The high hopes that News Corp. had for MySpace when it paid $580 million in for the social networking site in 2005 have never been realized and appear more elusive than ever.
Consequently, MySpace co-founders Chris DeWolfe (who is CEO) and Tom Anderson (who is President) are being pushed out of their management roles in major shakeup of the company's leadership.
The move is signals News Corp’s concern over the site’s declining market share and poor returns.
In the past three years Facebook has surpassed MySpace in total number of users worldwide, but MySpace has managed to remain the largest site in the U.S. and has 130 million users globally.
In 2008 the company had estimated advertising revues of $585 million, with the bulk coming from its ad-sharing deal with Google. But it will take a long, long time for News Corp. to recoup its investment at that pace. That revenue problem is compounded because Google has been unhappy with its MySpace deal and is unlikely to continue it at present terms when it expires next year.
The shakeup at MySpace underscores the value creation challenges that online media face. Services are typically offered free to generate high numbers of users and then these are used to create audiences for advertising or as a market for up-selling enhanced services. Although the audiences are attractive for some advertisers and some types of advertising, online advertising is not yet as effective as television and print advertising for most brands and retailers.