Wrenching job cuts at News Corp's MySpace are only the first steps the online hangout must take to regain its cool.
Outshone by newcomers Facebook and Twitter, MySpace must reverse worrying trends in user metrics and replace a lucrative $300-million-a-year advertising deal with Google Inc that expires next year, or risk lining up among Friendster, AltaVista, GeoCities and other once-mighty Internet brands.
That means redefining itself as a music and entertainment site, improving returns for advertisers and maybe even finding a new home, say analysts and former employees.
“People are very fickle in social networking," said Sanford Bernstein analyst Jeffrey Lindsay. “Unless you've got a way to keep them continually refreshed, you get a five-year life out of them and then after that they're really not very good."
Some wonder if News Corp Chief Executive Rupert Murdoch will prove as fickle, although most say a sale of MySpace is highly unlikely in these markets.
News Corp bought MySpace for $580 million in 2005, a move that made Murdoch, the man who made his fortune in newspapers, look like a Web visionary. But declining advertising revenue trends and the ascendance of Facebook means the once-reigning teenage social network is looking increasingly middle-aged.
“The problem is that banner ads (on MySpace) have not proven to be successful," Forrester Research analyst Josh Bernoff said.
Facebook has ads that engage its users better.
“You're going to need a bunch of smart people developing an ad format that has these clever features in it that make it work," Bernoff said of MySpace.
MySpace has a three-year search advertising deal with Google that guarantees the social network $300 million a year. But it is unlikely Google will sign up for another round at the same terms, analysts say.
Pali Capital analyst Richard Greenfield estimated a new Google deal could be worth half as much, while some estimates say it could be 75 percent less valuable.
Instead, MySpace could try to find a Google rival looking to get a boost in the search game. Some analysts speculate that Microsoft Corp is a possible contender.
Microsoft is “desperate to grow their online business so they're in a similar position," Lindsay said. “Google is so badly burned that they're not going to come back with anything resembling the original terms."
MySpace, Microsoft and Google declined to comment.
Outshone by newcomers Facebook and Twitter, MySpace must reverse worrying trends in user metrics and replace a lucrative $300-million-a-year advertising deal with Google Inc that expires next year, or risk lining up among Friendster, AltaVista, GeoCities and other once-mighty Internet brands.
That means redefining itself as a music and entertainment site, improving returns for advertisers and maybe even finding a new home, say analysts and former employees.
“People are very fickle in social networking," said Sanford Bernstein analyst Jeffrey Lindsay. “Unless you've got a way to keep them continually refreshed, you get a five-year life out of them and then after that they're really not very good."
Some wonder if News Corp Chief Executive Rupert Murdoch will prove as fickle, although most say a sale of MySpace is highly unlikely in these markets.
News Corp bought MySpace for $580 million in 2005, a move that made Murdoch, the man who made his fortune in newspapers, look like a Web visionary. But declining advertising revenue trends and the ascendance of Facebook means the once-reigning teenage social network is looking increasingly middle-aged.
“The problem is that banner ads (on MySpace) have not proven to be successful," Forrester Research analyst Josh Bernoff said.
Facebook has ads that engage its users better.
“You're going to need a bunch of smart people developing an ad format that has these clever features in it that make it work," Bernoff said of MySpace.
MySpace has a three-year search advertising deal with Google that guarantees the social network $300 million a year. But it is unlikely Google will sign up for another round at the same terms, analysts say.
Pali Capital analyst Richard Greenfield estimated a new Google deal could be worth half as much, while some estimates say it could be 75 percent less valuable.
Instead, MySpace could try to find a Google rival looking to get a boost in the search game. Some analysts speculate that Microsoft Corp is a possible contender.
Microsoft is “desperate to grow their online business so they're in a similar position," Lindsay said. “Google is so badly burned that they're not going to come back with anything resembling the original terms."
MySpace, Microsoft and Google declined to comment.
