Tuesday, July 19, 2005

M&A Monday: MySpace.com Acquired

It was a matter of time, as the saying goes.

Media conglomerates have two ways to break into the online social networking market.

Option 1 is to create their own site and build a customer base from scratch.

Never easy and not very cost-effective.

Option 2 is to go out and buy an established player.

News Corp annouced Monday that it'll take option 2.

News Corp. grabbed the wildly popular social-networking site MySpace.com by agreeing to acquire majority shareholder Intermix Media for $580 million in cash.

News Corp. said it would pay $12 per share for Intermix.

News Corp. plans to meshMySpace.com and Intermix's 30 other Websites into its newly formed Fox Interactive Media unit.

The new additions will nearly double News Corp.'s U.S. Web traffic to more than 45 million unique monthly visitors, according to the companies.

Intermix's network of sites had 27 million unique monthly visitors.

I don't know enough about Intermix to argue about whether or not MySpace will be a good fit, but I do know this: MySpace, which enables people to write Web logs and share music, among other social activities, has been giving competitor Friendster (which I prefer, even though I'm still getting used to Friendster's new interface) a run for its money.

MySpace gets more traffic than Friendster, the reason being that MySpace has more features that
Friendster is slowly trying to add unsucessfully.

But I think the edge MySpace has over Friendster is one related to culture.

Here's what I mean.

The culture at MySpace is very youth friendly.

Their popularity is mostly amongst users who eschew Friendster's more upscale design: goth kids, indie rock kids, Tribeca artistes.

You know the type.

If these sites thrive of word-of-mouth advertising, which I think they do, it is clear that MySpace is getting more airtime inside high school hallways and the like.

Hence, MySpace has a bit more of the market.

They have over 19 million registered users.

However, there may be a silver lining in all of this for Friendster.

Benefitting from a sort of "spillover interest" in virtual communities, I wouldn't be surprised to see Friendster go as well.

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