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MySpace Planning Massive Layoffs

Social networking site will cut its U.S. staff by up to 50% and virtually close its international operations to try to stem the flow of red ink, say reports.

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MySpace reportedly will begin the year by dramatically cutting its remaining workforce by up to 50% and reducing most of its staff in Europe and Australia.

In late 2010, the company re-launched itself as an entertainment hub, redesigned its logo, and entered into an integration partnership with former competitor Facebook. MySpace also inked a new search and advertising pact with Google and enhanced its mobile offerings. But the changes -- which included new management -- have not stemmed the site's stream of red ink, said reports, and parent company News Corp. has publicly disclosed its limited patience with the situation.

"There is not much hope left for the international offices. A few staff will probably remain, but essentially, everybody at MySpace is expecting the international operation to be closed down," a digital executive with ties to MySpace told SocialBarrel.

Looking Stateside, MySpace is expected to reduce its staff of approximately 1,100 by between 33% and 50%, according to the Wall Street Journal, which cited one person familiar with the subject. Layoffs could be announced this month, another person told the newspaper, which is owned by News Corp.

In 2005, News Corp purchased MySpace for $580 million, and saw the site hit more than 80 million monthly visitors in 2007. In November 2010, however, MySpace dropped to 54.4 million visitors, down 15% from a year ago, according to ComScore. Quantcast's numbers are even more dire: That tracking service puts MySpace visitors at 40 million per month in the past year. Ad spending was expected to fall to $347 million last year, a 37% decline, eMarketer said.

For its part, Facebook attracted 151.7 million monthly visitors -- a gain of almost 50%, ComScore said.

The News Corp. division that includes MySpace reported an operating loss of $156 million in the quarter ended Sept. 30, 2010, mainly due to the site's poor results. Ad revenue dropped $70 million in that period compared to the prior year, News Corp. said at the time.

"MySpace lost $100 million in the first quarter last year. To get it back on track is going to require a massive investment -- one which News Corporation it not prepared to make. It has many other priorities to put its money into. So instead, it needs to keep taking costs out of the business while it's still in its hands," a digital executive close to the company told London newspaper The Telegraph.

During an October earnings call, MySpace executives hinted that changes were ahead. Chase Carey, chief operating officer, said the company's losses were not "acceptable or sustainable. Our current management did not create these losses, but they know we have to address them. We judge in quarters, not in years."

One persistent rumor claims MySpace is for sale, perhaps to game-developer Zynga, according to All Things Digital, which also is owned by News Corp. But a private equity buyer is more likely, several sources told the online publication.

MySpace is "on a course to sell [by mid-year]," said CNBC, although it noted that "there are no talks currently with potential buyers."

MySpace declined to comment on layoffs or acquisitions.

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