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News Corp.'s MySpace is currently suffering a traffic implosion that is ruining the site's revenue structure. The company is desperately trying to reinvent itself and increase views to the site, but the bid does not appear to be working. Unable to stave the bleeding, MySpace is on the verge of losing its search ad partnership with Google. That's $300 million the company won't be earning next year.
Worse, MySpace might be putting its music service behind a paywall soon. That's a good way to ensure that traffic won't be skyrocketing any time soon.
For the last three years, Google has had an agreement with MySpace to sell ad space on the social network. But MySpace has not been able to meet its traffic goals in recent months. Come August, when the deal expires, Google won't be renewing.
But regardless of who decides to work with MySpace on search ads, the new deal won't be nearly as profitable for MySpace.
Google guaranteed payments of up to $900 million to MySpace in exchange for the right to sell small ads against the searches users make on MySpace.com. But if MySpace can't hit certain traffic goals, that money is not guaranteed. When the deal was negotiated in 2006, MySpace was rapidly expanding. Now, not so much.
MySpace's viewership has been in retreat for awhile. In the UK, the site's traffic has reportedly been cut in half over the last six months.
MySpace denies such a steep decline, but it can't ignore that traffic is dipping. In May, the company attracted 109 million users. Down almost 13% from the year prior, according to comScore. Meanwhile, Facebook's traffic was up 74% to 548 million global users.
MySpace has spent the last year trying to revamp its mission. The site is trying to target users under 35, with lots of music, videos, and games and focus the social connecting around those content areas.
The site is also working on succeeding where Facebook has failed on privacy. MySpace has multiple options to protect and hide information uploaded to the site. However, privacy alone is not going to convince Facebook users to migrate back to MySpace.
And TechCrunch reported in the fall that the site plans to turn its free streaming music service into a subscription product. That isn't likely to grow users.
Furthermore, MySpace might be on the block. News Corp. is currently shopping for a buyer for the Fox Audience Network, which serves much of MySpace's advertising. Since FAN is also being considered for sale, MySpace is considered as an easy package to go with it. Silicon Alley Insider has heard that MySpace is up for sale and that "Rupert wants $700 million for it."
That price is likely high, considering that Murdoch paid $650 million for the site back in 2006, when MySpace was at its peak popularity. But selling the site might be able to do what News Corp. has failed to do with its reinvention: focus the site enough to grow traffic again.