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MySpace cleaves workforce nearly in half with 500 layoffs; UPDATE: Sale or spinoff looks imminent

Molly McHugh
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MySpace Logo (Nov 2010)Yesterday we reported that MySpace China underwent some severe cuts, including its Chinese CEO and most of its staff. Today, the social media company confirmed it’s slashing about 500 employees – nearly half of its personnel – in an effort to overhaul the suffering website.

In a statement today, MySpace CEO Mike Jones said “These changes were purely driven by issues related to our legacy business, and in no way reflect the performance of the new product.” He also remarked that these actions are a “tough but necessary” part of putting MySpace on the path to increasing profits. Jones also claims that despite current developments, the upgraded site has been “trending positively.”

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The revamp MySpace underwent earlier this year saw the site alter its focus to music and video content. While Jones seems to be defending the modifications, it’s clear the company’s struggles have continued. In an interview with Fortune prior to the relaunch, Jones admitted that MySpace had diverged from its original structure, something that contributed to its user loss.

Parent company News Corp recently warned the site it had months to turn its finances around, and talk of a MySpace sale is anything but off the table. All Things Digital reports that a sale is imminent, and that it is being shopped around to “private equity buyers.” The site also claims it’s possible Yahoo could scoop up MySpace.

This isn’t the first round of serious cuts MySpace has been subject to. June 2009 saw the company purge itself of nearly 1,000 jobs in two different rounds of elimination.


[UPDATE]

One day after cutting nearly half its staff, MySpace admits it’s up for grabs. “News Corp is assessing a number of possibilities including a sale, a merger and a spinout. The process has just started.” MySpace spokeswoman Rosabel Tao told Bloomberg today.

A MySpace sale is old news, but up until this point neither News Corp nor the struggling social site have confirmed this move. Yesterday, in the midst of its job slashings, CEO Mike Jones claimed MySpace was trying to get on the track to profitability. From the sounds of it, that may no longer be necessary.

Two anonymous sources told Bloomberg that in a private preliminary meeting, Jones admitted the possibilities of MySpace’s fate. According to the insiders, he said that were News Corp to decide on a spinoff, current employees would receive shares in the acquiring company and News Corp would help fund it.

And it sounds like there are interested parties. So far, we’ve Google, Zynga, and Yahoo mentioned as potential suitors.

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Molly McHugh
Molly McHugh
Former Digital Trends Contributor
Before coming to Digital Trends, Molly worked as a freelance writer, occasional photographer, and general technical lackey…
MySpace sold from the bargain bin at $35 million

A lot can happen in six years. Back in 2005, MySpace was king. The social network was crushing competitors like Friendster while Facebook was still in its infancy. The sky seemed to be the limit, and News Corp. was quick to take notice. In July of 2005 the media giant purchased MySpace for $580 million, and by August of 2006, the 100 millionth MySpace account was created.
But then things began to go wrong. The once dominant social network began to lose users by the droves. The reasons are many, but the result was that by April of 2008, Facebook had passed MySpace in traffic, and the company has been in decline ever since. News Corp. tried several times to reinvent and reinvigorate the property, but the downward spiral continued. Now after months of offers and several potential suitors, AllThingsD is reporting that a deal has been completed for the sale of MySpace, and all that remains are the signatures.
News Corp. new it would take a loss on MySpace, and it rushed to sell the property before the end of the fiscal year on Thursday. The original asking price was said to be in the neighborhood of $100 million, but according to the report, News Corp. has accepted the offer from Specific Advertising for $35 million with the provision that News Corp. will retain a small stake in the company of less than 5-percent.
Specific Advertising was a late entrant into the bidding, emerging as the front runner just yesterday. Founded in 1999, Specific Advertising helps advertisers to buy digital ads online, through mobile devices and on TV. The company also collects user data and information to help create targeted ads. As of May, Specific now reaches roughly 79-percent of U.S. internet users.
The sale will give Specific access to the 30 million or so MySpace users’ data to use for targeted advertisements, as well as giving the company a media platform of its own from which to sell ads. It isn't clear what happens next for MySpace, but it will begin with a housecleaning, and more than half of the current 400 MySpace employees will be out, including current CEO Mike Jones and the executive staff, who will remain in an interim role briefly.

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Rumor: Myspace to lay off 37.5% of workforce on Wednesday
myspace sale

It is rumored that Myspace will be firing 150 of its current 400 employees Wednesday this week. More than one source within the company is saying that the cull is certain.
Gawker spoke to a Myspace veteran with friends at the company who believes many are expecting and even hoping for the cuts. He said, “I think the management owes the employees severance because of the terrible management mistakes they presided over.”
There is speculation that the layoffs are an attempt to appear more attractive to potential buyers by being less bloated with costs. Myspace has already had a huge case of bulimia in January when it cut 47 percent of its 1,100 US and international employees, but that still wasn't good enough for anyone to take the social networking site off of News Corps' hands. Since 2009, Myspace has laid of more than 1,500 employees. These latest cuts will be about 37.5 percent of their staff.
It's still not clear whether this will be happening on Tuesday or Wednesday, but Myspace's fiscal year ends on Wednesday. TechCrunch reports that their own source is confirming that layoffs will happen. The 150 employee cut may also be related to a rumor that Myspace is being sold. TechCrunch says that the sale will be signed tomorrow and will be announced at the end of the week. There's no word on who the buyer is, though Activision's CEO Bobby Kotick is a frontrunner in the speculation.
It doesn't seem like such a bad deal for all sides. NewsCorp gets to hand over a company that lost 10 million users between January and February, and was steadily being drained of it's users by 14 percent each month. Employees that get laid off (who should have easily foreseen this) will not be pushed out into the cold. They'll get to take part in a transition plan where they can work and get paid while they job hunt, though this probably only last a few weeks.

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A look inside News Corps’ overly optimistic MySpace sales pitch

Last week, it was reported that MySpace’s days were numbered and the sale process was going to hit full swing soon. Apparently it has, and as could have been assumed, it’s not going to be pretty. TechCrunch claims to have obtained a copy of MySpace’s very confidential pitch plans as penned by News Corp.

As could be expected by any company trying to peddle its struggling Web property, News Corp is being overly optimistic about MySpace’s future. Of course this optimism can only go so far: The most positive things News Corp could say about MySpace is that its annual revenue will be approximately $109 million and its expenses at $247 million. Do the math, and that means the failing social network is operating on a $165 million loss for the year. Unfortunately, that figure is about as good as it gets. News Corp wisely chooses not to touch on much of MySpace’s past numbers, user falloff, or general slump into oblivion. Instead, the document largely seems to conclude that there is hope since the sites revenues are growing (it should be mentioned that so are its expenses, even in the face of massive layoffs this year).

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