Murdoch's New Startup Incubator

The SlingShot Labs venture is designed to spawn Internet startups for News Corp. and also likely to help MySpace compete with Facebook

by Aaron Ricadela

With 110 million members and $800 million in annual revenue, MySpace has become a growth engine for Rupert Murdoch's News Corp. (NWS) media empire. Now the media mogul wants to turn the online social network into a breeding ground for his next success story.

MySpace plans to announce as soon as Feb. 13 that it has formed a business incubator called SlingShot Labs to spawn Internet startups for News Corp.'s growing empire of Web properties, which now includes The Wall Street Journal's WSJ.com as well as the video game site IGN. Murdoch and MySpace CEO Chris DeWolfe plan to be closely involved in the venture, which News Corp. has seeded with $15 million to hire roughly 40 employees, mostly software developers, say people with knowledge of the plans.

The venture is being launched nearly a half-year after archrival Facebook announced a $10 million fund to invest in software companies that build applications for its social network. Indeed, most of of MySpace's rank and file are deep into projects designed to reignite the site's growth after a year that saw Facebook's membership soar. MySpace's current to-do list includes building an ecosystem of software developers (BusinessWeek.com, 10/18/07) who can create add-on "widget" applications for the site; redesigning MySpace's profile pages to give members more control over who sees what; expanding the selection of music on the site; and expanding its efforts in Russia, India, and Turkey.

MySpace CEO: "My Baby, My Idea"

With all that swirling about, SlingShot is seen as a way for MySpace to keep looking down the online media road and be able to pounce quickly on opportunities, says DeWolfe as he downs cappuccinos and a Red Bull during a recent interview at a San Francisco restaurant.

Two longtime MySpace lieutenants, Josh Berman and Colin Digiaro, will run SlingShot as co-presidents. SlingShot employees—10 new hires have signed on so far—will receive equity in the startups. The incubator also satisfies a craving of DeWolfe's. "This is my baby, my idea, and something I've wanted to do for a long time," he says. (Along with MySpace co-founder Tom Anderson, he signed a new two-year contract worth millions in October.)

Outsiders also see SlingShot as a way for MySpace to tap a vein of software developers who can help the site build more compelling features to compete with Facebook and thereby capture a greater share of social-media ad spending. Worldwide, advertisers are expected to lay out $2.15 billion worth of marketing on social networks in 2008, surging 75% from last year's $1.23 billion, according to research firm eMarketer. At a time when advertisers are still experimenting to find the right business models for marketing on social networks, it's sensible for MySpace to nurture companies that can expand the possibilities, says Debra Aho Williamson, a senior analyst at eMarketer.