Richard Greenfield of Pali Research circulated a “Buy” recommendation on News Corp. this morning, a positive assessment of the media giant premised to a large degree on what appears to be skyrocketing revenue at MySpace.com.
Citing Comscore statistics, Greenfield says that the number of unique users at MySpace is up 16% since year-end 2005 and 76% since News Corp. acquired the company in the summer of 2005, with 37 million unique monthly users as of February 2006.
MySpace attracts 60,000 unique users per day, making it the eighth most heavily trafficked web site/group of websites. All this growth has no doubt paid off handsomely for News Corp. and Greenfield puts some numbers on that pay-off.
While News Corp. does not break out revenues for Myspace yet, our sense is that revenues are north of $13 million per month (monthly revenues were $3-$4 million, when NWSA announced the acquisition of Myspace in July ‘05).
If he’s right, that $156 million in revenue on an annual basis. Greenfield also predicts that MySpace revenue will continue to grow at a rate of 20%, month-to-month sequentially. If he’s right about that, MySpace would generate $617 million in revenue over the next twelve months. At that pace, News Corp. will easily pay off its investment of $580 million in MySpace within the next eight to ten months.
But it’s not so much the revenue growth model for MySpace that drove Greenfield to a buy recommendation — it’s the still untapped potential that MySpace holds as an outlet for News Corp. programming.
We believe Myspace holds significant value creation potential for News Corp. as traffic monetization (thru advertising) improves. While we sense investors are still skeptical of the potential to transform social networking into a “real” business – we view the opportunity to exploit content/programming on Myspace as a key reason to own News Corp.
Cynthia Brumfield at 3:36 PM|Comments(0)
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