Was MySpace a Bad Acquisition?

The authors of “Curse of the Mogul”, namely Jonathan Knee, Bruce Greenwald, and Ava Seave, allege that media moguls are a bunch of idiots, basically (note to their lawyers: yes, I am paraphrasing).

Via Business Insider:

For instance, News Corp acquisitions in the past decade, from the Journal to MySpace, have not gone over well. News Corp wrote down $3 billion on the Journal, and MySpace is pretty much worth zero at this point.

I understand MySpace [2009] < MySpace [2005] - granted, but still, am I crazy or was that not a great deal: Google (GOOG) paid Fox Interactive Media $900M to serve text ads on the digital properties of News Corp. because it wanted to block Microsoft and Yahoo! (YHOO) from landing the MySpace inventory.

News Corp. (NWS) paid $580M for Intermix, which owned MySpace.

Today MySpace is no longer the largest social network out there, but it remains a very fierce player in music and entertainment.

I fail to see how it was a bad deal, even if its value keeps falling over time.

Comments

[Media Analyst]

Agree 100%. How is it a bad deal to pay $580 MM and almost immediately turn around and get a $900 MM revenue guarantee for search ads alone, not even including display ads and the ability to promote your own brands? Even if it's worth zero today they have already had a positive return on investment. Credit for negotiating the Google deal goes to Chernin...

2009 Oct 13 05:39 PM

[kbaran]

I disagree. MySpace could turn out to be a very bad investment for Fox. Only a small portion of the 900M was actually profit. So If you pay 580M and make say a profit of 200M in the next 4 yrs... and with prospects of making nothing substantial in the future... then it is a pretty darn bad investment in my book.

2009 Oct 14 06:02 PM