If Yahoo! (Nasdaq: YHOO) truly is hooking up with News Corp.'s (NYSE: NWS)(NYSE: NWSA) MySpace, as yesterday's Los Angeles Times suggests, the deal sounds like a match made in purgatory.
Two sinking companies can't be lashed together to create a seaworthy vessel. MySpace just shed nearly half of its jobs this week. How can it find salvation with another dot-com now doling out its own pink slips, despite the obvious recovery in online advertising?
Don't get me wrong. Yahoo! is in much better shape than MySpace -- it simply has no direction. MySpace is tanking as a social network, a niche not known for second chances. No one's banking on a revival at Friendster, Tribe.net, or AOL's recently ditched Bebo. If -- or rather when -- Facebook peaks, you can count on a long downhill slide there as well.
If you think I'm out of line, I offer MySpace itself as Exhibit A. The company put a lot of effort into a site makeover that rolled out in November. Two months later, it's showing 500 employees the door.
"The new organizational structure will enable us to move more nimbly, develop products more quickly, and attain more flexibility on the financial side," MySpace CEO Mike Jones explained in a statement issued with the layoff announcement.
That sounds logical in theory, but don't we hear the same thing from every newspaper publisher justifying a round of layoffs? At the end of the day, circulation continues to shrink, ad dollars depart, and more pink slips arrive.
Yahoo! may see things differently. Google, Yahoo!, and Microsoft may have built popular portals with sticky free e-mail, but they have largely flopped when it comes to social networking. If Yahoo! can pick up MySpace, then feed it traffic through its hundreds of millions of e-mail accounts and random visitors, perhaps it can keep new users flowing into MySpace faster than the old ones are departing.
That's a risky gamble. Buying MySpace won't give Yahoo! any growth-stock credibility with the market. However, I'd still rather see Yahoo! make the purchase than simply stand still, especially if the company can snag MySpace at a fire-sale price.
Everyone knows how this will end. But a combination of Yahoo! and MySpace may be just enough to slow the inevitable demise of the once-dominant social network.
Is it too late to save MySpace? Share your thoughts in the comment box below.
