Decline in revenue makes cuts necessary
Last modified on Wednesday, 17 June 2009 10:34
MySpace has shown the door to over 30 percent of its employees in a reduction that has cost about 400 workers their jobs. From what we understand, MySpace blames the fact that they grew too quickly and the recent economic downturn that impacted ad revenue as the reason the cuts became necessary.
While some are pointing fingers at parent company News Corp, the spin seems to put this as a restructuring that will lead to MySpace being able to better compete for ad revenue once the economy ticks upward.
According to the whispers that we hear, Facebook has become the bigger player in the social networking arena and MySpace may be in more of a user decline than what the company is suggesting. Some complain that lack of advertising is one of the main reasons that some users prefer Facebook, while MySpace has a large ad inventory and uses it in such a way that many complain that they are drowning in advertising.
While new management might help the situation at MySpace, it would seem that this will be little comfort to the 400 that have lost their jobs. Some in the industry view MySpace as in a very serious situation that could spell even more short term problems if they are not able to attract users back to using MySpace again. Even if they get the users back, the company will still need advertising revenue to power the site in order to pay the bills, and finding the right balance could be tricky.