MySpace readies site overhaul to rekindle growth

An undated image courtesy of MySpace.

SAN FRANCISCO (Reuters) - With shrinking audiences, deep layoffs and two management shake-ups, MySpace, the one-time leader in Internet social networking, has had a rocky year.

Mike Jones, who took over as co-president last month with Jason Hirschhorn, said that even within MySpace some employees have lost the will to keep fighting.

"We are at the point now where we need believers," said Jones, noting that the News Corp unit has encouraged various individuals not fully committed to the cause to leave and has hired new talent.

The need for faith speaks to the scope of the challenge facing MySpace. With competition from booming social networks like Facebook and Twitter, and Google Inc jumping into the fray, MySpace hopes to become the first social network to regain its mass appeal.

At the company's Beverly Hills headquarters on Monday, Jones and Hirschhorn outlined their plan for the first time since taking the reins as co-presidents. They pulled the curtain back on a new version of the site that will be rolled out in installments over coming weeks and months.

The new site recasts MySpace more strongly around its music and media content, with features such as the ability to listen to a music playlist based on songs that other MySpace users are sharing in their stream of updates.

The goal is to spur growth among new users and to lure back users that have departed, says Hirschhorn.

"We do not want to stay at 100 million (users) or 120 million. We want to grow to 200 million or 300 million," Hirschhorn said, though he declined to give a time frame for achieving those numbers.

MySpace had 119.6 million unique visitors worldwide in January 2010, down 7.4 percent year-over-year (though up from its November low of 108.1 million), according to ComScore.

While those seem like respectable numbers, Facebook says it now counts 400 million active users.

Hirschhorn, a former executive with Viacom Inc's MTV Networks, joined MySpace in April 2009 as Chief Product Officer, part of a new management team that brought in Jones as Chief Operating Officer and Owen Van Natta as CEO. Less than 10 months later, Van Natta is gone, due to what a source close to the company said was a personality conflict among the trio. Van Natta couldn't be reached for comment.

The two new co-presidents would not comment on the shake-up, but said the revamp of the site now being introduced is in keeping with the strategy all three executives devised over the past 11 months, including the August 2009 acquisition of Internet music sharing service iLike.

Analysts say building on MySpace's strength in music and entertainment is a sensible strategy, though some wonder whether the company will be able to create a unique offering amid a raft of rivals with similar goals, from Yahoo Inc, and music-service Pandora to Facebook.

And they warn comebacks are rare in the Web business.

"When you look at the other social networks that have faltered, they end up being a special play for a particular culture," Jeremiah Owyang, a partner at Web consulting firm Altimeter Group said on Monday. He cited Friendster, a social networking pioneer that lost ground to Facebook and MySpace and now caters to users in Southeast Asia.

SEARCHING FOR A DEAL

One of the immediate challenges facing the two new presidents is replacing the three-year, $900 million search advertising deal with Google that expires in August 2010.

The drop-off in MySpace traffic already has resulted in the company receiving lower-than-expected payments from Google, and analysts say any new deal will be on far less favorable terms.

Jones, who has led negotiations with Google, would not comment on whether MySpace would need to alter its cost structure if the next search deal yields less revenue. But he was confident MySpace wouldn't have trouble finding a partner or partners, interested in selling ads to its audience.

Some analysts also wonder whether MySpace, which News Corp acquired for $580 million in 2005, might be better off on its own as it vies with companies focused strictly on the Web business, many of which are privately-held and under less pressure from shareholders to deliver quarterly results.

"For many Internet companies, the most important thing is to be able to be adapt and be quick to move in a rapidly changing market, and sometimes that could be impeded by being part of a larger company," Ryan Jacob, of the Jacob Internet Fund said on Tuesday. The Jacob Internet Fund does not own News Corp shares.

However, Jacob said that the financial support News Corp provides, and the doors it can open to partnerships, could prove helpful to a company trying to rebuild its business.

Hirschhorn said MySpace was under no pressure to meet financial goals at the expense of long term strategy.

"We're a business, this isn't Unicef. Of course we're focused on monetization," said Hirschhorn.

News Corp's priority was improving MySpace and rebuilding its audience. "If we don't improve this product there's not going to be anything at the end of the road," he said.

(Editing by Edwin Chan; editing by Carol Bishopric)