance of social networking site Facebook has produced a bunch of winners and losers online.
Among the winners are Zynga, a games maker on the Facebook platform, that will soon have an initial public offering (IPO) estimated to raise around $1 billion for the company. Losers include former social networking site giant Friendster that has now rebranded itself and, most recently, MySpace, which was sold by News Corp. at a heavy loss for only $35 million.
History of MySpace
In July 2005, Rupert Murdoch’s News Corporation acquired MySpace at a staggering price of $580 million.
At that time, MySpace was the world’s leading social networking site and just one year after the purchase, the site registered its 1 millionth user. However, in April 2008, emerging competitor Facebook overtook MySpace’s traffic for the first time and it was downhill for MySpace from then on.
In August 2009, News Corp. booked a $680 million loss to write down the value of MySpace. In November 2010, the company announced it is open to options regarding MySpace’s restructuring, including a possible sale. In January 2011, the social networking site laid off half of its 1,000 employees.
As Facebook’s advertising revenues grew exponentially over the years (see eMarketer’s graph below), MySpace’s revenues shrank with net losses reaching $156 million at the end of 2010.
Sale to Specific Media
And now, just a few weeks ago, it was announced that MySpace was successfully sold to Specific Media, an online media and advertising company, for “only” $35 million — a far cry from News Corp’s original purchase price of $580 million.
It was also reported that international superstar Justin Timberlake will have a stake in the new company as he himself invested an undisclosed sum in the deal. (Don’t be confused. It’s the real JT who was involved in this transaction and not Sean Parker who Timberlake portrayed in The Social Network movie.)
An excerpt from the official press release of MySpace on June 29, 2011 regarding the sale:
Specific Media, a digital media company, today announced its acquisition of Myspace, a leading social networking destination for consumers, celebrities and artists. As part of the deal, Emmy and Grammy winning artist Justin Timberlake will also take an ownership stake and play a major role in developing the creative direction and strategy for the company moving forward. Specific Media and Timberlake plan to unveil their vision for the site in an exclusive press conference later this summer.