How Much Did MySpace Cost?

Many of my favorite blogs always note that NewsCorp bought MySpace for $580M. Given MySpace’s 27 million users (at that time), bloggers calculate 1 user=$21. This metric is used to justify other websites’ valuations.

But it’s not true!

I was a shareholder, and the fact is NewsCorp bought InterMix for $580M. InterMix had many highly profitable divisions, from gift card sites to office supplies, and had a public marketcap of $300M long before they ever created MySpace. Accounting for the goodwill on NewsCorp’s balance sheet, one can estimate NewsCorp really paid about $200M for MySpace. That translates to about $7.40 per MySpace user. You have to hand it to Rupert Murdoch, he got the deal of the century.

$7 is a bit less than $21

The point is, bloggers cannot use the $21/user metric to calculate the value of websites. $7 is much more accurate math on the MySpace deal. All of my favorite Web 2.0 blogs seem to make this valuation error. See examples at: GigaOm, VentureBeat, TechCrunch, and ReadWriteWeb. If enough people repeat this false $21/user statistic, perhaps companies will really begin paying this much for websites. And we wonder how bubbles start!



29 Responses to How Much Did MySpace Cost?

  1. […] How Much Did MySpace Cost? took me six minutes to write and was viewed by thousands of visitors. Meanwhile, Top 50 Web 2.0 Blogs took an entire week to compile and was read by almost no one! […]

  2. […] spyware. Intermix developed a little social media company called MySpace and was snapped up by News Corp for $580 Million. So you never really know what to expect from an internet marketing […]

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