News Corp.'s New Net Bets
The Fox Interactive Media unit of giant News Corp. (NWS) said on May 1 that it had acquired two small Internet companies to help expand its online operations, which already include the popular social-networking site MySpace.com. The companies are Newroo, a news aggregator based in San Francisco, and kSolo, an online karaoke site with headquarters in New York.
"Fox Interactive Media's acquisitions of Newroo and kSolo demonstrate our commitment to empowering users with interesting tools that they can use to further enhance their online experience and online identity," said Ross Levinsohn, president of Fox Interactive Media. "The acquisitions further validate FIM's ability to unearth early-stage, technically savvy Web 2.0 companies led by entrepreneurial, forward-thinking management teams."
Fox Interactive Media didn't disclose the purchase prices for the two companies. But one industry expert, Michael Arrington, who runs the popular blog www.techcrunch.com, said he believes that FIM bought the companies for less than $10 million each. The move is an attempt by News Corp. to use relatively inexpensive acquisitions to build up loyalty among its Internet audience and persuade users to spend more time on its sites.
SCOUTING FOR DEALS.
News Corp. has already spent a total of $1.3 billion buying Internet companies since last year. Its biggest purchase, at $580 million, was MySpace. It also bought gaming company IGM and sports site Scout.com (see BW, 12/05/2005, "The MySpace Generation").
KSolo may fit well with MySpace, which has a large following among musicians and their fans. Already, MySpace allows members to put up music videos or create soundtracks for their home pages. With kSolo, people could record their own versions of Don't Take Your Guns to Town from Johnny Cash or Don't Cha from the Pussycat Dolls and put them on their Web sites. Newroo would work well with any of News Corp.'s Internet properties, which also include www.foxsports.com, www.foxnews.com, and various other properties.
The deal also shows that News Corp. continues to use executives hired in recent deals to help identify new trends and more acquisitions. One person familiar with the matter said the kSolo deal was spotted by a senior MySpace executive who stumbled across the site and took a liking to it. Top execs from the two recently acquired companies, including kSolo founder Nimrod Lev, are expected to remain with FIM.
NOT DONE YET.
FIM is likely to make several more online acquisitions over the next few months. Levinsohn suggested in March that up to five deals could be in the works, according to Arrington. Levinsohn couldn't be reached for comment. But he said publicly last month that he liked startups that had interesting tools but little prospects of standing on their own as businesses. Such ventures can be acquired for relatively low prices.
"FIM likes sites that generate lots of page views, and it likes user-generated content," Arrington said. It could try to acquire a blogging platform like Six Apart, a blogging network such as Gawker Media, or photo service Photo Bucket, which already has a commercial arrangement with MySpace. But those companies wouldn't be cheap, and it's not clear that FIM is still inclined to continue spending at its scorching pace of last year.
News Corp.'s strategy is much more aggressive than that of many of its rivals. While FIM is adding features and functionality through acquisitions, social-networking competitor Facebook is focused on organic growth. The site, which is aimed at college and high school students, recently has opened its networks to companies such as Apple (AAPL) and Microsoft (MSFT), where many recent alumni work, according to Melanie Deitch, director of marketing at Facebook. "The beauty of Facebook is that it has an elegant, low-key design, and users tell us not to change it," Deitch says.
The fast pace of Internet deal-making at News Corp. has put pressure on other major media companies to keep up. Viacom (VIA), for instance, is starting to invest more heavily in the Web (see BW Online, 04/10/2006, "Socializing for Dollars"). AOL (TWX)has overhauled its site and invested in blogging (see BW Online, 04/27/06, "AOL Launches New Network of Financial Blogs").
Over the next few months, the challenge for FIM will be to integrate the latest acquisitions into a coherent portal with a common look and feel, similar to the empires that Yahoo! (YHOO) and Google (GOOG) have constructed.