Oldie Murdoch buys MySpace

October 2006

As the use of broadband becomes more and more popular, and the broadband itself gets faster, so the use of the internet as a medium for broadcasting both sound and pictures will grow.

It’s like building a new road – if it’s a good one, people make journeys they would not otherwise have considered. In the same way, the availability of a high speed transmission method (like broadband) can only encourage people to demand that something be transmitted to them, and where there is a demand, you can be sure that there will be a businessman who will try to satisfy that need.

In the internet world, it seems likely that one such businessman is Rupert Murdoch, at least for the moment. This is a bit of a relief, whatever you think of Murdoch, because at 75 at least he offers an alternative to the irritatingly youthful entrepreneurs and multi-billionaires that usually own successful internet companies.

Oldie Murdoch has been buying up the means to reach the internet audience by spending hundreds of millions of pounds on various companies, but in particular a site called Myspace.com. This seems a bit odd when you first look at Myspace, because all it seems to amount to is a place were anyone can create their own little website, for free, on which they can put pretty much anything they want, such as pictures, text, videos, and their own music.

The idea is then that they then invite their friends with Myspace sites to visit their site, and they all create links to each other. Then each friend recommends the site to others and so on. A network of people builds up, who, in theory, use the site to communicate with each other and to chat with each other about whatever interests them.

I can’t say it has ever held much allure for me, but I must be in the minority, because when Murdoch bought it (for $580 million) it had 20 million members and another 100,000 joining every day. One year later it has over 80 million members and that number is growing by more than 280,000 daily. Over one billion pages of the site are looked at every day (although none by me) and there has been no advertising, or marketing of any kind.

All this is very impressive, but none of these millions of people pay Murdoch a penny, and he pays all the considerable cost of the infrastructure. Why? Because every one of those millions of people is a potential buyer of something, and he has a highly charged sales team working hard to sell advertising on the site.

This sounds a bit familiar to me – it is just like the growth of the commercial television companies. Their job is simply to provide TV programmes that attract viewers, so that they can sell advertising around it. But Myspace goes one better: the company sells the advertising, but provides no content at all; all of the millions of web pages are created by the users and marketed by them to their peers. All Murdoch has to do is provide a platform for them and they do all the rest, at no cost at all to Rupert.

But it gets even better for him; his technology scans all of the billions of pages and directs an advert to each one that has been cunningly chosen to appeal to someone who likes whatever it is that is on that page. That means the adverts can, in theory, be accurately targeted at just the right pairs of eyes – always something of a marketing holy grail.

It’s not an exact science yet, and their skill at automatically assessing what is on the page and delivering just the right advert needs honing, but you get the idea. It strikes me that this business has all the potential to be what Lord Thomson, in early commercial television days called “a license to print money”, but without all the bother and risk of having to produce those pesky programmes to tempt us to look.

The truth is, however, that nobody, not even Rupert Murdoch, knows what Myspace.com is capable of commercially, or if indeed it will last the course. Some as yet unthought of upstart internet idea might jump up and spoil things for him. But at the moment he is the one who has the means to reach 80 million people (and growing), and that’s not a bad start.