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MySpace: How Does a Buyer Resurrect a Wounded Internet Brand?

Analysis: Bidders include the site’s co-founders and private equity firms, but saving MySpace from the digital ghetto is no easy task

Congratulations, you've bought MySpace and its 77 million users.

Now what do you do with it?

That depends greatly on whether you're advertising network Specific Media, private equity firm Golden Gate Capital, or MySpace co-founders Chris DeWolfe or Tom Anderson, each of whom is putting together a group of bidders for the failed social network.

News Corp. is expected to make the deal by Wednesday morning for  $35 million, making the price per user some 45 cents.

Also read: MySpace Expected to Sell for $35M By Wednesday 

That 77 million users is quite a large customer base, presuming they are real people. All those eyeballs make even a sickly tech company an attractive target for buyers hoping to launch digital games or sell online ads, according to industry experts.

“It’s definitely lost its edge, but if you have an active audience on it, it’s worth something,” said Mike Hickey, an analyst with investment firm Janco Partners.

But turning MySpace around will take nothing short of a miracle. From AOL to Napster, the Internet is littered with once-hot brands that are now desperately uncool. And it’s hard to find an Internet company that has successfully reinvented itself after peaking, and losing, its mojo.

"If they are going to bring it back, they will have to do something that's never happened before," Anil Dash, a social media consultant and director of Expert Labs, told TheWrap. "In the history of the web, a lot of sites have come and gone, but not once has anybody ever brought a site back to its peak."

The various parties looking to snap up MySpace declined to comment to TheWrap, but a look at their track records gives some notion of their plans:

>> Golden Gate Capital has a knack for picking up distressed properties that have high upsides, such as J. Jill and Lawson Software, but can also be liquidated if the gamble doesn't pay off.

>> Specific Media is clearly hoping to use MySpace as a platform to sell ads. The online ad broker currently reaches 170 million users through various outlets and could pad its numbers and its rates by adding MySpace members to the pile.

>> DeWolfe and Anderson, who are launching separate bids with private equity backers, have a personal stake in rescuing their brainchild from the rubbish heap of history. It is unclear if they want to reinvigorate their original vision for the site, or use the database as a platform for yet another social media venture.

Also read: News Corp.'s Failed Social Experiment: Why MySpace Didn't Deliver

"Everybody's second startup is a chance to atone for their first startup," Dash told TheWrap. "When you succeed you want to prove you can do it again and it's not a fluke. When you have something that's failed, that becomes even more acute."

To sweeten the deal, corporate parent News Corp. is unloading the social networking site at pennies on the dollar. It will sell off MySpace for $35 million, a far cry from the $580 million Rupert Murdoch’s media empire plunked down for rights to the platform in 2005, an individual with knowledge of the discussions told TheWrap.

News Corp. will likely retain a small stake.

To make the purchase worthwhile, MySpace's new owners will have to invest some resources in turning the site around, and that won't be easy. Stories of sexual predators and overaggressive homepage ads have taken their toll; the site's users currently stand at 77 million, far short of the nearly 700 million users Facebook currently boasts.

In the month of January alone, the site shed 10 million members. And the number of MySpace members continues to plummet despite News Corp.'s efforts to rebrand the site as a music platform. It is a failed laboratory for corporate synergy.

“It’s not like a TV show, where you can go in the next day and fire the writers and bring on a new team and replace the actors and remake it. We’re talking about people's habits and social connections, and you can’t fix that by doing things that Hollywood executives do,” said Owen Thomas, formerly of VentureBeat and now the founding editor of Daily Dot.

Yet, if the reboot is done right, MySpace could potentially be a platform to chip away at Facebook’s hegemony.

There are some signs that after years of explosive growth, Facebook may be losing steam. In May, the social networking giant lost 6 million U.S. users, leading some analysts to speculate that with a viable alternative, more members might migrate away from Facebook.

“I think there’s room for competition,” Michael Pachter, an analyst at Wedbush Morgan Securities. “There are people who don’t want to be on Facebook, an emerging class of young people who see it as their parent’s site. A well-run social network that already has 50 million people can grow.”

For MySpace to be of value as a gaming platform, or even a launching pad for any media, its new owners will have to perform a serious blood transfusion. Before they can monetize their new bauble, they will have to transform MySpace into a place where people actually want to interact and post personal information.

That kind of change needs to come from the top, and it may even mean that the new owners might have to do what few people are doing these days: sign up for accounts and spend some time on MySpace themselves.

“You have to forget about the dollars and cents and take it seriously as a community,” Thomas said.

After all, misplay the MySpace hand, and you might as well own Friendster.  

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