MySpace to slash a third of its workforce

Jun 17, 2009
Euan Stuart

The social networking site announces the staff cuts as it is hit by competition from rivals Facebook and Twitter

The job cuts are the brainchild of new chief executive Owen Van Natta, who was appointed two months ago to replace MySpace co-founder Chris DeWolfe and is tasked with the job of increasing the popularity of the site. It has recently struggled with competition from Facebook and Twitter, more recent entrants which have caught the public's imagination.

The Rupert Murdoch-owned networking site is to cut 420 staff from a total of 1,400 in the US, with Van Natta describing the company's employee wage bill as "bloated". He went on to say "I understand that these changes are painful for many. They are also necessary for the long-term health and culture of MySpace." It is thought that the company will also close offices in Europe.

MySpace executives hope that the new staffing levels will help it return to a start-up culture, with more innovation and new ideas. News Corp paid $580m for the operation in 2005 and it has by and large been a success, with 125m monthly users, earning its parent around $200m a year. However with its three year advertising deal with Google due to end next year, and a vast reduction in the $900m the internet giant initially paid likely, cost cuts are needed.


Analyst Debra Williamson at eMarketer on "Thirty per cent is more than a haircut. It's chopping the head off. [It is a] very aggressive move… to send a message to the marketplace that they're really taking the turnaround of MySpace seriously."

Jeff Segal in the Daily Telegraph: "Without Google's business, MySpace could be set to lose $100m annually. That may help explain the cuts demanded by Owen Van Natta, the two month old chief executive. His former employer Facebook, meanwhile, expects to generate positive cash flow next year, but if advertisers are becoming sceptical that's no certainty."

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