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What’s News Corp’s MySpace problem?

Rupert Murdoch’s $580million acquisition of MySpace may have seemed a steal compared to the $240m Microsoft paid for a 1.6 per cent stake in Facebook, but all is not well with Murdoch’s plans for his social network, and it is being felt in its stock price after Fox Interactive Media (where MySpace sits in the News Corp empire) reported it would miss its 2008 revenue goal of $1billion. News Corp’s stock price has slipped 9.9 per cent this year alone.

Sure, Murdoch is throwing money at MySpace to expand into India and South Korea and add a music downloads service, but the social network is struggling to attract and retain advertisers in the volumes it needs because of the risk of their brands being shown next to inappropriate user-generated content. It is precisely the freedom and flexibility MySpace user love so much, which is causing the company problems with advertisers.

Bloomberg reports that Fox Interactive’s costs will rise a massive 46 per cent this year as they bid to open new channels for MySpace – almost as much as revenue is expected to grow. The bottom line with investors is that while MySpace continues to try to grow its audience in different markets – it is still failing to fully monetise the vast audience it already has.

However, today MySpace launched a new ad platform to give advertisers more control over where their ads are being run. It is a small step – arguably long overdue – but whether it will solve the site’s short-term adveritsing issues remains to be seen, when rival networks have already stolen a lead. While Facebook wrestles privacy issues, today enabling an ad system opt-out, it is at least driving strong advertising revenue.

MySpace’s hope has to be in the medium term, beating Facebook into new markets where advertiser sensitivity to site content is far less pronounced, doesn’t it?

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