MySpace on Shaky Ground With News Corp. Bosses

News Corp. has given MySpace a deadline to reverse its traffic declines and achieve profitability, and that turnaround must happen in “quarters, not in years.” According to management, the site’s search and advertising revenues were down $70 million last quarter compared to the year-ago period.

“We’ve been clear that MySpace is a problem,” said News Corp. president Chase Carey during an investor conference call late yesterday discussing the company’s fiscal first quarter results. “We recognize that we had to redefine and largely rebuild this business.”

Carey did not say exactly when it will move to unload MySpace if it doesn’t become a sustainable business. “I’m not going to put a specific date. These are fluid businesses… But our traffic number is still not going in the right direction. And we have to stabilize that and have a predictable path forward.”

So what will News Corp. do if MySpace continues its slide next year? The significant operational costs of the site combined with its considerable competitive disadvantages suggests finding a buyer may be easier said than done.

Carey noted News Corp. has cut costs by consolidating MySpace’s sales force, and ClickZ reported earlier this week that the company has sold its Fox Audience Network to yield optimization firm Rubicon Project.

The message that MySpace is now a more trim operation was clearly important to investors, but it might also have been intended for would-be buyers.

Carey softened the blow with a shout-out to Jonathan Miller, CEO of News Corp.’s digital unit, who has sought unsuccessfully to shore up MySpace’s revenue and traffic with a series of executive changes and product initiatives. “Our current management did not create these losses,” he said. “I give them great credit for pouring their hearts and sweat into creating a new great MySpace experience that has the potential to be an exciting business for us.”

MySpace is reinforcing its new focus on entertainment with investments in ad products and consumer research that’s designed to keep brand advertisers interested – and, again, perhaps help dress up the property for an eventual sale. It has partnered with MIT to create a usability lab and also launched a consumer insights panel at the beginning of September. New and patent-pending ad types include an “HD Skin” video format.

Speaking with ClickZ this week, News Corp. chief revenue officer Nada Stirratt said, “We can use those insights to develop new ad products and to dictate ad design… It becomes a smarter ad experience.”