(Adds Vanderhook comments starting in sixth paragraph.)
June 29 (Bloomberg) -- News Corp. agreed to sell Myspace to Specific Media Inc. for a fraction of what it paid six years ago, ending its efforts to turn around the money-losing social networking business.
News Corp. will receive $35 million, including a 5 percent stake in Specific Media, according to a person with knowledge of the situation who wasn’t authorized to speak publicly. Specific Media announced the sale in a statement today, without providing the terms.
The accord rids News Corp. Chairman and Chief Executive Officer Rupert Murdoch of a website that lost its lead in social networking to Facebook Inc. after being acquired in 2005 in a $580 million deal. The company had sought about $100 million for Myspace after Chief Operating Officer Chase Carey said in February he wanted a deal completed by the June 30 end of the parent company’s fiscal year.
“It gets Myspace off their books finally, which has a certain value,” said Michael Gartenberg, an analyst at Gartner Inc., a Stamford, Connecticut-based research and advisory firm. “This shows how fast things change on the Web and how quickly $580 million in value can vanish.”
Myspace CEO Mike Jones will depart after a two-month transition that includes “significant” job cuts, he told employees today in a memo. News Corp., based in New York, will own a stake in the online advertising company after the sale is complete, Specific Media said in the statement.
“Social media has forever changed how people find and interact with entertainment,” Tim Vanderhook, CEO of Irvine, California-based Specific Media, said in an interview. “There are few names that have the international prominence of Myspace.”
For Specific Media, Myspace’s 34.9 million monthly visitors provide an audience for its network of online ads. The company was formed in 1999, and in 2002 created an advertising network that places marketers’ messages on websites.
Recording artist and Hollywood actor Justin Timberlake will take an unspecified stake in Specific Media and help develop a new Myspace strategy, the company said in an e-mailed statement. Details will be announced by September, Specific Media said.
Timberlake will keep an office at Myspace, which will likely move out of Beverly Hills by the end of the year, and oversee a team of about six employees focused on developing products, Vanderhook said.
“We hope to reinvigorate the brand and give users a reason to come back,” Vanderhook said. “Justin Timberlake will advise us on how to get them back and give consumers a reason to come back to a brand that has been challenged.”
Vanderhook takes credit for creating the so-called pop- under advertising unit after the dot-com bust a decade ago. Specific Media has run campaigns for New England Jeep dealers, Colorado’s lottery and Air New Zealand, the website says.
Specific Media raised $100 million from San Francisco-based private-equity firm Francisco Partners in 2007, according to the website. Its acquisitions include Broadband Enterprises, an online video company known as BBE.
Under the new owners, Myspace isn’t likely to rise up and compete with Google Inc. or Facebook as a social network, Gartenberg said. Specific Media can still make the website profitable, he said.
“There are a lot of opportunities for Myspace to carve out a niche in social music exploration,” Gartenberg said in an interview. “The brand is probably worth what they reportedly paid, even though it’s a fire-sale price.”
News Corp., owner of the Fox TV network, climbed 22 cents to $17.39 at 4 p.m. New York time in Nasdaq Stock Market trading. The Class A shares have gained 19 percent this year.
Jones told employees in January that News Corp. planned to spin off or sell the site. He led a redesign in October aimed at building online communities around films, TV shows and music.
Jack Kennedy, executive vice president of operations for News Corp.’s digital group, has overseen the sale process, while Allen & Co., a New York-based investment bank, marketed the website to potential buyers.
Facebook, based in Palo Alto, California, had 157.2 million U.S. users in May, according to Reston, Virginia-based Comscore Inc. It had a market value of $71 billion yesterday, according to SharesPost Inc., an exchange for stock in privately held companies.
Results for Myspace aren’t broken out in News Corp.’s financial statements. The division that includes Myspace lost $575 million in the fiscal year ended June 30, 2010, according to company reports. During that period, Myspace lost less than $100 million, the website said in an e-mail in October.
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