$6 billion MySpace: Will this Levinsohn cash in?

Ross Levinsohn is no longer a fan of MySpace; His ex-boss, however, continues to sing its very high praises, to the tune of $6 billion. 

Rupert Murdoch, Chairman and Chief Executive Officer, News Corp., touted a $6 billion MySpace “flip” price tag to shareholders in Australia earlier in the week, according to Australian press reports. 

Ross Levinsohn resigned as President, Fox Interactive Media (FIM) yesterday. I interviewed him last month and asked him about lofty valuations for the FIM MySpace property (see "FIM Ross Levinsohn on MySpace in "Real Deal" Exclusive Interview").

Question: When a Wall Street analyst puts a three year $15 billion projected value on MySpace, do you believe that is helpful to News Corp., harmful or indifferent? 

Ross Levinsohn told me:

It is flattering, but it shows how much work you have to do…but I’m not focused on that.

We are building out our Internet platform, we are driving this Web 2.0 business with a different approach, it is paying off, if we can deliver and build that value for News Corp., that would be great.

Murdoch seems to be believe News Corp. is well on its way to achieving “that value,” even though Peter Levinsohn has taken over the FIM reigns from Ross Levinshon.

Is Murdoch’s $6 billion a leap of faith in his 2005 $580 million purchase of MySpace?

In “News on Digg acquisition? How about MySpace?” I question Murdoch’s oft repeated assertion that the Google-MySpace announced $900 million search “landmark deal” “more than pays for the MySpace acquisition”:

In determining what to pay to acquire MySpace, News Corp. had to have taken into consideration the ongoing revenues the Web property was already receiving from its non-landmark search outsourcing deal with Yahoo…

MySpace may have negotiated a “better” deal with Google than it already had in place with Yahoo, but the revenue stream from outsourced search, in and of itself, ought not be considered new revenues that “pay for” the MySpace acquisition.

A correct assessment would be that ongoing outsourced search income was part of the value attributed to MySpace and considered by News Corp. in advance of agreeing to pay $580 million to acquire the Internet property, regardless of search vendor.

In “Web 2.0 hype: Popularity without profits,” I discuss how brand marketers are questioning the bottom-line worth of Web 2.0 “popularity” and holding back ad spends from social networking properties, such as MySpace.

I questioned Ross Levinsohn about the economic potential of MySpace:

Question: Rupert Murdoch and yourself look at Yahoo as the number one Internet company to catch. Murdoch recently said, “With continued international expansion, MySpace could well become the biggest global online company as early as this time next year. We are close to Yahoo! in unique visitors in the U.S. already after one year, Let's see how we do around the world." You said at OMMA that FIM is the second biggest Internet company in the U.S. in terms of page views and fast approaching Yahoo. FIM is not fast approaching Yahoo if revenues is the measurement, however. Yahoo is a $6 billion revenue company, while FIM is reporting less than $300 million in revenues. What is the timeframe for catching up with Yahoo’s revenues?

Ross Levinsohn told me:

We are not focused on beating Yahoo at anything. Yahoo has been around for ten or eleven years. We are just getting started, 13 months, it’s been a great first year.

Rupert Murdoch and Peter Chernin want us to build the best business possible, we’re not comparing ourselves to the 800 pound gorilla in the room. We are ahead of our strategic plan so far. We are doing terrific for a traditional media company.

Will Peter Levinsohn be able to turn “terrific” into $6 billion?