The MySpace social media network's traffic has dropped so much that it will fail to satisfy a minimum traffic level crucial to parent company News Corp's three-year $900 million advertising deal with Google, inked in 2006, that made Google the exclusive search advertiser on MySpace – then the world's most popular social network.

News Corp. executives bandied about three different estimates of how much of the Google's $900 million MySpace will not take in, due to the shortfall, but a consensus emerged that the penalty will be in the neighborhood of $100 million.

As the Financial Times points out, this Google ad deal covered News Corp.'s estimated $580 million purchase of MySpace. The site's failure to provide the deal's minimum traffic level is bad news for News Corp., which otherwise reported a generally positive outlook due to its movie studio and cable channels, which currently generate 85 percent of the company's revenue.

MySpace knows as much as anyone that its traffic is dwindling as users continue their migration to Facebook and Twitter to do their social networking.

Rupert Murdoch's new second-in-command at News Corp., Chase Carey, essentially admitted defeat in the social networking arena: "We're not trying to beat Facebook. We're not trying to beat Twitter."

Rather than compete against those social networking heavyweights, MySpace intends to double down on what has always been a core strength: the millions of artist pages on the site, which dwarfs the catalog of other music services, because it includes so many unsigned (and, for that matter, signed) bands. MySpace's new strategy, already known before the earnings call, will be to realign the site as an entertainment destination rather than a place where people keep up with friends and family.

If the strategy works, it will likely involve MySpace leveraging video in addition to music. MySpace Video currently boasts over 20,000 music videos, television shows and other videos, but faces entrenched competition from YouTube that could be even fiercer than Facebook and Twitter are on the social networking side.

On the other hand, News Corp's strong television and film properties could give MySpace a leg up on the competition, at least when it comes to its own titles. Indeed, Marketwatch paraphrased Carey as saying "many aspects of the business are changing, including when movies can debut on platforms other than theaters, the value of syndicated reruns, and the growth of video-on-demand."

See Also: