MySpace Users Build Up Ad Immunity
There was a time when Mark Seremet considered «investing.businessweek.com» one of the best things to happen to his business. Seremet, then-CEO of customized clothing company «investing.businessweek.com», saw sales jump sixfold in late 2005 and early 2006 after he ran ads on the popular social networks MySpace and «investing.businessweek.com». “Somebody would get the shirt, then tell a friend,” Seremet says. “It was really an amazing change for the business.”
But Seremet’s love for social networks, including the News Corp. («www.businessweek.com») flagship, soon diminished. By last year, when he left Spreadshirt for another company, ads on MySpace had lost a lot of their oomph, measured by the number of times users clicked on them. The ads’ so-called click-through rate plummeted from one in 100—a decent return by Web standards—in 2006 to one in 1,000 in 2007. “Users became more or less desensitized to the advertising,” says Seremet, a veteran of Take-Two Interactive («www.businessweek.com») and now president of video game publisher Green Screen. “You won’t make money on it.”
Seremet’s experience reflects growing frustration at a lot of companies hoping for a boost from advertising on social networks like MySpace. Across the Web, companies large and small, from Spreadshirt to Google («www.businessweek.com»), are throwing money at social-network advertising but not getting the hoped-for returns. All Smiles
You won’t hear much complaining from News Corp., though. Sales for Fox Interactive Media («www.businessweek.com»), the division that includes MySpace, surged 87% in the last three months of 2007 from a year earlier, “primarly due to revenue growth for search and advertising at MySpace,” said News Corp. Chief Financial Officer «investing.businessweek.com» on a conference call. That puts the division on track to reach CEO «investing.businessweek.com»’s goal of $1 billion in sales by the end of 2008, said Chief Operating Officer «investing.businessweek.com». FIM generated $23 million in operating income—up from $1 million a year earlier. “Turning to FIM, we are starting to see real progress on the advertising front,” said Chernin. “We have regained our momentum at MySpace.”
That’s just what Murdoch wants to hear. He purchased MySpace for $580 million in 2005 as part of an effort to put News Corp. at the forefront of a boom in online social media. The strategy includes last year’s acquisition of Dow Jones, parent of The Wall Street Journal. News Corp. reiterated Feb. 4 that it will keep the bulk of the Journal’s Web content behind a subscription wall; that limits what the company can generate from advertisers hoping to reach a large audience, but it ensures a steady stream of subscription fees. News Corp. also has no plans to fight Microsoft («www.businessweek.com») for Internet icon Yahoo! («www.businessweek.com»). “We are definitely not going to make a bid for Yahoo,” Murdoch said.
