When News Corp. bought MySpace last year for $580 million, the social networking site had 17 million unique monthly visitors; this June that number more than tripled to 54 million. MySpace now boasts 100 million members worldwide and is adding new members at the rate of 250,000 a day; Facebook, the number two site for social networking averages 14 million users and number three, MSN Spaces, 8.7 million. MySpace, however, is not just dominating among social networking sites, the traffic its users generate places the site at the number two spot on the Web, just behind Yahoo!. As such a presence, MySpace finds itself in an elite group with the likes of Microsoft and shows little sign of slowing down. With money from a recent deal with Google the company plans to expand, on both its core offerings and its international reach. Analysts wondered a year ago if News Corp. would be able to make MySpace viable, it would seem things are heading in that direction.

A recent article in BusinessWeek refers to what it calls the MySpace ecosystem, an independent network of third party companies which develop features and applications for MySpace. Similar ecosystems exist around few companies, “Only the largest and most vibrant of tech communities are capable of creating that sort of network effect.” Analyst Richard Greenfield of Pali Research says, “The MySpace ecosystem could help the site grow even faster than it otherwise would, increasing the usefulness and awareness of the site at no cost to News Corp.” Another thing that could help MySpace grow faster is the recent deal it struck with Google.

On August 8 it was revealed that Google paid $900 million to take over as the search engine of MySpace; the deal has Google providing both the search function and the placement of text ads alongside the search results generated by MySpace users. After the announcement Peter Chernin, News Corp’s president and chief operating office said in a press conference, “In one fell swoop, we have paid for two-thirds of our Internet acquisitions . . . We have gotten a 70 per cent premium on our MySpace investment and are now playing with house money.” Pali sees the significance of the move, “Fox Interactive Media’s agreement with Google illustrates how MySpace (and social networking more generally) has become a ‘real’ business.” According to Fox Interactive Media president Ross Levinsohn, “It was the most important decision we were going to make strategically and financially. It gives us the clarity to move forward with the expansion of our business.” This expansion will include, “developing content and tools for consumers and expanding our network.” Leaving the search and advertising networking up to Google will allow the company to grow and do just that.

On the content end of things, MySpace will focus on video; increasing staff for its MySpace video and adding more video content from News Corp. and other providers. Though MySpace video lags behind its competitor, YouTube, Levinsohn said MySpace video has done well. “YouTube gets all the buzz . . . But MySpace video is 60% to 70% of the size of YouTube. Nobody recognizes that.” Europe and Asia, which accounted for 8.8 and 3.6 million unique visitors last month respectively, will be the focus of MySpace’s network expansion. A MySpace site for France is expected at the end of the month and in September, one more in Europe and one in Asia.

Of course with all the growth there is risk and BusinessWeek sums it up well, “There’s still plenty of risk ahead for MySpace and FIM. A powerful rival could come out of nowhere, just as MySpace did two years ago. The process of turning MySpace into a big business could alienate users. But so far, Murdoch’s big bet on the Internet appears to be paying off.”


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