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MySpace poised for massive layoffs

January 3, 2011 |  4:45 pm

ChaseCarey

Struggling social network MySpace is poised to lay off about half its staff, spurring speculation that it may be radically reducing overhead to prepare for a sale.

The News Corp.-owned site is expected to cut 50% of its 1,100 employees in mid-January, a person with knowledge of the matter confirmed. The reductions were first reported by the Wall Street Journal technology blog All Things Digital. The cuts are seen by some industry observers as a prelude to cuts necessary to restore the site to profitability and lure potential buyers. 

A MySpace spokesperson declined to comment on the report.

The clock has been ticking for MySpace since October, when News Corp. Chief Operating Officer Chase Carey pronounced during an earnings call that the site's losses were not "acceptable or sustainable," and that a turnaround would need to be effected in months, not years.

More recently, Carey has been quoted as saying the media conglomerate was weighing its options for the website -- raising the possibility of a sale.

"There are opportunities here to do 20 things [with MySpace], but that doesn't mean you're going to do any of the 20. If there's something there that makes sense you ought to think about it," Carey said in late November at the Reuters Global Media Summit conference.

MySpace sought to regain some of its sizzle with a relaunch last fall, in which the site underwent a makeover as an entertainment destination, where 13- to 35-year-olds could gather to discover new music, movies, TV shows and games.

The new look has done little to arrest the erosion of its user base. The number of monthly visitors dropped to 54 million in November -- down 3.7 million from a month earlier, according to measurement firm comScore Media Metrix. Advertising revenue has fallen to $347 million, down 26% from a year ago, based on researcher eMarketer's most recent estimates.

In a sign of the challenges ahead, MySpace sent plaintive e-mails to inactive users in late December that read, in part, "We've missed you at Myspace lately. Plain and simple, we think you should come back. And here's why." The e-mail goes on to tout the site's new features.

News Corp. acquired MySpace in 2005 for $580 million, with Chief Executive Rupert Murdoch outmaneuvering rival Viacom Inc. to seal the deal at a time when the social network was surging in popularity. In 2006, the site scored a $900-million deal with Google for the right to sell advertising next to searches on the site. MySpace and the search giant renewed their search and advertising relationship in December, although terms weren't disclosed.

-- Dawn C. Chmielewski

Photo: Chase Carey, chief operating officer of News Corp., speaks during the Reuters 2010 Global Media Summit. Credit: Shannon Stapleton / Reuters

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