News Corp: My MySpace for Your Yahoo!

Reported in The Times today, a possible deal has been discussed for News Corp to trade in MySpace for a 25 per cent stake in Yahoo. According to an anonymous source, talks began before Terry Semel was ousted, but no one is sure if they will continue under the incoming CEO, founder Jerry Yang. Meanwhile, Rupert continues to push his $5.9 billion bid for Dow Jones.

Giving up MySpace, which News Corp purchased in July 2005 for a bargain $580 million, wouldn't be a bad move. The social networking site is popular and fast-growing, but has yet to prove its staying power. Social networking sites are new and therefore a risky venture. What's more, rival Facebook has recently surpassed the once supreme MySpace in growth. As MySpace continues to progress, News Corp as a Yahoo stake holder will continue to have access to and benefit from whatever growth, popularity, and innovations occur with the online social hotbed.

So buying into Yahoo is the safer bet. Compared to MySpace, Yahoo is a giant on the internet, and an old one at that. Along with its maturity, the portal offers a diversity of features that MySpace doesn't have, like instant messaging, email, a search engine and news. So the swap works in News Corp's favor, plus Yahoo could use the boost right now, anything, as it shakes things up and maybe marrying into Rupert's empire could provide the solution to the portal's slump.

With ad sales far below the Mt. Olympus high standard set by Google, Yahoo needs to start proving to shareholders that the once unparalleled portal can stand up to the big G. Whatever bag of tricks and/or digital assets News Corp brings to the table as a stake holder is yet to be seen, but one expects old man Murdoch will be able to give those kids in Mountain View a little healthy competition.

--Andrea Chalupa