Why is MySpace worth so much less than in 2006? 4 Reasons

When Rupert Murdoch bought MySpace in 2006 it had 21million members and it was valued at $580million, when he sold it last night, it had 35 million users and was worth $35million. That is 6% of the 2006 price. Given that the number of users had increased a bit – why the drastic tumble in the value?

Also factor the heady state of the tech market for example that start-ups like Square* (which few outside tech world have heard of) got valued at $1billion only last week, why is MySpace worth so little?

1) MySpace is unlucky to have one of the best companies on the internet as a rival
There are rivals and competing services in most areas of the internet, unfortunately, MySpace’s rival is Facebook, genuinely one of the most successful and innovative companies on the internet. This is kind of the issue that AskJeeves.com had with Google.

2) Users have been devalued
Back in 2005 when Facebook had 8 million users a month, MySpace’s 20million users a month was good. Now, in this age of mass digitisation you need a lot more than that to impress. Many more people are on the internet and so MySpace’s current 34million users is worth a lot less than it would have been 6 years ago.
It’s the same with hits on websites. The currency of unique users has been devalued. Facebook now has 700million uniques a month. That’s what they need to be aiming for.

3) Future prospects are dim
Start-ups like Square get lots of attention and heady valuations because people are betting on their potential to go massive. They expect they’d get a high return on their investment. It’s fair to say that despite MySpace’s significant audience, it has little potential to move in the space. Facebook dominates the social networking sphere and nimbler smaller groups like Twitter fill in the gaps it can’t reach. As for music – the market is even more packed, and even less profitable. Spotify is making a successful business out of online music, but it is one of the only companies to do.

4) It loses money.
Oh yes – this. NewsCorp don’t release the exact figures for MySpace but the division it’s in is losing money, something in the millions of dollars range. That needs to be fixed.

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Having said that, we’re sure MySpace can do something with its significant user base and reputation. Hey, I’m waiting to see what Justin Timberlake can pull out of the hat…

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*For the record, Square is a service that enables anyone to accept credit cards anywhere. Square offers an easy to use, free credit card reader that plugs into a phone or iPad. It’s simple to sign up. There is no extra equipment, complicated contracts, monthly fees or merchant account required.