Q: What Went Wrong With MySpace? A: Rupert Murdoch

In November of 2005 Rupert Murdoch’s News Corp purchased MySpace.com for $580 million. A big gamble – and one that hasn’t paid off.

MySpace was the original ‘big’ social network – at its peak in 2008 it had an estimated 100 million monthly visitors, and could be considered the head of a pack of other social media sites – such as Hi5.com, Orkut.com, Friendster.com. In those heady days back in 2005 when Murdoch wrote the cheque for MySpace – Facebook was still a twinkle in Mark Zuckerberg’s eye – and the future was looking bright.

Since its launch in 2006, Facebook has taken off like a rocket – the intersection between MySpace’s traffic and FaceBook’s traffic occurred during the summer of 2008 – and this represented a Rubicon moment for both sites. From the summer of 2008 onwards users abandoned MySpace like rats leaving a sinking ship, and swam across to FaceBook as the social network of choice. Soon after the rats jumped ship, MySpace started becoming a very lonely place – and then the ship sank. News has begun circulating that Rupert Murdoch is beginning the process of un-friending MySpace – and its sale imminent.

Rupert Murdoch is becoming something of a master a fouling up anything to do with the internet. Buying MySpace when he did was a gamble – however investing $580 million that early in the social media game has proven to be a big error. Murdoch’s decision to put his online versions of his news websites behind a giant and relatively costly pay-wall also appears to be a wrong move – decimating the volume of traffic sites like TheTimes.co.uk receive. For news – Murdoch has completely mis-calculated how many internet users find and consume news. Some, for sure, have a regular site they go to where they read articles and stories. The majority of news consumed online is browsed news – from either content networks such as Yahoo or from Google News. Rupert Murdoch doesn’t have anything behind his pay-walls that is so unique it cannot be found else where for free.

Let’s imagine that Rupert didn’t invest his $580 million in MySpace in 2005 – and instead waited to see how the game unfolded. In October of 2007 Microsoft purchased a 1.6% stake in Facebook for $240 million. Let’s imagine that in 2012 FaceBook has an IPO, and the valuation of the company is placed in the region of $60 billion (maybe more). This would mean that Microsoft investment of $240 million in 2007 would have turned into $960 million in 2012 – or a 300% profit. Had Rupert waited – he could have been in Microsoft’s potential position. Instead – Rupert is presented with the less than glorious (and very public) reality of selling his MySpace to anyone who has a few million and wants a now defunct social network.

As has been proven by the disaster with TheTimes.co.uk and Rupert’s great pay-wall – he (and his organization) do not know what is going on with the internet. Rupert has successfully taken the monthly visitors to The Times from about 20-million to maybe a few thousand – which is crazy and written about here. The advertising revenue that could have been generated from having 20-million visitors per month would be quite impressive. Instead – Rupert is trying to charge visitors £1 per day to read the news. Rupert, it seems, thinks surfing the web is like going into a newsagents and buying a copy of todays newspaper for the ride to work on the train – like they did back in the good old days. I am unsure as to Rupert’s any experience with mistresses – but the internet is a fickle mistress. If you do not give her what she wants – then she will go else where. As has been proven with the demise of MySpace, and the seismic destruction of The Times’ web traffic – Rupert didn’t give the internet what they wanted so they went else where In the case of MySpace, they wanted cool stuff and a site that didn’t look like some horrid mess of apps and HTML. With The Times – they didn’t want to pay for something they could get for free just one click away.

Murdoch comes from a time when it was highly profitable to cut down trees, then truck them hundreds of miles to a paper mill, turn the trees into paper, then truck the paper hundreds of miles to a printing press, and spend hours applying ink to the paper, and then chopping all the paper up, bundling it up and driving it hundreds of miles to depots, then taking it from the depot to hundreds of small outlets and selling newspapers to people to read whilst they ate their corn flakes. Like a lot of old people – I just think that Rupert Murdoch doesn’t understand the internet. Perhaps this video will help him.

Of course – it is not a completely sad story with MySpace. Tom Anderson – the once omnipresent face of MySpace – made off like a bandit from MySpace, lining his pockets with Rupert’s cash.