Wall Street Journal
MARCH 28, 2011
By EMILY STEEL
With its traffic plummeting and its future uncertain, social-media and entertainment site Myspace is having an increasingly hard time drawing advertisers, especially for long-term deals.
In February, Myspace registered its sharpest audience declines since the site began its downward spiral in 2009. Traffic to Myspace last month plunged 44% from a year earlier to 37.7 million unique U.S. visitors, its lowest monthly total since February 2006, according to comScore Inc.
Meanwhile, people who visited the site spent on average 59% less time in February than they did a year earlier, comScore data show.
The declines come as Myspace owner News Corp. pushes ahead with efforts to unload the website. Options that have been discussed include combining Myspace with another website, such as a gaming or social-networking site, in exchange for cash and equity in the merged company. Executives also have talked with private-equity and venture-capital firms about deals in which such a firm would take over the business, leaving Myspace employees and News Corp. with minority stakes.
With so much up in the air, several marketing executives say they are hesitant to commit ad dollars to Myspace, particularly for larger or extended campaigns. "We're not seeing our audiences on Myspace, and not seeing them play the big influencer role they once did," says Shiv Singh, head of digital for PepsiCo Inc.'s PepsiCo Americas Beverages, which hasn't run an ad campaign with Myspace since 2009. "We don't know who will own them or what they will look like in June or July."
Rosabel Tao, a spokeswoman for Myspace, declined to comment. Myspace is owned by News Corp., which also owns The Wall Street Journal.
Myspace used to regularly attract big splashy ad purchases from major marketers looking to tap into the social-networking craze and Myspace's willingness to participate in innovative campaigns.
A series of big-name sponsors, including McDonald's Corp., Sony Corp.'s Sony Pictures, State Farm Insurance and Toyota Motor Corp., signed up to the launch of Myspace Music, a joint venture with several record labels, in September 2008.
When MySpace's popularity among Internet users was surging—it peaked in 2008—the site regularly sold the high-priced ad space on its homepage months in advance.
Today, Myspace still charges relatively high prices for splashy ads on its homepage, but demand has dropped off, and several marketers say they no longer make commitments months in advance.
"Nobody is going to commit to an upfront because they wouldn't know who they are going to be writing checks out to in six months," says Ian Schafer, chief executive of Deep Focus, a New York-based digital ad agency owned by Engine USA, which creates campaigns for clients including Microsoft Corp., Nike Inc. and Hearst Corp. Mr. Schafer says his clients haven't run an ad campaign with Myspace for several months.
"They have gone dormant over the past two years with advertisers," says Scott Kelly, digital marketing manager for Ford Motor Co., which hasn't run an ad campaign with Myspace in about two years. Ford was in discussions with Myspace about a campaign for its Mustang brand in 2009, but the talks fell apart when Myspace closed its Detroit office and didn't follow up, Mr. Kelly says. "They literally left town and left the campaign on the table. We haven't done a campaign with them since."
In their meetings with ad buyers, Myspace's ad-sales teams pitch the site's extensive reach, its targeting options, self-service ad-buying systems and opportunities to create interesting promotions, such as the opportunity to "hijack," or take over, the site's homepage. Homepage hijacks cost a minimum of $750,000 to $1 million, according to a person familiar with the matter.
Some marketers say they still are open to buying short-term display ads on the site, which are paid for based on the number of times an ad is viewed, because Myspace continues to draw a sizable, though shrinking, audience that ranks it 26 among U.S. Web properties. Those ads cost a couple of dollars per thousand views, according to ad buyers.
Standard display ads for Citigroup Inc. appeared on prominent sections of the site for several days last week. A Citigroup spokeswoman declined to comment.
Myspace also has a deal with Google Inc. to sell a portion of its ad space through Google's advertising systems.
"Myspace still has a strong teen audience, and is good for gaming and content sharing. Depending on the campaign, Myspace is definitely still in the mix," says Joe Mele, a managing director at Razorfish, a digital ad agency owned by Publicis Groupe SA, which creates campaigns and buys ads for clients including AT&T Inc., McDonald's and J.C. Penney Co. He added, however, that clients might question the firm's rationale for recommending Myspace.
Kelly Twohig, an executive vice president at Publicis Groupe's Starcom USA, which buys ads on behalf of such marketers as General Motors Co., Bank of America Corp. and Kellogg Co., is more critical. "This is not a place you are going to go for a franchise opportunity, something multiyear or multiquarter. You are not going to invest resources and talent in something big that may not be there for the long term."
U.S. ad revenue at Myspace dropped 39% in 2010 to $273.8 million, according to research firm eMarketer. The News Corp. segment that includes Myspace reported an operating loss of $156 million for the quarter ended Dec. 31, primarily due to the site's poor performance. Search and advertising revenues at Myspace for the quarter shrank $70 million from a year earlier.
Myspace revamped its site in the fall, trying to attract users between 13 and 35 years old. The site dialed back its focus on connecting with friends, aiming to become a hub for music, entertainment and games. Chief Executive Mike Jones says that Myspace now is a "complementary offer" to Facebook Inc., which is "not a rival anymore."
Visitors to the site have steadily dropped off since then, even as the company continues to release new features. Myspace recently unveiled a new homepage with more of a focus on music, movies, celebrities and TV. The company also is developing a new linkup with Facebook that would allow musicians and bands to manage their Facebook profiles from Myspace, according to people familiar with the matter.
"Their fall from relevance has been so significant, that advertising on Myspace just doesn't make sense to us," says Chuck Sullivan, senior vice president of global online services for hotelier Hilton Worldwide. Mr. Sullivan says that Hilton hasn't bought any ad campaigns with Myspace for more than two years.
This article was not very surprising for me. For the past few years Myspace has been becoming less and less popular. I am curious to see if something similar will happen to Facebook, however with the popularity of Facebook that is hard to imagine.
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