Figuring Out Why Specific Bought MySpace

Raise your hand if you had Specific Media winning News Corp.’s MySpace yard sale. If your hand shot up, you probably work at Specific. Your last name might even be Vanderhook.

More likely, your first reaction to last Thursday’s news was to Google Specific Media. While News Corp.’s desire to sell the flailing once-hot social networking site had long been telegraphed, the list of potential buyers (Yahoo, Vevo, Zynga, etc.) did not include many ad networks. Thus, the puzzling $30 million deal had many in the digital ad industry in speculation, dismissal and conspiracy-theorizing mode, with their collective thinking best summed up as “Why Specific? And what are they going to do with MySpace?”

Decade-old Specific is a formidable ad network The company’s network reached 170.9 million unique users in the U.S., per comScore, and it also has a presence in 11 countries. But Specific isn’t all that distinguishable from many other big ad networks in the space — the ValueClicks, Tribal Fusions and Casales of the world — other than a lingering reputation for shady practices and the fact that it’s been throwing its cash around. Last year the company snatched up the online video ad network BBE for $55 million.

Specific Media CEO Tim Venderhook sees this deal (and partnership with Justin Timberlake to revitalize the property) about elevating Specific Media’s profile and putting it in the territory of Yahoo, Facebook, Microsoft and Google — seriously.

“This is a big digital media business now,” he said. “We wanted to transition the business, and we said, ‘what property can we go out and acquire [to help do that]?’ MySpace hit on all cylinders.”

Of course, MySpace hasn’t hit on all cylinders in years. While Vanderhook noted the site’s still ‘gargantuan” audience — 35 million U.S. uniques, those familiar with MySpace’s traffic trends and user loyalty patterns say the site’s value has diminished even more than outsiders realize.

“It’s highly downscale,” said one executive. “Its audience has decreased 5-fold over the years and it’s very C and D county.”

Plus, MySpace’s still vibrant music footprint may quickly evaporate, as many of its deals with the record companies are said to be expiring in less than a year. “It’s highly unlikely to be revived,” said one insider. “There is too much negative brand perception.” Even with Justin Timberlake involved.

“I still don’t know how or if it makes sense,” said Adam Shlachter, managing director, digital U.S. MEC. “This reminds me of buying a run-down house that needs a full renovation.”

Problem is, MySpace has already gone through a massive renovation, as News Corp. moved in 2010 to completely redesign and redefine the property as an social entertainment hub.

Vanderhook implied that that was a mistake and that Specific may want to broaden MySpace’s appeal. “I don’t think that strategy was dead on,” he said.

One strategy Vanderhook liked was MySpace’s experimentation with original content, such as show like the Electus-produced Jerk All-Stars. That’s where he sees major potential for the deal. Specific currently dabbles in original content through the distribution and sale of the former BBE property Jen and Barb Mom Life.

“We wanted to get into the content business,” said Vanderhook. “And MySpace also has a lot of user-generated content. The most successful digital media companies have both.”

But UGC is still a very tough sell for brands. And beyond a few select shows, MySpace’s lineup of originals is thin. How far is Specific willing to go with that content push? “It doesn’t make Specific Media all that different than the company they sit in now unless they’re becoming content producers with this deal,” said Shlachter.

One thing MySpace does have going for it is a loyal Hispanic user base, something else Specific found attractive, given the rapid growth of that demographic.

Some have speculated that the MySpace buy is aimed at helping Specific find a buyer of its own, or possibly to set up an IPO. But they would seem to have a lot of work to do with MySpace before either scenario becomes a reality.

In the meantime, Vanderhook reitirated Specific’s commitment to revitalizing the once-great MySpace brand. “This is 100 percent about investing in the property,” he said.Among the theories being spun by industry insiders last week were that Specific plans to gut MySpace’s operating costs and milk its ad inventory for all it’s worth until the property loses all remaining value.

But as one rival seller explained, there would be little benefit to hoarding MySpace’s inventory for Specific’s own network.

“Yes, they now own their own inventory at a very low cost,” the buyer said. “But exclusive in-page ads on MySpace are nothing special.”

That’s because MySpace’s ad inventory is not viewed as effective by brands or direct-response advertisers, explained another ad network executive familiar with MySpace’s performance metrics.

Another oft-floated idea is that Specific is after MySpace’s data, which the company will be able to utilize better than MySpace could. This was, after all, what once made MySpace so coveted. Back in 2006, then-head of Fox Interactive Media Ross Levinsohn called MySpace’s user data “digital gold.” That theory would seem to make sense, given that both Specific’s CTO Fabrizio Blanco and its evp of product Jason Knapp were previously top executives at Strategic Data Corp, the ad serving/optimization platform which was acquired by News Corp in 2007 to enhance MySpace (it was eventually sold last year when News Corp. unloaded the Fox Audience Network). It would also mark a sign of the times when an ad network feels the need to get access not just to exclusive inventory sources but exclusive troves of data.

Yet one close observer noted that if MySpace’s data was so valuable– News Corp would have figured out how to use it more effectively by now. Vanderhook downplays the notion, saying this deal isn’t about data. “Data has zero to do with the transaction,” he said