3 Reasons MySpace Lost Its Way

| About: News Corporation (NWS)

Turns out MySpace is in worse shape than previously anticipated, and while the cliche goes that companies are built over the long term, apparently, they’re “judged in quarters, not in years”, according to News Corp. (NASDAQ:NWS) COO Carey Chase.

Can’t blame him for being upset, MySpace’s revenues are $70 million lower year over year. Not sure if this is just at MySpace or the overall digital unit that includes my former employer IGN.

Either way, one has to wonder, apart from the rise of Facebook, where did MySpace go wrong?

Here are 3 additional factors:

1) Dow Jones Acquisition Distraction

Whereas Rupert Murdoch was initially focused on building MySpace as a business, his infatuation with acquiring Dow Jones to inherit its flagship Wall Street Journal was a distraction; and a costly one. In the end Murdoch paid nearly $6 billion and wrote off most of it, indirectly, he can also add the loss of value of MySpace as an additional related cost.

2) The Myth of the Entrepreneur’s Midas touch

Murdoch also gave way too much power and autonomy to MySpace’s Chris DeWolfe. You can argue whether or not MySpace was DeWolfe and Tom Anderson’s baby or whether they were chosen by Intermix/eUniverse’s Brad Greenspan to run. That’s all history. What is fact is that any time a company gets acquired, there needs to be a healthy balance between letting the founder lead with letting the acquiring company put that leadership into the context of the new organization. I don’t think this was done at MySpace.

3) Google’s Free Money

When Google (NASDAQ:GOOG) agreed to pay News Corp. $900 million, it was pretty clear to me that Google overpaid to fend off Microsoft’s (NASDAQ:MSFT) efforts into search. Initially people thought I was crazy and Google’s googley algorithms would generate revenue from MySpace’s user-generated content and audience. I said it then as I say it now: UGC isn’t worth a warm bucket of spit and MySpace made that argument crystal clear.

Here’s a memo, any time you start off the month with millions guaranteed, you get complacent.