Management shakeup at MySpace

MySpace, owned by the News Corporation, grew by leaps and bounds since its inception in 2003. However, of late, the site has started losing market share to arc rival Facebook, prompting DeWolfe to resign from his role as the chief executive.

The news of DeWolfe's resignation was revealed by Web site TechCrunch. Sources familiar with the matter said that Facebook executive Own Van Natta is likely to replace the outgoing CEO DeWolfe. The latter will, however, remain on the board of MySpace China.
Michael Nathanson, an analyst at Sanford C. Bernstein & Company, said of the resignation, “At some point News Corp. has to look at the investments and the current management team. It doesn’t surprise me in the least.”

In the overall management shakeup at MySpace, intended to reinvigorate its business, Tom Anderson, another co-founder and MySpace's president, would be "assuming a new role in the organization".

In 2005, Rupert Murdoch owned News Corporation had piped Viacom in a bitter bidding battle, and had acquired MySpace for $580 million. On paper, the acquisition was a very good strategic fit. However, after the initial success, things started falling apart for MySpace when Palo Alto, California based Facebook surpassed it in terms of number of users worldwide.

The traffic trends on the two sites suggest that growth for MySpace has come to a standstill while Facebook has grown at a fast clip.

Measurement firm Nielsen said that MySpace had close to 54 million unique visitors in February, down from 56 million in the comparative period last year. On the other hand, Facebook drew 45 million more visitors in the said period. Its visitor base increased from 20 million in February 2008 to 65 million in February 2009.

To make matters worse for MySpace, its search advertising deal with behemoth Google (NASDAQ: GOOG) ends next year. The said deal fetched MySpace close to $300 million. Nathanson opined, “The company then has a potential black hole in terms of profitability.”