Image via CrunchBase
News Corp. paid $560 million to buy MySpace in 2005, but if you want an idea of how much it might sell for this time around, try moving a decimal point. Maybe two.
That's the view of Justin Siegel, CEO of MocoSpace, a mobile entertainment company that hopes to acquire the once-leading social network. Siegel went public with his company's bid yesterday and says he is in discussions with Allen & Co., the New York-based investment bank that's exploring strategic options for MySpace on behalf of News Corp.
"I think it will be fairly significantly discounted on that price of $560 million," says Siegel. "I don't think News Corp. has any expectations of being made whole. If you consider any tax benefits they'd get from a large write-off as part of making them whole, maybe. But no, obviously not."
Siegel regards AOL's purchase and subsequent sale of the social networking company Bebo as one useful measuring stick for gauging the probable value of MySpace. The initial acquisition "was an $800 million-plus cash deal. Then, 18 months later, it was a big write-off and a sub-$10 million deal. I don't expect that MySpace is going to sell for nickels on the dollar like Bebo did, but I do think we are uniquely positioned in terms of our skill set to extract value out of that business." (Siegel told Bloomberg he thinks MySpace might sell for as little as $50 million, which is the same figure an analyst quoted to me.)
A Boston-based mobile entertainment community launched in 2005, MocoSpace is primarily interested in MySpace for its mobile business, which, Siegel says, is large but generates little revenue. "If I had to guess, I'd say it's probably around 20 million uniques and growing on their mobile site and probably not monetized very much at all. We'd have to take a good look at the other parts of the business, whether it was the web piece or particularly the music area, and decide whether there's a an opportunity to run those with minimal resources and run them profitably, or whether it would make sense to wind them down or sell them."
With revenues of over $10 million last year, MocoSpace, although "significantly profitable," per Siegel, is not exactly a giant. But Siegel notes that the company has "very strong investors," including Softbank, and says he has discussed a deal with other investors who would be on board "if it looked like we could pull together something that made sense. The question with MySpace, as with any asset, is the price you pay versus the value you get out of it."
