MySpace announced today it will cut its US workforce by 30%, which represents about 400 employees.
This move comes just 2 months after a new management has taken office, appointed by Rupert Murdoch. News Corp. had always stated that MySpace was "very profitable", whereas it is no secret that its competitors have yet to post meaningful profits. Still, Mr. Murdoch had expressed for some time that MySpace was oversized staffwise relative to its peers. We note that MySpace will retain 1,000 employees in the US, which is higher than Facebook's 850 employees.
We have discussed in class how MySpace was losing grounds to its more recent and "nimble-footed" social network competitors.
According to data from Nielsen, online traffic on MySpace in April dropped 31% year on year. The network has today 130 million registered users, vs. 250 million for Facebook. A year ago, MySpace was still ahead... the fall has been spectacular.
Therefore, the lesson is the following : for all the talk about how social networks revolutionize the way people interact with each other and how they affect traditional media... they eventually remain bound to the same rules as traditional businesses: they have to make money, and when they don't, they downsize and restructure, just as General Motors does....
MySpace's new management team is headed by Owen Van Natta, a former Facebook executive himself. Does that mean that MySpace is going to try and merely replicate / adapt its competitor's model, or on the other hand does this move signal the Company's determination to gain back its creativity and dynamism, which ultimately will be its growth drivers?
Time will tell!
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