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Why would any company want to acquire Myspace?
News Corp. is evaluating two offers for the social networking site, Myspace. Offers range from $20m-$30m.
Who would want to buy Myspace, and why?
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6 Answers
Under the "best owner" theory, an enterprise is worth most when owned by the company that can make the best use of its assets, whether it be through synergies, acquiring complementary competencies, the ability to leverage its other assets to improve its existing business model, etc. Clearly News Corp. is not the best owner for MySpace, and arguably, had no business buying the property in the first place.
I think everyone is in agreement that MySpace will never compete solely as a social media site. The value lies in its users, despite the fact that they are on the decline.
Specific Media (the buyer), an online advertiser, evidently sees some potential for MySpace's user base, at a minimum, as an audience for its ads. The company paid $35 million for the site, which is relatively inexpensive. According to Quantcast, MySpace currently has about 20 million unique monthly visitors, which translates into a price of $1.75 per unique monthly visitor. For purposes of perspective, Facebook has about 140 million unique monthly visitors and its most recent valuation was $71 billion, which implies a value of over $500 per unique monthly visitor. I recognize that, comparing MySpace to Facebook is anything but meaningful, but it does indicate that Specific Media did seem to purchase the site at a rock-bottom price.
The challenge will be in Specific Media's ability to capture the attention of MySpace diehards in order to stem the rapidly declining user base, as well as its ability to leverage those users to enhance value, rather than destroy it.
There was an interesting article recently about the history of MySpace, about the flight to Facebook in the mid naughties and the ongoing demise of the company. Amusingly, the final nail in the coffin was when Pauly Shore was visiting he had a photo taken in front of the developers slushie machine as they were enjoying Happy Hour so when HR found out about it they made them sell the slushie machine on EBay and ended Happy Hour (go HR!).
SM is tribal, or so it seems to me and I think MySpace is a dead product (even rebranded).
From afar I always wondered if Apple would be a good fit for MySpace. It might be too late now and the demographics might not be a fit anymore but Apple has fallen pretty plat in the social media space. MySpace has been more music and entertainment oriented. Seems like MySpace could have been a better option than Ping.
Another idea is that MySpace could have been an interesting play for the music industry. They could have created an Hulu-like-JV to create a more direct-to-consumer experience for promoting music.
To me it looked like Blizzard Activision $ATVI CEO Bobby Kotick was going to buy MySpace and I thought the deal made sense. MySpace could be a great way to extend the MMPORG gaming experience into a community such as MySpace. The problem myspace has right now, is no people. If MySpace and Blizzard Activsion's fanatical gaming community (gamers create lots and lots of content on third party sites and build and host websites about the game) this would breathe life into MySpace and maybe it would reemerge as a gaming community. For Blizzard Activision MySpace would become a way of monetizing the eyeballs of the players. And when you think about it, MySpace + Gaming Community serves as a proxy for FaceBook + Zynga. It would create market cap value for Blizzard Activision far beyond the $30M MySpace acquisition price, by presenting to Wall Street a nice neat one to one package built along lines similar to two companies Wall Street already loves.
I have to agree with Jeff. 20-30 million unique monthly visitors is a lot of traffic. A relatively cheap price to buy all of that traffic today.
Whether or not the new owners can do anything with that traffic, or keep it from declining even further (it has declined by at least 50% since 2010) is a different question. But not horrible speculation on "this site has a lot of traffic and maybe we can do something with it".
A more interesting question to me is "where did $545 million of value go from 2005 (purchase price $580 million) to 2011 (sale price $35 million" ?
Dan, at the risk of oversimplification, I would suggest that the $545 million in value migrated to Facebook, like everyone else.
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