New York — After rumors of an impending deal leaked two days earlier, News Corp’s MySpace moved to strengthen its entertainment arsenal said on Thursday it has agreed to purchase music recommendation service iLike, as the once-hot social networking site faces a drop-off in visitors and tries to reinvent itself as an hub for music, videos, games and other entertainment collection.
However, MySpace declined to disclose financial terms of the deal, AllThingsD reported that the unit of News Corp. shelled out about $13.5 million in cash upfront, and promised an additional $6 million to retain twin brother founders Ali and Hadi Partovi into the MySpace fold and other iLike talent.
The site was backed by venture capital funds and Ticketmaster Entertainment. Several blogs, including AllThingsDigital, reported earlier in the week that iLike would be bought by MySpace for around $20 million.
Since 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 the declining 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.
iLike is popularly known as the best social music service on Facebook, the social networking site that has surpassed MySpace as the top Web destination for friends and family to share photos, messages, video clips and other media.
The acquisition comes as News Corp owner Rupert Murdoch has pushed to recreate MySpace as an entertainment portal, taking advantage of its continued strength in areas like music and movies.
MySpace is owned by News Corp., which also owns Dow Jones & Co., publisher of The Wall Street Journal.
The deal underscores the urgency with which MySpace, bought by News Corp in 2005 for $580m, which was then the most popular and fastest growing social networking site just two years ago, has lost ground with users who have moved onto Facebook or other sites, is now seeking to recollect its market share after losing its shine as a web phenomenon.
“We have restructured the MySpace business, refocused the product and company strategy,” Owen Van Natta, a former Facebook top executive who is now chief executive officer of MySpace, told reporters.
The iLike purchase reinforces MySpace’s position in digital music world after creating a joint venture with the big music labels last year.
“It allows MySpace to control the social music space even more than they were,” Sonal Gandhi, an analyst at Forrester Research specializing in digital music. “Now they control the social music technology on other sites as well.”
“We think that integration of iLike should help drive stickier traffic and ultimately improve monetization of MySpace user base,” said JP Morgan analyst Imran Khan.
This acquisition is the first under Van Natta’s watch and comes as MySpace is attempting to build on its popularity among recording artists and bands, to showcase their music and to help consumers find the bands and videos they like. The iLike acquisition serves MySpace’s “need to create new social experience in music and beyond,” Van Natta, said during his first news conference since he arrived four months ago. Van Natta is assigned the task of resuscitating the site, which is facing intense competition from rival Facebook Inc. and upstarts like Twitter Inc.
Van Natta said the acquisition is part of a broader effort to “bring world-class talent” to MySpace. iLike’s management team, which will stay with the company after the deal closes, has had a string of successes in the technology business. Ali Partovi founded and sold online-ad company LinkExchange to Microsoft for $265 million in 1998. Hadi Partovi co-founded and sold TellMe Networks Inc. to Microsoft for $800 million in 2007.
Ever since taking over the helm at MySpace earlier this year, Van Natta and Jonathan Miller, News Corp.’s head of digital, have sought to streamline the sprawling internet business into one devoted to the social interactions that spring from the consumption of music, films, television and video games.
Van Natta said iLike would extend its service, which allows users to share music play-lists and recommendations, beyond music by applying it to other entertainment content, possibly including film.
iLike is among the web’s most popular applications and has charted a meteoric growth in users, if not profits, in two years. It currently attracts 55m users, executives said.