News Corp’s MySpace for Yahoo deal, worth it or not?

June 20, 2007

News Corporation has discussed swapping MySpace with Yahoo in return for a 25% stake in the resulting group.

A deal would demonstrate a quick (and profitable) return on News Corp’s investment in MySpace, which cost it $580M in summer 2005. Yesterday Yahoo was worth $37B. A quarter stake in an enlarged company would be worth $12.3B.

News Corp is interested in a deal even if it means losing some control of MySpace because it would give the media group exposure to a far larger internet-based business. It also gets them away from the reliance on one service which currently is losing ground to Facebook. For Yahoo, it gives them a foothold in the social networking world and a huge user base to apply Panama to. Google currently serve ads for MySpace, I’m sure that wouldn’t last if Yahoo gets involved.

It’s an interesting deal and I actually kind of hope it goes ahead. Hopefully Yahoo could apply some of their years of internet knowledge to MySpace to make it less cheesy and more appealing to other age groups than the teens it currently serves so well, and for Yahoo the benefit really is in the advertising possibilities that would be opened up to them.

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