Chernin on MySpace: Growing Slower Than Expected

I was wrong - News Corp.’s Peter Chernin talked at length about MySpace and Fox Interactive Media on today’s quarterly earnings call. As expected, FIM revenue for fiscal 2008 (ending June 30) will be down about 10% from the original $1 billion projection. Revenue for the third fiscal quarter was $210 million, up 55% from a year ago but down 10% from the second fiscal quarter. For FIM to reach the new $900 million target, it needs to earn $270 million in the current quarter.

Key challenges to monetization, according to Chernin: huge quantity of ad inventory; the fact that ad models that marketers are used to (read: banners, search) don’t work as well in social media; and the difficulty of quantifying the economic value of a “friend” vs. other metrics from the TV and radio space that marketers are used to looking at.

Chernin acknowledged that growth is coming slower than expected at FIM. While he and other News Corp. execs did not explicitly say how much of FIM revenue is attributable to MySpace, in the past they have put it at about 80%, which works out to about $720 million in MySpace revenue in the current fiscal year.

MySpace Revenues - What Will News Corp. Say Today?

This afternoon News Corp. reports quarterly revenues and many people expect Rupert, Peter et al to comment on the state of things at Fox Interactive Media and MySpace. Not too long ago, the Wall Street Journal reported that FIM would fall $100 million short of the $1 billion revenue goal for fiscal 2008 that Rupert Murdoch had set last June. Since then the media has been all over the idea the social networking is failing to monetize as quickly as everyone had hoped.

In recent earnings calls NWS has been a lot more open about the finances at FIM. However, I have a sneaking suspicion that this call won’t answer many questions. NWS has one more quarter until the end of the fiscal year and I’m not sure how much they will offer in terms of guidance. A lot about FIM and MySpace is in flux, what with the ad sales reorganization and the launch of the new ad tech unit under Adam Bain. Plus, NWS has plenty else to talk about in other aspects of its business.

We’ll see in a couple of hours.

How Has Social Networking Impacted Society?

Those of you who are interested in the human side of social networking (rather than the marketing side, wink) should check this out. The New York Times’ Freakonomics blog asked several notable academics about the effect of social networking on society. Their thoughts are gathered here.

MySpace Learns From Facebook

Yesterday, MySpace finally launched its developer network. Soon, you’ll be able to bite, pinch and slap your friends on MySpace just like you did on Facebook.

Although MySpace is 9 months late to the third-party-application party (Facebook opened its platform last May), it’s clear that the social networking giant has learned something from Facebook’s experience thus far:

1. App developers can use MySpace tools to sell advertising. This is smart because it allows MySpace to keep its hand in the game. Facebook’s hands-off approach means apps have to come up with ad strategies on their own. Developers don’t have to use MySpace’s tools, but they will undoubtably make it easier for apps to generate revenue.

2.  Apps are hosted on MySpace servers. Correct me if I’m wrong about this, but I’m pretty sure Facebook apps are hosted on third-party servers outside of Facebook. If that’s the case, then MySpace probably will have a lot more visibility into how the apps work and the way they interact with user data. Some of the problems Facebook has had with rogue apps using deceptive practices may not happen on MySpace.

3. Apps must pass a “safety review process.” All apps running on MySpace will need to go through a safety check to make sure they don’t overstep privacy boundaries, according to a company statement.

The true test will be whether developers will flock to MySpace as they have to Facebook (now with 15,000+ apps and counting).  But surely the parameters outlined above will bring more legitimacy to the app marketplace.

Fox Interactive revenue grows on Google’s back

Looks like Fox Interactive Media got the better end of its deal with Google.

Just last week, Google was bemoaning during its earnings call that “social networking inventory is not monetizing as well as expected,” in the words of Google’s George Reyes.

Today, News Corp. touted search as a leading driver of revenue growth at FIM in its latest fiscal quarter.  “Our revenue from Google is guaranteed; that’s not a particular issue for us,” News Corp.’s Peter Chernin said during the earnings call this afternoon.

Search accounts for between one-quarter to one-third of revenue at Fox Interactive Media, Chernin said.

Company execs also touted MySpace’s new HyperTargeting platform as a revenue driver. The site now offers targeting in more than 750 categories, with the goal of getting to 1,000 by July. The most popular segments are fashion, consumer electronics, videogames and financial services, all of which are categories where marketers had formerly shied away, News Corp. said.

MySpace vs. Facebook: Who’s Winning the Stats Battle?

These days, whenever News Corp. execs give public speaking appearances, the Facebook comparison slides are de riguer. Try as it might, MySpace just can’t get the little monkey (or 1,000-pound gorilla?) off its back.

The latest dustup? Some Hitwise figures announcing that MySpace had a 72% market share of US visits to social networking sites in December 2007 — well above Facebook’s 16% share.

TechCrunch jumped into the fray with some numbers from comScore showing that MySpace had 69 million US unique visitors in December vs. Facebook’s 35 million — giving it not nearly as big a lead as the Hitwise numbers indicate. In page views, TechCrunch reported, MySpace’s 38 billion trounced Facebook’s 13 billion.

TechCrunch also reported — breathlessly — that worldwide comScore figures showed that Facebook had surpassed MySpace in minutes spent on the site — 21 billion to MySpace’s 17 billion.

MySpace, meanwhile, sent out a press release touting the Hitwise numbers and figures from NetRatings (yet a third measurement service) showing that

“MySpace leads in the “Loyalty Matrix” (time spent per person combined with visits per person). During the month of December the average user spent over two hours and fifteen minutes on MySpace.”

A couple of things to note here: First, page views are a distorting metric. In a time when so many sites are using Ajax, they’re becoming less and less important as a measure of true activity.

Second, time spent is also a vague measure. For one thing, Facebook’s site has become one of the slowest loading sites around (thanks to all those apps cluttering people’s pages). And plenty of people keep Facebook open in one browser tab while they do other things online. So unless comScore’s numbers measure active engagement with the site (something the company is in fact working on), the time spent metric is also flawed.

Piper Jaffray on Social Network Advertising

Piper Jaffray’s latest edition of its Internet Strategist research note (out today; not available online) contains strong optimism for the future of online advertising. Among the predictions from Piper analyst Aaron Kessler: 20% growth in the online advertising market (vs. single digits in the rest of the ad biz), strong growth for ad networks and more consolidation in online ad services.

In the social networking realm, Piper projects that sites such as MySpace and Facebook will continue to suck time and pageviews from other sites, but that ad CPMs for SN sites and user-gen sites in general will remain low due to huge inventory (i.e., untargeted remnant banner ads), consumers’ lack of interest in the ads and advertisers’ concerns about the content.

One bright note for social networking, Kessler believes, is the ad targeting plans that the two major sites are working on. MySpace’s HyperTargeting has shown CPM lifts of 50%.

Kessler left out a key piece of the SN revenue puzzle: search. Already, search accounts for 30% of MySpace’s revenue, according to a presentation that Fox Interactive Media’s Michael Barrett gave at last month’s UBS media conference.

Another revenue driver for 2008 and beyond is the local/small business market. Both MySpace and Facebook recently launched self-serve ad systems, enabling any business to create a campaign (on Facebook, businesses can design a page for free, while MySpace still charges for anything but the basic no-frills page). Local online advertising is a growing business and social networks may be poised to bring in a sizeable portion of that revenue.