News Corp. To Acquire Intermix

Rupert Murdoch’s News Corp. has demonstrated the seriousness of its commitment to digital media by reaching a deal to buy Intermix Media Inc. for $580 million in cash.

At the same time, Intermix announced it has exercised its option to buy the 47 percent of MySpace.com it does not already own.

The announcement — one of the biggest commitments to the Web by a big media conglomerate in recent memory — underscores how important online advertising has become to traditional media companies now that the online ad industry has recovered.

“News Corp. has historically been one of the big media conglomerates that hasn’t invested heavily in the Internet, which in 1999 looked pretty smart, but which lately has looked a little slow,” said David Card, senior analyst with Jupiter Research.

Intermix and Myspace.com will become part of Fox Interactive Media, a new unit that News Corp. announced on Friday will oversee Foxsports.com, Foxnews.com, Fox.com and the Web sites owned by Fox’s local television stations.

With the addition of MySpace and Intermix’s network of sites, News Corp.’s U.S. Web traffic will nearly double to more than 45 million unique monthly viewers, the company said.

The acquisition gives News Corp. a serious online boost with advertiser-coveted 18- to 34-year-olds, a demographic increasingly difficult to reach via traditional print and television.

“Intermix’s brands, such as MySpace.com, are some of the Web’s hottest properties and resonate with the same audiences that are most attracted to Fox’s news, sports and entertainment offerings,” Murdoch said in statement.

Two-year-old MySpace.com has come practically out of nowhere to become the fifth most-visited Web site based on page views, according to comScore Networks. The site allows its mostly teenage and young adult users to post personal home pages, share photos, chat, download music and peruse classified ads, among other things.

According to Nielsen//NetRatings, general community Web sites, led by MySpace.com, are a small sector but the fastest-growing one in CPM-based online advertising, having risen an estimated 214 percent to $33 million from June 2004 to June 2005.

“General community sites tend to have a higher level of engagement or interactivity with their users, making the sites very attractive to advertisers,” said Gerry Davidson, senior media analyst, Nielsen//NetRatings.

Besides MySpace.com, Intermix comprises some 50 other branded joke and inspirational Web sites such as Flowgo.com, a site featuring low-brow humor such as “The Tootin’ Cousins Bathtub Duet” where computer enhanced babies pass gas while singing in the tub.

Intermix also owns a marketing network reportedly providing approximately 60 million subscribers with dozens of email newsletters on topics such as sports, news, technology, entertainment, business, and finance.

The Alena division packages and distributes healthcare lines that include Hydroderm and Body By Jake CarbManager.

The health and fitness sector is also small, but nonetheless was ranked by Nielsen//NetRatings as the second fastest growing segment of CPM-based online advertising, having risen 80 percent in estimated revenue to more than $4.5 million from June 2004 to June 2005.

Los Angeles-based Intermix Media was formerly known as eUniverse, Inc. and changed its name to Intermix in July 2004.

Intermix was the target of a lawsuit by New York State Attorney General Eliot Spitzer, who accused the company of false advertising and deceptive business practices in bundling hidden spyware that delivered pop-up advertising and redirected Web traffic to an Intermix search engine.

The company last month agreed to pay $7.9 million to settle the suit without admitting wrongdoing, and agreed to stop distributing its adware and toolbars, which Intermix said it had already stopped distributing.

The company in June posted a fourth-quarter net loss of $409,000, compared with a loss of $4.4 million a year ago. The sale price of $580 million represents a 12 percent premium over Intermix’s closing price on Friday.

News Corp.’s acquisition of Intermix is scheduled to close sometime in the fourth quarter of this year.