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BW Businessworld

Reinventing MySpace...

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Such merry-prankster anarchy is the stuff of News Corp's social network, along with garish and clashing pages featuring photos of often young and scantily clad bodies that may or may not be real pictures of the people who posted them.

That was chapter one of the MySpace story, written by co-founder Chris DeWolfe, 43, who until last week was chief executive. Now, Murdoch is writing chapter two, the one in which MySpace must start making more money.

Four years after News Corp bought the site for $580 million, Murdoch is replacing DeWolfe with Owen Van Natta, former chief operating officer of rival social network Facebook, which is far more popular with the business crowd.

"Let's be honest. Facebook copied MySpace ... but stayed three steps ahead of them and as a result got all the incremental buzz," said Oppenheimer & Co analyst Jason Helfstein. "People who have money to spend don't use MySpace."

Van Natta must invigorate MySpace with ad deals and try to keep search advertising giant Google Inc on board after its $900 million advertising deal with MySpace expires in June 2010. Most analysts think Google would not pay anywhere near that much money to MySpace if it does stay.

The 39-year-old has the business chops: Van Natta is credited with negotiating Facebook's $240 million investment from Microsoft Corp. He also headed business development at online retailer Amazon.com Inc.

"Van Natta has a proven record if we talk about money," said IDC analyst Caroline Dangson.

Whether he can overhaul MySpace's image as a low-rent teenage hangout and boost the age of its membership base to attract more advertising dollars is unknown. Van Natta did not return telephone calls and no one at News Corp or MySpace would discuss the changes.

Cultivating The Image

Part of what made MySpace look good to News Corp was its membership base of fresh, young and often ribald members -- perfect targets for advertisers such as Toyota Motor Corp and McDonald's Corp. But an online house party is not what appeals to older people, nor the advertisers that target them.

Instead, business professionals have gravitated toward Facebook, which now boasts more users worldwide than MySpace. It's also catching up in the United States with 54.5 million monthly unique visitors, compared with 76 million for MySpace, according to comScore.

While MySpace brings in more revenue than Facebook, Wall Street has lavished attention on Facebook lately, particularly in anticipation of a possible public stock offering.

"The growth opportunity we see now for social networking is among an older crowd," said IDC's Dangson. "MySpace has had a reputation of being more popular among younger users. They are more comfortable sharing certain things about themselves that people who are older would never share."

Van Natta was one of the top executives who helped make Facebook into what it is before being ousted by its chief, 24-year-old Mark Zuckerberg, in 2008.

Analysts say MySpace should imitate Facebook, even though the privately held network has seen its valuation fall from $15 billion at the time of the Microsoft investment to an estimated $2 billion to $4 billion now.

Figuring out how to make money off MySpace's still impressive user base has become more important for News Corp now that its other businesses, such as cable and broadcast, are suffering from the economic slump.

News Corp also has another bet riding on Van Natta's performance: that it can make itself look cool again.

Investors and media experts called Murdoch visionary for buying MySpace in 2005. Since buying The Wall Street Journal and watching the newspaper and TV ad market tank, he has regained his reputation of being a buggy-whip newspaper man.

"It's tough to say if you can reverse consumer opinion just by changing an executive, but we'll see what kind of fresh ideas come in there," said Miller Tabak analyst David Joyce.

Giving Van Natta command of MySpace, if nothing else, will bring the unit closer to Murdoch and the rest of News Corp.

The question is whether they can create a site that Murdoch would be proud to use for his personal home page.

Van Natta already has one.

(Reuters)