MySpace Prepares to Downsize…Again

The New Year is not off to the best start for MySpace. Far from welcoming 2011 with a glass of champagne, the once-dominant social networking site is instead rumored to be preparing to downsize dramatically, with significant layoffs coming possibly as early as this month.

The New Year is not off to the best start for MySpace. Far from welcoming 2011 with a glass of champagne, the once-dominant social networking site is instead rumored to be preparing to downsize dramatically, with significant layoffs coming possibly as early as this month.

According to a Wall Street Journal report, the News Corp.-owned site may cut between one third to one half of its current 1,100 person staff. This after the entire MySpace staff was given the last week of December off from work to save money, and to give executives time to decide which cuts should be made permanent.

MySpace premiered as one of the Web’s first social networks but has since struggled to stay relevant, most recently seeing its once shining star eclipsed by quickly-growing sites like Facebook and the rise of location-based sites such as Foursquare.

In the last quarter, the segment of News Corp. that owns MySpace lost $156 million, prompting the company to attempt a number of drastic turn-around effots.

The last round of layoffs for the site took place in June of 2009 when MySpace cut its staff by 30 percent in the U.S. and, a week later, reduced its international workforce by 300 people.

In October, MySpace unveiled a new logo and a site redesign intended to redefine the company as a “social entertainment destination for Gen Y.” The redesign was largely seen, however, as more of a strategic decision to put the site out of competition with the likes of Facebook and Twitter and into a whole new category of entertainment hub.

And, just before the New Year, MySpace introduced the Hijacks program that allows certain celebrities, from the Black Eyed Peas to Jack Black, to “take over” the site for short periods of time, followed by the introduction of “Mashup with Facebook.”

In an “if you can’t beat them, join them” approach, “Mashup” linked MySpace with Facebook, allowing users to log into the site via their Facebook accounts and receive customized, entertainment-based updates on MySpace based on their Facebook preferences.

Yet, the differences between the trajectories of the two sites could not be more stark.

According to the Journal, Myspace had 54.4 million unique visitors in the U.S. in November, a 15 percent decrease from a year ago. On the other hand Facebook had 151.7 million unique visitors, which was a 50 percent increase from November 2009.

Facebook was also the recipient this week of a $450 million investment from Goldman Sachs, a transaction that puts the social network at a valuation of around $50 billion.

Meanwhile, for MySpace, the layoffs could be just the beginning of the end.

The Journal and other outlets report that News Corp., which acquired Myspace in 2005 for $580 million, is open to a complete sale of the site, with a private equity buyer for MySpace as the most likely outcome if the site is sold.