As MySpace Sells for $35 Million, a History of the Network's Valuation
News Corp.'s Rupert Murdoch has finally decided to unload MySpace, selling the property for just six percent of what he paid in 2005
Rupert Murdoch has finally given up. In an exclusive nabbed by All Things D's Kara Swisher, the News Corp. captain has decided to unload MySpace, once the world's largest social network and once the company that Murdoch thought he could anchor his expanding network of media properties to, for just $35 million. The buyer: Specific Media, an advertising network.
The deal, which values MySpace at just six percent of what Murdoch paid for the property back in 2005, has not yet been completed, but sources "close to the situation" have told Swisher that it's a sure thing. As part of the deal, MySpace's staff of 400 will be cut in half and the top executives will be put on the fast track out. News Corp., though, will hold on to a small stake, estimated at somewhere between five and 10 percent.
JULY 2005: $580 MILLION News Corp. purchased MySpace for $580 million in cash. Some reporters speculated at the time that Murdoch was just buying access to the social network's young demographic; he wanted to serve his advertisements against this group. Others argued that this was only part of the equation: Murdoch, they said, was planning on building a competitor to MTV. This second opinion -- that News Corp. would expand MySpace to include a dedicated cable network and more -- became the favored one as plans surfaced for News Corp.'s new headquarters, which showed Fox News and other Murdoch properties taking a backseat to MySpace.
2007: $12 BILLION This was the figure passed around in 2007 when Murdoch attempted to merge MySpace with Yahoo.
OCTOBER 2007: $65 BILLION When Facebook really started to take off in late 2007 and analysts and investors were valuing the social network at $15 billion, David Bank at RBC Capital Markets was so frustrated that he made comparisons to other networks to show just how ridiculous everyone was being. "Applying the same $357 per-subscriber valuation that $15 billion implies to MySpace's much larger pool of 185 million registered users would yield a valuation of $65 billion for MySpace," the Wall Street Journal reported.
JUNE 2008: $3.3 BILLION-$20 BILLION Looking at the total amount of Internet advertising in countries rather than creating an algorithm that takes into account a social network's pageviews and unique visitors, Michael Arrington at TechCrunch created a new method of determining valuation in mid-2008. His model argued that MySpace should be priced at somewhere between $3.3 billion and $20 billion depending on how much value you place on each individual user.
FEBRUARY 2010: $500 MILLION-$1.2 BILLION After hearing word that Murdoch might consider selling MySpace, Business Insider's Henry Blodget dug into the details. "A glance at the financials -- shrinking revenue, losses, declining market share, loss of mojo and market leadership -- would suggest that the company might be worth 1x-2x revenue -- on the assumption that MySpace could cut costs radically and make a bit of money in the next few years," Blodget wrote. "That would put the valuation at about $500 million to $1.2 billion -- with the lower end being LESS than Rupert paid for it, and the upper end being twice what he paid for it (hardly the steal of a century).
JANUARY 2011: $1 BILLION In early 2011, Trefis took a close look at MySpace's financial data. After seeing that the social network planned to reduce its workforce by half and reconfigure its strategy, it was decided that the company, though it could never catch up to Facebook, was worth $1 billion. The most interesting detail about this valuation is that Trefis, in its analysis, seems to feat that it might be undervaluing MySpace. "The strategy also involves leveraging the user database of competitors, like Facebook," Trefis noted. "This could be a significant move for the site as it would alleviate direct competition with Facebook. If you can't beat 'em, join 'em."
APRIL 2011: $100 MILLION By the end of April, Murdoch was tired of pumping money into his failing social network and rumors started to spread that he was looking for a buyer at a $100 million price point. At this point, MySpace was losing millions of users every month and News Corp. could do nothing to stop the bleeding. By the beginning of 2011, Facebook has surpassed the 500 million member mark and MySpace was down to about 63 million.
Image: MySpace.