Murdoch Magnifies MySpace

Not long ago, Rupert Murdoch's News Corp. (NYSE: NWS  ) acquired Intermix, getting its hands on the hot social-networking site MySpace.com. When I heard that Murdoch's been talking about turning MySpace into a newfangled kind of Internet portal, it seemed a little weird to me -- why mess with success? But I quickly saw the logical motivation behind his plans.

This week, Murdoch's been talking about a lot of plans for his News Corp. properties. Among them, he included plans to transform MySpace into an online communications hub, incorporating instant messaging, voice communication, and free video downloads. (News Corp. made other news with a new video-on-demand plan this week.)

You might think it's a silly plan; after all, does MySpace need that much more going on? Its strong bias toward sharing and streaming music has already helped draw a healthy audience among the Internet masses. (See this recent article from long-time Fool Rick Munarriz about MySpace.com's new record label and the ramifications for the music industry at large.)

But while News Corp. may look like an old-school media company (given its various Fox holdings and The New York Post), that doesn't mean Murdoch is blind to the advancing threats the Internet presents to traditional media and its advertising model. News Corp.'s acquisition of MySpace and gaming site IGN both imply that Murdoch's trying to head off this threat by co-opting a piece of it. Meanwhile, companies like Yahoo! (Nasdaq: YHOO  ) , Google (Nasdaq: GOOG  ) , Time Warner's (NYSE: TWX  ) America Online, and Motley Fool Inside Value pick Microsoft (Nasdaq: MSFT  ) all strive to offer some or all of the elements that Murdoch's talking up for MySpace. (In the hot social-networking segment of the Internet, Yahoo! has recently taken the lead by purchasing companies like Del.icio.us and upcoming.org.)

It goes without saying that News Corp.'s plans are meant to lure MySpace users into sticking around the site for longer periods of time, thus increasing the value of its online ads; MySpace's young, hip regulars are a coveted demographic. MySpace has amassed 47 million of those demographically desirable users since its inception in January 2004, and Murdoch said that it's adding 1 million users each week.

It occurred to me that MySpace could lose some of its coolness factor if it suddenly seems too much like everybody else. In addition, a heavier emphasis on advertising might start to drive away MySpace's media-savvy core audience; I may not be so young or hip anymore, but I have noticed that MySpace seems to have a lot of flashing ads these days. And I can't help but recall what befell Friendster -- it was ultra hot, and then, well, it wasn't. Talk about fair-weather friends.

Murdoch's plans may be logical and intriguing, but in the highly competitive and fickle Internet arena, it's anybody's guess just what content and communities will be trendy tomorrow. One false move, and MySpace might face social (networking) suicide.

Further foxy Foolishness:

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Alyce Lomax does not own shares of any of the companies mentioned.


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