News Corp Paid $580 Million for MySpace and Sold It for $35 Million

MySpace went live on August 1, 2003. It was built inside eUniverse, an internet marketing company later renamed Intermix Media, which used its existing users and email lists to fill the new site. MySpace quickly became popular with teenagers and young adults.

It grew very fast. ComScore counted 1.2 million unique US visitors in June 2004 and 17.7 million a year later. In February 2005 MySpace’s CEO, Chris DeWolfe, talked with Mark Zuckerberg about buying Facebook, then a college-only site. According to Wikipedia, DeWolfe turned down Zuckerberg’s asking price of $75 million.

2005: $580 million

In July 2005 Rupert Murdoch’s News Corp agreed to buy Intermix Media for about $580 million in cash, or $12 a share, a 12% premium to the market price. Intermix owned more than 30 websites, but MySpace was the prize: as part of the deal Intermix bought the 47% of MySpace it did not already own. InformationWeek reported that the purchase tripled News Corp’s reach among US internet users.

At the time, the purchase was seen as a good investment. MySpace was the fifth-ranked web domain by page views, according to comScore figures cited at the time, and served 8% of all ads on the internet in June 2005.

2006: $900 million from Google

A year later the deal seemed to pay for itself. In August 2006 Google agreed to pay News Corp at least $900 million in revenue-sharing payments over almost four years to provide search and advertising on MySpace and other Fox sites. The Associated Press noted that this alone covered most of what News Corp had spent the previous year on MySpace and the gaming site IGN.

MySpace passed 100 million accounts that month. By one measure, it had become the most visited website in the United States in 2006.

Losing to Facebook

The Google money had a cost. A former MySpace executive later argued that the deal forced the site to carry even more ads on pages already crowded with them. Meanwhile Facebook, no longer limited to college students, was rolling out a cleaner design and opening itself to apps. “Apps were the breaking point,” the analyst Charlene Li later told the AP.

In April 2008 Facebook overtook MySpace in global traffic rankings. In May 2009 it passed MySpace in US visitors as well. Users, advertisers and musicians left. Over the 11 quarters before the sale, the AP reported, News Corp lost about $1.4 billion in the business segment that included MySpace.

2011: $35 million

News Corp put MySpace up for sale in early 2011 and hoped for at least $100 million. It could not get it. On June 29, 2011, it sold MySpace to the ad network Specific Media, with the singer Justin Timberlake as a part owner, for about $35 million, mostly in Specific Media stock. News Corp kept a small stake. It recorded a $254 million loss on the sale, Digital Trends reported.

MySpace still exists; it is now owned by the advertising technology company Viant. The $35 million price was about 6% of what News Corp had paid six years earlier.

What the record shows

• The price reflected the peak. News Corp bought at the height of MySpace’s growth, and the growth stopped within three years.
• Guaranteed money can carry a cost. The $900 million Google deal paid well, but critics say it locked the site into heavier advertising.
• The cheap option was the dangerous one. MySpace passed on buying Facebook for $75 million.
• Losses arrive slowly, then all at once. Years of operating losses ended in a sale for a fraction of the price.

Other social networks in this archive were sold at the right moment. Instagram went to Facebook for $1 billion and WhatsApp for $19 billion. Snapchat refused to sell at all.