Troubled social network MySpace has confirmed it will slash 500 jobs in order to cut costs, keep the website operating and remain competitive, with sources suggesting the Australian office will see job cuts under the restructure.
SmartCompany contacted MySpace Australia this morning to confirm whether local jobs would be lost, but was referred to the American office.
However, sources close to the company have suggested the local office will see significant staff reductions, although some workers will stay on to transition the company into new advertising partnerships.
The confirmation of the job cuts has fuelled rumours that News Corp is looking to sell the site, which it bought for $US500 million back in 2005. While the site was at the top of the social networking market at that time, it has now lost millions of users to Facebook.
The layoffs aren’t surprising – MySpace has been losing both traffic and users for years as Facebook becomes the dominant social network. They also come after the company announced a major round of job cuts early in 2010.
Company chief executive Mike Jones said in a statement the layoffs would be part of a “significant organisational restructuring”. About 47% of the staff, or 500 employees, will be laid off at divisions across the world.
“Today’s tough but necessary changes were taken in order to provide the company with a clear path for sustained growth and profitability,” Jones said in a statement. “The new organisational structure will enable us to move more nimbly, develop products more quickly, and attain more flexibility on the financial side.”
The company will be entering into partnerships in Australia, Britain and Germany to manage advertising. In Britain, the site will partner with Fox Networks, but the company still hasn’t released any new details about the Australian and German operations.
But while Jones claims 3.3 million new profiles and a 4% increase in mobile users are the result of the site’s new focus on music and entertainment, analysts aren’t convinced the changes will work in the long-term.
The site’s financial results have been poor for months, with Fox Interactive reporting a net operating loss of $US156 million in the quarter ending September 30.
At the time, MySpace chief operating officer Chase Carey told analysts on a conference call the losses were not “acceptable or sustainable” and that it would only have mere quarters to turn its operation around.
All Things Digital has previously reported that News Corp made the cuts in order to start showing off the site to private equity buyers, with Yahoo listed as a possible acquirer. Any sale is sure to present a huge loss for the company.
MySpace has also been the victim of various internal corporate restructures. Previous chief executives Jonathon Miller and Owen Van Natta have both left in the past two years, while co-president Jason Hirschhorn stepped down in June 2010.
And while the site unveiled a new look last October to focus on entertainment and music, traffic has been dropping. According to ComScore, unique visitors dropped from 110.8 million in September 2009 to 81.5 million in November 2010.
The layoffs come as rival Facebook has just completed a $US500 million round of funding led by investment group Goldman Sachs, with many analysts believing the move will come ahead of a float in 2012.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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