MySpace Buys Popular Facebook App iLike

After rumors of an impending deal leaked two days earlier, MySpace officially announced its acquisition of music startup iLike on Wednesday. Though terms of the deal were not disclosed, AllThingsD reported that the unit of News Corp. paid $13.5 million in cash upfront, and promised an additional $6 million to retain founders Ali and Hadi Partovi and other iLike talent.

Years after its launch in 2002, iLike found its greatest success in becoming the de facto music player on the social networking pages of MySpace rival Facebook. Lacking its own music service, and acknowledging the popularity of iLike on its site, Facebook changed the name of the application in its menus to just “Music” in April. Of iLike’s 50 million registered users, 31 million installed the music player on their Facebook pages.

There are no plans to disrupt the use of iLike on Facebook or any other sites, MySpace CEO Owen van Natta said on a call with the media. On the contrary, he thinks the service could help MySpace extend its reach to more areas of the Web. “This marriage has to do with a distributed Web and how it is the Web can serve our users in a more distributed way,” said Owen van Natta, a former executive of Facebook hired by News Corp. in April.

Even if MySpace likes the idea of having instant real estate on Facebook, there's no guarantee the larger social network will reciprocate: Facebook could decide to pull the plug on the application, though it would face a barrage of criticism from its vocal users and would be hard-pressed to offer up an alternative with as much appeal.

Facebook spokeswoman Brandee Barker says that's unlikely to happen as long as the iLike application stays the same. "We expect that users will continue to discover and share music through the iLike application on Facebook," says Barker. "We look forward to working with the iLike team to make music a great social experience on Facebook and across the Web."

The reported price of the iLike acquisition is likely to sound some alarms in Silicon Valley. In 2006, a large investment round led by Ticketmaster valued the company at $53.2 million. It doesn't appear that the company lacked suitors, either: Amazon and Facebook also showed interest in buying iLike, according to TechCrunch.

The valuation "confirms two things," says David Pakman, partner of venture capital firm Venrock. "One, that music is not a great place to make money. And two, that value has to be created, not just consumer clicks." Despite the high number of folks adding iLike to their Facebook profiles, few were opening up their pocketbooks for concert tickets or buying into other ways the company collected fees.

Still, many tech entrepreneurs welcome any activity in the startup space, regardless of the price. "You’re seeing more interest in the streaming space and music space in general. That’s a dramatic turn from six months ago," says Jeff Yasuda, founder of the Twitter-like music service

Before it's here, it's on the Bloomberg Terminal.