MySpace fires 400 employees as ad revenue declines

San Francisco (CA) – MySpace has responded to declining advertising revenue and a decreased market share by firing 30 percent of its staff.

“MySpace grew too big considering the realities of today’s marketplace,” explained Jonathan Miller of News Corp in a statement. “This restructuring will help MySpace operate much more effectively both structurally and financially moving forward.”

Parent company News Corp. has already taken a number of steps to reverse the slow decline of MySpace, including replacing CEO Chris DeWolfe with former Facebook executive Owen Van Natta. Although the new management team is undoubtedly under increased pressure to increase traffic, it may unrealistic to expect MySpace to regain its once ubiquitous status.

“Two years ago MySpace seemed like it had unlimited upside, and people were throwing around valuations in the multibillions of dollars,” Cowen & Co analyst Doug Creutz told Bloomberg. “The site has lost a lot of that cachet.”

As TG Daily previously reported, Facebook recently ousted MySpace as the reigning US social networking champion. According to ComScore, FaceBook attracted 70.278 million unique US visitors in May, compared to MySpace’s 70.237 million. Facebook has also widened its worldwide lead over MySpace, with a total of 307 million users in May, compared to MySpace’s 123 million.

Nevertheless, MySpace still managed to generate $1 billion in advertising revenue during 2008, compared with Facebook’s $300 million.

“[Facebook has become the] “largest player on the global stage, dominant in many countries, [replacing] MySpace as the world’s most popular social network,” noted Nielsen. “Whilst part of Facebook’s huge appeal is the simple layout of an interface that carries very little ad inventory, MySpace’s offering possibly makes its inventory – of which there is a lot more compared to Facebook – easier to monetize, particularly in terms of immersive advertising.”