In Yesterday IT Next had reported about News Corporation trying its best to get the price of $100 million for the also-ran in the social networking space, MySpace. We had predicted that News Corp. was unlikely to get this price. Now the social networking company has been sold for mere $35 million, which is just a fraction of the $100m its parent company was seeking. The lucky buyer of what was once being billed as the hottest social networking place on Internet is the digital media firm Specific Media.
The exact terms of the deal between News Corp. and Specific Media have not been disclosed, but it is likely that News Corp. will, retain minority equity in the company, while the control will pass into the hands of Specific Media.
It was in year 2008 that News Corporation had bought MySpace for $580 million. The price of $35 million seems even more shocking when you realise that the company was valued at $12 billion when News Corp attempted to merge it with Yahoo in 2007. However, visitors soon started flocking to Facebook and MySpaces fortunes took a nosedive towards the nadir of business oblivion. Between mid 2009 and 2010, more than half of the sites visitors simply evaporated. In three years, MySpace found itself at the rock bottom of the social networking heap.
The site even tried to use a rather unprofessional strategy of luring back visitors by allowing them to sign-in by using their Facebook ID. This plan too did not work and the traffic kept disappearing. Now analysts are predicting that the lacklustre valuation of failed MySpace is going to impact the valuation of other Internet firms. For instance there is LinkedIn, which has already gone public and is being valued at $8.6 billion. The most ultimate prize of them all is of course Facebook, which is being valued at $80 billion.
It is time to ask how realistic are the valuations given to Internet start-ups? If MySpace can go into a tailspin and lose majority of its users and hence its valuation, then the same sort of malaise can strike other social, business or gaming related sites. Perhaps, it is time to get a reality check.
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