Since my last post I have learned a few things:
1) MySpace is flying – traffic wise – and has passed Yahoo! and Google in terms of page views. See Jeff Clavier for all the good news there. Although some claim that MySpace’s design produces a large number of extra page views – maybe 2-3 times as many as are required
2) There is a lot of uncertainty about how much revenue they are making. Information in press releases from Fox Interactive Media (FIM – the division of News that owns Myspace) is confusing in that it talks about Myspace but then seems to give figures for the whole of FIM.
3) Nonetheless they are making big claims – $1bn in revenue by the end of the decade
4) CPMs are VERY low – reported as 10c average – adserving technology costs on their own are likely to be 1/3 to 1/2 of that (note the extra page views point above which should, in theory at least, have the effect of reducing CPMs by 50-67%)
5) One reason advertising may not work (or CPMs will be low) is that people come to MySpace to visit each other, not to access content
6) On the other hand some rumoured numbers I have heard for Facebook penetration of their vertical and average time spent per day on the site are staggering and lead me to question my whole thesis here that the traffic may not be monetisable
7) People are starting to talk about the business model for MySpace not being traditional advertising but instead a recommendation or collaborative filtering tool
It is easy to see why opinion is sharply divided on whether MySpace was worth the $580m or not. I’m still of the opinion that on a pure DCF basis it will turn out not to have been worth that much. For NewsCorp it may have been worth that much to get a foothold in the new world and start learning. It is only 2.5% of their market cap and I can’t shake the suspicion that part of their justification was that being associated with the hype around MySpace will do more than that for their share price over the short to medium term.