Murdoch mulls MySpace swap

Rupert Murdoch's News Corp is apparently in talks to swap social networking hub MySpace for a 25% stake in Yahoo. Well that didn't last long, did it? Just last year MySpace was predicted to wreak havoc on the media and the music industry. While the hacks and label heads sat there sweating, everyone from teens to dry cleaners were flocking to the hub to publicise their band, their business or, most often, baffling minutiae of their tedious lives. Power to the people and all that.

Last Updated: 31 Aug 2010

But Murdoch, who paid $580m for the site in 2005, last week revealed his feelings on the wisdom of the investment. Asked if newspaper circulation was down because everyone was heading to MySpace, he replied ‘I wish they were. They're all going to Facebook at the moment.' Ouch. Now he's considering offloading his bright young thing for a stake in what many see as an internet has-been. Yahoo may be worth $37bn, but it suffered a 16% fall in profits in the first three months of 2007, and the loss of its chief exec Terry Semel. Co-founder Jerry Yang has now had to rejoin the ship, to steer it back on course and make up the ground it has quite spectacularly lost to arch-rival Google. 

Perhaps Murdoch should have paid more attention to the Google and Yahoo lesson in the first place: when it comes to the internet, you don't necessarily want to put your money on the first dog out the traps. Yahoo may have had the early legs, but Google is now undisputed champ, its name now a verb used among even the barely computer literate. Likewise, MySpace pioneered the social networking idea, but Facebook has spotted a niche and is the one that everyone's talking about. Fads, particularly ones with low barriers to entry, are dangerous territory for investment.

And that's probably what makes a stake in Yahoo quite appealing. It may be a poor man's Google, but its recent results may make it available at a knock-down price. For Murdoch, who has struggled to apply his usual sound instincts to investments on the web, it may provide solid footing. Semel was roundly criticised for not spotting the potential, as exploited by Google, in paid-for searches. Instead he concentrated on pushing Yahoo as an information hub. Sounds like solid Murdoch territory, doesn't it?


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