MySpace to Miss Revenue Target

The social networking website MySpace will fail to hit its revenue target this year as advertisers struggle to judge the commercial value of making on-line friends, its owner News Corporation admitted tonight.

News Corp revealed that its Fox Interactive Media arm, which includes MySpace, will miss its goal of an 80% increase in revenue by "about 10%". The division had been predicted to generate as much as $1bn.

The setback is a setback for News Corp's chairman, Rupert Murdoch, who has made MySpace the centrepiece of his media empire's digital strategy. It could raise questions over the soaring valuation of competitors such as Facebook.

News Corp's chief operating officer, Peter Chernin, said earlier growth projections had been "very aggressive" and that the group remained satisfied: "Despite the obstacles we're facing, what we're accomplishing is extraordinary."

Chernin said one of the reasons for the shortfall was the tricky task of evaluating the commercial potential of contacts in cyberspace: "It's still difficult to quantify the economic value of a friend in the social networking space."

He said advertisers were accustomed to basing their thinking on long established, tried and tested metrics.

In spite of this, News Corp maintains that MySpace is the strongest social networking offering on the net. In the key US market, it boasts 73m regular users compared to Facebook's 36m, each of whom spends an average of 44% more time on the site than Facebook users.

The figures emerged as News Corp's global profits jumped by $1.8bn to $2.7bn, largely due to a tax-free gain of $1.7bn from the transfer of its stake in DirecTV to Liberty Media.

The results included a $21m profit contribution from newly acquired Dow Jones, which includes the Wall Street Journal.

Speaking on a conference call, Mr Murdoch said his initial impressions of Dow Jones were positive: "The more time I spend working with the company, the more opportunities I see in improving and expanding its businesses."

He said he saw particular potential in Dow Jones' news wires, its cuttings service Factiva and its indices operation, which compiles Wall Street's Dow Jones Industrial Average. All of these, Murdoch said, could prosper as they serve the rapidly growing financial services industry in emerging markets.

"It may take time but I'm as confident about it as I've been for any acquisition I've ever done," said Murdoch.

Elsewhere, News Corp confirmed that it has tabled a bid for the Long Island-based newspaper Newsday, thought to be in the region of $580m.

Murdoch wants to combine Newsday's back office functions with those of his New York Post title to improve cash flow by $100m annually. He brushed aside suggestions that competing buyer Cable vision might out-bid him.

"I don't think Cable vision will prevail," said Murdoch. "Just be patient for a couple of days, please."

In Britain, earnings grew in double-digit terms at News Corp's stable of newspapers – the Sun, the News of the World, the Times and the Sunday Times – partly due to the decommissioning of older printing presses as the papers move to new color facilities.

But News Corp's movie revenues were sharply lower, falling from $410m to $261m, as Twentieth Century Fox releases such as Juno and Alvin and the Chipmunks failed to match last year's Borat and Night at the Museum.