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MySpace Decimates International Staff

MySpace may have taken an ax to roughly 30 percent of its U.S. employees, but that's nothing compared to what owner News Corp. is doing in other countries. An elimination of upwards of two-thirds of non-American staff suggest that the company is going to focus most of its resources on one or two markets where it thinks it has the best chance to actually make money.

According to the Financial Times, MySpace is cutting two-thirds of its staff and closing at least four offices outside North America: Around 300 of the company's 450 employees outside of the US are to go. Operations in London, Berlin and Sydney would become primary hubs for MySpace's international operations. Offices in Argentina, Brazil, Canada, France, India, Italy, Mexico, Russia, Sweden and Spain are "under review" and face possible closure.

According to some reports, the U.K. may be spared the heaviest of cuts because it has the largest base of customers outside the U.S. The thought is that London, Berlin, and Sydney will become regional hubs. Currently, there are 15 international offices. MySpace China, which is locally owned and managed, and the joint-venture MySpace Japan will be unaffected by the action.

The company must be careful because roughly half of its traffic is international. Loose too much focus in too many areas, and the result could be a large decrease in site traffic and, as a result, smaller advertising revenues:

EMarketer predicted in May that MySpace would generate only $25 million in ad revenue outside the United States this year, only a fraction of the global total of $520 million. The total is expected to shrink from $605 million last year, according to eMarketer.
At one point, MySpace was the king of the social networking scene, though, as was widely reported, last month comScore ranked Facebook as finally having more unique visitors. By other measures, the change may have happened earlier. For example, look at this graph from Compete.com:

In this view -- and note, virtually all web traffic numbers that are repeated as Truth are actually Estimates -- Facebook overtook MySpace earlier this year in unique visitors. More importantly, notice that Facebook is on the ascendency, while MySpace has been on a slow decline. Another view, this time from Quantcast.com, agrees in general pattern, if not absolute numbers:

If anything, it might be that comScore called the switch in dominance late. But as I mentioned last week, many of the social networking companies are in a fad business, and it's tough to turn that type of enterprise into a social institution, particularly when the metrics are so incomplete and fail to answer some important questions from a business point of view:

  • What is the value of a unique visitor?
  • How often visitors return?
  • Is there a particular value and mix of visitors that allow for a viable business?
  • What are the demographics of the visitors?
  • What is the business model and how does the company make money?
The last one is particularly important. For any company, not all customers are economically "good." At a time when advertisers can demand viewing and click-through statistics, a stie must combine both desired demographics with responsive users.