Fox Interactive turns annual profit; MySpace revenue to top $800 million in fiscal 2008
News Corp. said its Fox Interactive unit, which largely consists of MySpace, turned a profit of $10 million on revenue of $550 million for the fiscal year ending June 30.
Context & Ripple Effects
News Corp.'s two-year-old social bet has crossed into the black: Fox Interactive, essentially MySpace plus its sibling properties, booked $10 million of profit on $550 million of revenue for the fiscal year ended June 30, and management is guiding MySpace ad revenue past $800 million in fiscal 2008. For a division built around an audience-first property, this is the moment the monetization story has to carry the valuation.
The profit lands while MySpace is fighting on several fronts at once — upgrading its video products to chase YouTube, which itself grew out of users embedding clips on MySpace profiles, fielding eight states' attorneys general over sex offender profile data, and fending off privacy litigation that also touches Facebook. Co-founder Chris DeWolfe has also floated, though not confirmed, opening the site so outside web services can plug in directly, following a rival's lead.
First-order effects
- News Corp. now has hard numbers proving the MySpace audience converts to ad dollars — $550 million in fiscal-year revenue against a $10 million profit — strengthening its hand with advertisers and in fiscal 2008 budget talks around the $800 million target.
- MySpace must fund the video upgrade race against YouTube and the compliance burden from state attorneys general out of a business that only just turned profitable, keeping margins thin.
Second-order effects
- If DeWolfe's rumored platform opening proceeds, third-party developers gain a large new distribution surface, forcing Facebook and other rivals to compete on openness as well as ad rates.
- Advertisers get a second scaled social network with demonstrated revenue traction, pressuring publishers elsewhere on the web to justify their own ad pricing against social inventory.
Third-order effects
- Social networking shifts from an audience-growth game to a revenue-accountability game, where divisions like Fox Interactive are judged annually on profit rather than registered users.
- Safety and privacy compliance — AG data requests, emotional-distress litigation — hardens into a structural operating cost every major social platform must price in, advantaging incumbents with revenue to absorb it.
The trend: Social networks are entering the phase where ad-monetization results, not user counts, determine whether portal-era acquisitions like News Corp.'s MySpace hold their value.