News Corp.: MySpace on track to top annual sales of $500 million; post modest profit

MySpace's fiscal 2007 sales are on track to top $500 million with more growth to come in 2008, said News Corp. chief operating officer Peter Chernin.

News Corp., which revealed the glimpse of MySpace's financial results on its fiscal second quarter earnings conference call, said Fox Interactive revenue, which consists mostly of MySpace's results, were $125 million for the December quarter. MySpace revenue grew 25 percent from the preceding quarter and were up 70 percent from a year ago.

Aside from a brief span of the News Corp. conference call, Fox Interactive was barely mentioned. News Corp.'s earnings recap focused mostly on the television business.
As for MySpace's outlook, Chernin said fiscal 2008, which begins July 1 for News Corp., is when the social networking site should show some serious financial leverage.

Chernin noted that MySpace's projected fiscal 2007 revenue of $500 million "is with minimal search revenue from Google." Couple the Google deal with better ad technologies, the subject of a recent Forbes article, and a growing sales force and Fox Interactive should have operating profits of about 20 percent in fiscal 2008.

News Corp. CEO Rupert Murdoch quickly chimed in and called that estimate too pessimistic. "I think that's pretty pessimistic. I think we can do a lot better," said Murdoch. Gee, no pressure there. 

Chernin noted that MySpace, which is struggling to keep up with its growth, was slightly profitable in December and will be for fiscal 2007. "If anything we've seen our monetization grow," said Chernin. "We would expect profitability to rise dramatically in 2008."

Referring to MySpace's $900 million deal with Google and whether Fox Interactive could partner with other companies like eBay, Chernin said the partnership is doing fine. The Wall Street Journal reported today (subscription required) that MySpace has been courting eBay and potentially annoying Google. "We have a binding letter of intent and are overdelivering on impressions," said Chernin. "We are significantly overdelivering on our guarantees."
Google and MySpace will continue to work together in ways that are mutually beneficial, added Chernin.