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Yahoo Hedges, Myspace Pledges. Second-Tier Scrappers Settle Into a New Online Business Climate

January 12th, 2011

Remember this Blood, Sweat & Tears song? “What goes up must go down. Spinning wheel got to go ’round. Talking ’bout your troubles it’s a cryin’ sin. Ride a painted pony let the spinning wheel spin.”

In recent weeks, just as we’ve watched companies like Groupon, Facebook, Zynga and Twitter add over $2 Billion (that’s $2 BILLION) in new venture capital, we’re also seeing companies like Yahoo and Myspace in the news as well. Only, in the case of Yahoo we were learning about layoffs (560 employees), and at Myspace (500 employees announced on Tuesday, January 11). A stark look at the contrast between these groups of companies is detailed here:

On the Way Up: Recent Investments
Groupon ($950 Million, January 10)
Facebook ($500 Million, December)
Zynga ($360 Million total)
Twitter ($200 Million in December)

On the Way to Something Else
Yahoo: (560 employee layoff, 4% of workforce on Tuesday, December 14)
Myspace: (500 employee layoff, 47% of workforce on Tuesday, January 11)

But in addition to reducing staff and operating costs, both Yahoo and Myspace are also announcing bold new plans. Yahoo launched thepostgame.com, its first venture into online magazine publishing that will focus on sports. The same day, Myspace announced a clean new design for the site intended to give users more ways to consume music, videos and read about celebrity gossip. In its work to position more clearly, it has entrenched even more in the entertainment space.

Yahoo co-founder Jerry Yang was the company’s CEO in 2008 when Microsoft presented a buyout offer of $47.5 billion. Shareholders were infuriated when Yahoo snubbed the offer, and Yang subsequently stepped down. The new CEO, Carol Bartz, who took the helm in January 2009, has said she wants to streamline the company and refocus it around content. As Yahoo has lost major revenues in display advertising — once its main value proposition — to Google and Facebook, it has worked to reinvent itself beyond an Internet portal. But even with the launch of thepostgame.com, things appear in decline for the company. Sort of gives new meaning to the old advertising catch phrase, “Yahooooooooo!” For executives, it probably feels like going over whitewater rapids.

My Space is Shrinking
News Corporation won a competitive battle against Viacom and earned the right to buy Myspace in 2005 for $580 Million. Cut to 2011, where the most recent quarter showed operating losses of $156 Million. Meanwhile, users have been fleeing Myspace for Facebook by the millions in the last 2-3 years. Sounds like Mr. Murdoch would like a “do-over.” Rumors are even circulating that the News Corporation would consider any buyout offers for the company.

These recent moves to redefine the audience and redesign the site are not so much an attempt at a comeback as they are to better serve the existing users. The thinking seems to have gone from a model of growth to one of preventing attrition, or some might say, “preventing an all-out hemorrhage.” The company has done its homework and is settling into a focus on entertainment for people 13 to 35 years of age, also known as Generation Y. That’s the mantra of every company slipping in market share: define the audience and recalibrate the focus.

“Over time, Myspace got very broad and lost focus of what its members were using it for,” said Michael Jones, president of Myspace.

According to Tim Arango of The Times, “the decline of MySpace again shows the fragility of social media where fickle consumers and changing tastes can make sensations out of services like Tribe and Friendster that quickly fade from public imagination.” I’ll say. Spinning wheels and carousel horses seem like a ride in the park when compared to the social media business. A company can go from king of the mountain to bottom of the pile in 2 years.

At one time, Myspace was as popular as Facebook is today. “MySpace was like a big party, and then the party moved on,” said Michael J. Wolf, the former president of MTV Networks and managing partner at Activate. “Facebook has become much more of a utility and communications vehicle.” As the company grew, it seemed to lose focus on delivering to its customers. The presentation of the site was cluttered and confusing; the focus internally — by accounts inside the organization — was on making money.

Chris DeWolfe, one of the founders, said, “The paradox in business, especially at a public company, is, when do you focus on growth, and when do you focus on money? We focused on money and Facebook focused on growing the user base and user experience.”

News Corporation President Chase Carey pledged to improve performance for investors, saying recently, “The current losses are not acceptable or sustainable.”

Yahoo Sports Adds an Online Magazine

Hot Social Networking Site Cools as Facebook Grows

For Myspace, a Redesign to Entice Generation Y

Yahoo Layoffs: 600 Cut in Long Rumored Move

http://www.thepostgame.com/

http://www.myspace.com/

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This entry was posted on Wednesday, January 12th, 2011 at 10:00 am and is filed under Business, Design, Marketing, Media, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

DWAYNE FLINCHUM
Founder & President,
IridiumGroup Inc.

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