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Tuesday, July 19, 2005

Hoping To Find Its Place In Cyberspace, News Corp. Acquires MySpace - 07/19/2005

MediaPost Publications - Hoping To Find Its Place In Cyberspace, News Corp. Acquires MySpace - 07/19/2005
Hoping To Find Its Place In Cyberspace, News Corp. Acquires MySpace
by Gavin O'Malley, Tuesday, Jul 19, 2005 8:00 AM EST
MORE THAN A DECADE AFTER it squandered its first foray online - the first of any major media conglomerate - News Corp. is once again betting big on online media, announcing a deal Monday to acquire Intermix Media Inc. for $580 million in cash. Intermix, which operates the wildly popular social networking Web site MySpace and about 30 other Web destinations, has made inroads in drawing both the precious youth market and advertisers. The timing of the deal is interesting for News Corp. in general and MySpace in particular. The deal comes 12 years after News Corp. bet big and failed with its first online strategy, and has been licking its digital wounds ever since. In 1993, it acquired Delphi Internet Services Corp., one of the world's first consumer Internet service providers. But News Corp. failed to formulate an integrated online strategy, squandering the opportunity as Delphi was passed by other emerging online services such as America Online, CompuServe, and Prodigy.
News Corp. isn't the only major media conglomerate to make an ill-timed bet online. Walt Disney Co. bet big when it acquired early popular search engine Infoseek, which ultimately was merged into Disney's online services. And, of course, Time Warner, merged with America Online, became dominated by an online strategy, before it regained its footing as a broad-based media and entertainment concern. Now Time Warner is once again looking to AOL to fuel its growth.

Mainly, big media companies like News Corp., Disney, Time Warner, and Viacom, have looked online as a way of extending their traditional media brand franchises and to help promote their usage. News Corp.'s acquisition of Intermix looks to be a genuine diversification play into the rapidly growing area of social networking.

Nielsen//NetRatings' AdRelevance unit reported last week that MySpace beat out heavyweights MSN Hotmail and Yahoo! Mail as the leading site for advertisers to promote their wares in June, with a 7.9 percent share of ad impressions. Advertisers include Procter & Gamble and Sony Pictures.

Additionally, MySpace.com currently dominates other social-networking sites on the Web, with 84.46 percent of the market for the week ending May 21, according to research firm Hitwise.

The deal represents one of many recent buyouts of Internet companies by traditional media players. For instance, earlier this year, Dow Jones & Co. purchased MarketWatch for $519 million, and New York Times Co. bought About.com from Primedia for $410 million.

Intermix, which said it had exercised its option to buy the 47 percent of MySpace.com it doesn't already own, will become part of News Corp.'s new Fox Interactive Media unit. The addition of Intermix's 27 million monthly users will more than double Fox Interactive's online audience.

Richard Rosenblatt, Intermix Media's chief executive officer, and Chris DeWolfe, chief executive officer of MySpace.com, will retain their jobs when the acquisition is completed. A company representative said MySpace had no plans to change under new management.

"MySpace will continue to create new ways to connect people online and to maintain a unique environment where our users can creatively express themselves," a spokeswoman said in a statement. "With this acquisition, MySpace will be able to accelerate its growth plans and expand into new markets."

In April, Intermix became the target of New York Attorney General Eliot Spitzer and his quest to curb spyware. Spitzer sued Intermix for spreading ad-serving programs without consumers' consent, along with the games and screensavers available on its sites. Intermix said it had stopped distributing programs mentioned in the lawsuit, but in June agreed to pay just over $7 million to settle the charges without admitting any wrongdoing.

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