June 20, 2007
MySpace: Has Murdoch shown his hand?
Guessing the value of MySpace has become a faourite party game in the Web 2.0 world - and it is one that Rupert Murdoch has now played in public three times.
In 2005 he paid $580m to get his hands on the site.
At the end of 2006, the year that MySpace Mania peaked, the News Corp boss speculated at a shareholder meeting that its value had jumped to $6bn.
Now, he seems to think it has has more than doubled again. To judge by reports in the New York Times and Murdoch’s own London paper, he is now putting a value on it of $12-16bn - what it would be worth if he were to swap it for 25-30 per cent of Yahoo, an idea apparently touted by News Corp.
Well, you could forgive Murdoch if he were inadvertently to overstate the price a little. According to a Citigroup analysis today, a more reasonable valuation might be closer to $6.5bn (based on a multiple of 30 times MySpace’s likely earnings before interest and taxes next year.) Based on that figure, a swap would leave News Corp with more like 15 per cent of Yahoo.
The most interesting aspect of all of this, though, may have nothing to do with speculation about price. Rather, it is that Murdoch has apparently shown his hand: after less than two years, it seems he is willing to trade away his ownership of MySpace. An opportunistic grab to cash in at the top? A strategic sleight of hand to ally himself with a portal that, while struggling to find its way, still has one of the best audiences on the Web? Either way, this may say as much about Murdoch’s views about the prospects for MySpace as it does about Yahoo.
