MySpace woes underline social media conundrum

News Corporation's financial results this week provided further evidence to support the thesis in my previous blog that significant social media brands are struggling to find a sustainable business model, especially when subsumed within media conglomerates.

News Corporation's financial results this week provided further evidence to support the thesis in my previous blog that significant social media brands are struggling to find a sustainable business model, especially when subsumed within media conglomerates.

News Corp's president, Chase Carey, glumly dubbed MySpace “a problem” in reporting that the group's first-quarter operating losses on digital and other activities had grown to $156m, up $30m year on year. The increased losses were blamed mainly on lower search and advertising revenues at MySpace. Carey's further comment that these losses were “neither acceptable or sustainable” were ominous portents and don't bode well for MySpace's continued existence in its current format.

It follows the well-documented travails of teen social network Bebo when it was subsumed into AOL. An $800m acquisition in March 2008 was jettisoned earlier this year for a fraction of that amount as the troubled media group cut its losses, tacitly admitting it too had failed to find the business model amongst the fool's gold of massive traffic numbers. As previously reported, Twitter too is refocusing on the need to turn its massive usage figures and undoubted potential into actual revenues.

The implications for PR and communications are that the new-media mega-brands are still evolving, and that not all of them are going to prosper in the way Facebook has – admittedly also after a long period of similar cynicism about the social network's ability to turn its enormous traffic into genuine dollar revenues.

Facebook took a 1.6% investment from Microsoft in 2007 for $240 million, but apparently refused a complete takeover offer. The deal secured Facebook's financial credibility and established a valuation at the time of $15 billion, but Mark Zuckerberg's decision not to sell out completely looks smarter and smarter as time goes on.

Comms professionals must continue to evaluate and utilize all the new digital and social media channels out there for their brands and their clients' brands, and not put all their eggs in one basket, because, as Chase Carey's comments indicate, that basket might not necessarily be around in the future.

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