Report: MySpace turning News Corp. stock toxic; advertisers shy of UGC

While I don't normally comment on matters relating to Wall Street here on The Social Web, a Bloomberg article published today raises a number issues relating to News Corp.'s attempts to extract profit from MySpace.

While I don't normally comment on matters relating to Wall Street here on The Social Web, a Bloomberg article published today raises a number issues relating to News Corp.'s attempts to extract profit from MySpace.

After Fox Interactive Media (FIM), the company division that runs MySpace, said it would miss its 2008 goal of $1 billion in revenue, or 3 percent of News Corp.'s projected sales, a number of Wall Street analysts have downgraded News Corp.'s stock price. The overall message being that the number one social networking site has been unable to monetize its millions of users, bringing into question FIM's plans for aggressive international expansion for the site (South Korea and India), along with the recently announced music joint venture, MySpace Music -- moves which will see FIM's costs jump 46 percent this year, almost as much as revenue, according to a report.

"When you have such a powerful asset as MySpace and you can't successfully monetize it, that's a problem for investors,'' Daniel Poole, assistant research director at National City Corp., tells Bloomberg.

The problem is an age-old one for social networking sites: advertisers shying away from the anarchy of User-Generated Content (UGC). Marketers "don't know what their brands will be placed next to,'' one analyst tells Bloomberg. The report also notes that Google's advertising partnership with MySpace, which guaranteed revenue of at least $900 million, expires in 2010.

So how will FIM solve the MySpace monetization problem?

The answer can be seen in a number of fairly recent MySpace moves: By weaning users off of UGC, or more specifically, by directing the "conversation" towards more predictable and professionally-produced content. Hence the recent expansion of MySpaceTV and its emphasis on original professional content and syndicated studio programing, along with the new joint music venture with major record labels. Additionally, MySpace has launched a new ad platform called Community Builder that "gives advertisers more control over their presence on the social networking site, allowing them to build, maintain and customise brand profiles".

Bottom line: the more MySpace can become a place for brands as much as it is for "friends", the more advertisers will help News Corp. monetize the site.