This make sense to us. NewsCorp (NASDAQ:NWS) is having a difficult time driving this business back to growth and profitability. This is likely because traditional media companies do not have the necessary vision to manage and grow prominent Internet assets. Time Warner (NYSE:TWX) gave up on AOL and Newscorp should do the same with MySpace.
However, MySpace is not, we believe, in the best fundamental position to be spun off into a separate company like AOL. Thus, a sale should be the best option.
Enter Google (NASDAQ:GOOG). Recent press reports states that Google is looking to do an acquisition along the size of YouTube and DoubleClick. We think MySpace will make a perfect addition to the Google architecture, and in particular, YouTube. There is a tremendous amount of synergies with YouTube that would allow both sites to grow. And with rumors that Google is prepping a FaceBook competitor, Google can layer on MySpace to that FaceBook competing business, add robust security settings, and the result should be a feasible competitor to FaceBook.
Google can then add a link to MySpace on the white homepage to rebuild awareness and drive traffic to the site. This would probably allow the search business on MySpace to grow exponentially.
Just our two cents.
Here are recent comments from NewsCorp about MySpace:
This increased loss primarily reflects $70 million in lower search and advertising revenues at MySpace versus a year ago.
On the other hand, results in MySpace have been below plan.
The final business I want to touch on is MySpace. We've been clear that MySpace is a problem. We recognize that we had to redefine and largely rebuild this business. We believe the foundation was there to warrant this effort and it has been our focus this year. We've made adjustments in the cost structure and most recently by consolidating ad sales and, most importantly, in the last few weeks we have relaunched MySpace with a focus on social entertainment. We feel really good about this relaunch product and it has been generally well received by the opinion makers in the business but we recognize the critical issue is building interest with consumers. We also recognize the challenges we face in doing so. The current losses are not acceptable or sustainable. Our current management did not create these losses, but they know we have to address them. I give them great credit for pouring their hearts and sweat into creating a great new MySpace experience that has the potential to be an exciting business for us. We equally know we need to make real headway in the coming quarters to get this business to a sustainable level.
Michael Nathanson - Sanford C. Bernstein & Company - Analyst
Thanks, I have one for Chase on MySpace. You mentioned the relaunch. I wondered how much time needs to pass before you judge whether or not it's successful and how you judge whether or not it's successful? What are you looking for and, if it doesn't work, what happens next? That's what I am looking at.
Chase Carey - News Corporation - President and COO
I'm not going to put a specific safety or fluid businesses, but I think this is something we looked to judge in quarters, not in years. And, I think our goal is to get to a place, essentially, probably, that is got a revenue top line that is going in the right direction and a clear path to profitability. I think those are the goals we set for that business, and I think the product we launch we feel really good about. We recognize we have to build an audience. We've got an audience. We still have great reach to give us the foundation to bring an audience to that product but our traffic numbers are still not going in the right direction and we have to stabilize that and have a predictable path forward and make sure we've the right cost structure and again a clear path to be a profitable business.