News Corp.: Facebook An Increasing Threat To MySpace, Bear Stearns Warns
Facebook mania could be putting a crimp in investor perceptions of News Corp. (NWS), the parent of its chief rival in the social networking sector, mighty MySpace.
In a detailed report today, Bear Stearns analyst Spencer Wang takes a close look at how the recent surge in usage of Facebook might be affecting MySpace - the No.1 traffic in the U.S. in terms of page views - and what it might mean for investors in News Corp. “Facebook is emerging as a serious competitor to Myspace,” he says. He notes that Facebook’s user base has grown 46% in 5 months and should reach 50 million users by the end of this year, and 100 million by mid-2008.
“Myspace will need to respond,” he says, noting that the number of minutes per user for MySpace has flattened. Wang notes that the number of unique visitors and the number of page views among users aged 12-17 fell about 25% in the June quarter versus last year. “The data may suggest that Facebook is capturing more mindshare among this leading edge demo,” he writes.
Wang says he doesn’t see any near-term revenue risk for Myspace, given low but improving monetization. “The risk,” he says “is that the growing traction for Facebook could negatively impact sentiment on Myspace/NWS.”
At first glance, that seems a little silly, since, as Wang notes, MySpace in 2008 will be just 3% of the company’s revenue, and 5% of earnings before interest and taxes. But he also notes that News Corp. shares are up 41% since the company bought MySpace, beating the 26% rise in the S&P 500 over the same period. Wang contends that “the bulk of the stock performance can be attributed to MySpace, as financial guidance for News Corp. has been relatively constant over this time period.”
Wang contends News Corp. is going to have to take steps to respond to Facebook’s more open approach, or face increasing erosion of the MySpace user base. Writes Wang: “We think there are some early signs that ‘engagement’ of MySpace users is peaking out, reinforcing the need for more innovation.
Or to look at it another way, Wang asks: “Is Facebook to MySpace as Google (GOOG) was to Yahoo (YHOO)?”
News Corp. today is down 24 cents at $23.78.
Friend me! I’ve got a Facebook page.
Facebook appears to be “facing” some serious litigation from old Harvard classmates. Any thoughts on this?
Sorry bud…but Facebook is quite a boring site. I think they will always lag behind Myspace. Once you get a certain amount of users, it is obvious that the growth trend will flatten out, but then again, you are already peaking out at the top in terms of users. That is common sense. The question is where Facebook will flatten out.
The user interface on Facebook is a clear leader in a competition between these two. While myspace offers several perks for the musician, the benefits beyond that lie in one’s ability (and time availability) to create. On Facebook, applications are easily added and deleted with no hassle. On another note, Facebook has clearly established an online environment that is easily searchable and easy to guard against predators.
Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields.
