News Corp Reports Steep Drop at Digital Unit

Company suffers double-digit decline in digital revenue, seeks to distinguish itself from Facebook.

News Corp reported a double-digit decline in its digital media business revenue this afternoon. Compared to the previous quarter, the firm said digital revenue dropped 26 percent as a result of lower search and display ad revenue in Q1 2010. In addition to the ongoing economic downturn, the company pointed to “significant transition” at its digital unit.

News Corp CEO Rupert Murdoch suggested the company sees the light at the end of the economic recession’s tunnel. “We appear to be emerging from the bottom of that cycle,” he said. However, he later qualified his statement noting he is “treating this recovery as still a little fragile.”

Slowing traffic at MySpace is negatively affecting the site’s search advertising revenue. “We have not been making our minimum guarantee so our search revenues will not be what was advertised much earlier,” said Murdoch regarding search ad revenues on MySpace. MySpace relinquished to Facebook the title of top social networking site in the U.S. this year according to multiple Web traffic trackers.

In the hopes of deterring comparisons to Facebook, the firm said that the focus at MySpace is on “key content sites.” MySpace is setting its sights on music, video, and gaming content, rather than competing directly with Facebook or Twitter, said the company.

Last year, News Corp. cited a softening in display advertising. However, by early this year, the firm expressed a positive outlook regarding online display advertising.

Last month News Corp changed the name of its Fox Interactive Media unit to News Corp Digital Media; the division encompasses Beliefnet, MySpace, Fox Audience Network, IGN Entertainment, Photobucket, and Fox Mobile Group. Along with the name change, the firm made several additions to its digital staff.

Marking progress at WSJ.com’s efforts to supplement its online advertising revenue, Murdoch said the site now has more than 1 million paid subscribers. This is “important as we work to get compensated for our online content from all our news sources,” he added.

News Corp reported $571 million in profit in Q1 2010, up 11 percent over the same period a year ago. Strong growth in its cable and film divisions offset losses in other segments.

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