Rupert Murdoch laid down the gauntlet to Fox Interactive Media earlier this month saying he wants the division to increase its profit factor by 20 over the next year. The division brought in $10 million in profits on sales of $550 million over the last fiscal year which ended June 30.
Murdoch believes the company can increase sales to $1 billion and profits to $200 million.
At the beginning of buying MySpace, which is part of Fox Interactive Media now, he told MySpace founder and now CEO Chris DeWolfe he didn't care how the site was monetized, just monetize it. I think Murdoch has grown tired of the slow pace of the effort and is putting the squeeze on DeWolfe and others in the unit.
While you'd think by the geek coverage of Facebook that they're about to destroy MySpace, MySpace still has far more ad sales and also it's own legion of fans.
"I think the reason we have this Facebook obsession is because a lot of us who live in the hothouse called Silicon Valley (including the media) are spending a lot of time on Facebook. I wonder how many of my colleagues have MySpace pages (I don’t.) It is one explanation for the apathy towards Rupert Murdoch’s social platform."
When you hear Milak say apathy towards MySpace, you have to consider that's not at all true with millions of people. Only the blogging tech writers, who are trying to do everything they can to bring Facebook to the forefront, are the ones trying to influence this.
At this time the reality is much different. While Facebook is growing faster by percentage, MySpace still has grown faster by numbers, as Facebook grew by 10 million and MySpace 15 million year-over-year.
With Murdoch publicly putting what he wants out there for everyone to see, his people are now being told to find a way to make his goals for sales and profits happen.
What that will mean there will be a couple things the company will have to figure out. One, whether to drop the prohibitions on users limiting their options for making money with the site. And second, how to protect their main source of income on MySpace - corporate advertising - while allowing smaller users to share in profits while making money.
Keeping that in mind, another problem is how to add value to the site which will pressure advertisers to pay more for ads. Web portals make much more money per ad than the social networks do. So that is another way to increase profits also.
We've been talking for some time at thealphamarketer on companies being far to concerned about ads being too disruptive to viewers. It'll never be known until something is tried.
I like how Murdoch's going about this. Murdoch is always one for telling his lower performing units that they need more of a sense of urgency. In the case of Fox Interactive Media and MySpace it's really true. The platform has extraordinary promise to make a lot of money in the network without alienating users.
It seems to me Murdoch is saying quit the playing around with fears about site abandonment because of ads, and make it happen.
He's right. How long can his people keep saying that without coming up with the right way to do it? Murdoch is basically saying concerns over consumer response is no longer an option as far as holding back the progress. We'll see some interesting things happen on MySpace in the near future because of that.
One other thing, did you notice the subtle hint to margins that Murdoch's numbers tell us? The division made $10 million profits on $550 million of sales. Now he wants $200 million in profit on $1 billion in sales.
He doesn't just want more ad sales, he wants more profitable ad sales.
I'm saying all this to say that those of us monetizing through the ad-supported model, need to be thinking the same way Murdoch is. We need to ask ourselves questions on what would be valuable to advertisers and users that would increase the amount we could charge for ads. What do the web portals have that makes them more desirable and profitable than social networks to marketers and companies?
While people have been spending more money on social networks in the recent past, the major reason is because of the low cost of reaching a large number of people, not necessarily because they are better performing than portals.
We have to realize that same low-cost competition can impact our efforts, and so whatever we're offering to the users must also add tremendous value to advertisers as well, if we want top dollar from our monetization efforts.
Comment Preview