How can News Corp. kick MySpace back into gear? By purchasing a social gaming company like Zynga, says Pali Research’s Rich Greenfield in a post today (registration required).
It’s no secret MySpace is flagging. It is surprising, though, MySpace will miss certain traffic targets costing it $100 million in potential Google revenue.
Greenfield thinks the problem is MySpace’s lack of user engagement. If — and it’s a gigantic if — News Corp. wants to invest in MySpace, social gaming is an option. His reasons:
- “The most logical direction for Myspace to move is social gaming – acquire a Zynga or a start-up along those lines that can leverage the Facebook social connected web (particularly as Myspace self-admits it is moving away from being a social network to an entertainment/content site, so it should work to embrace social nets such as Facebook going forward).”
- “Myspace’s recent embrace of Twitter helps them leverage other social networks, but Facebook is the clear global winner in social nets, in turn, we will be curious to see if and how Myspace can work with Facebook over time.”
We don’t think there’s any way News Corp. will pick up Zynga. The hot social gaming startup wants to IPO. Besides, it would cost too much. While Zynga is ensnared in a minor scandal over scammy advertisements, we think News Corp. would have to pay $1-$3 billion for it.
On last night’s call, Rupert said, “historically, our best money makers are things we started from scratch or bought for peanuts.” While he didn’t flat out deny he’d be interested in acquisitions, he said we need to “see great fits.” Since he just passed on the Travel Channel at less than a billion, we don’t see him picking up a social gaming company for more.
After getting burned by MySpace, Photobucket and IGN, it’s hard to see News Corp. pulling the trigger on another big digital purchase for a while. Even Playfish, who is believed to have a fraction of Zynga’s revenue is rumoured to be selling for $400 million.
Bigger picture: MySpace is such a confused company, we don’t see Murdoch pouring hundreds of millions of dollars in to it. News Corp. executives say MySpace is changing, but they don’t really have a clear vision for what the company will look like in 12 months.