News Corp. Sheds Intermix Properties

News Corp. has sold many of the assets included in the July 2005 acquisition that brought it MySpace. The properties are back to the company’s former CEO. Financial details were not disclosed.

Just 16 months after it acquired Intermix for $580 million, News Corp.’s Fox Interactive Media (FIM) unit has sold most of the non-MySpace assets of Intermix to Demand Media, the company headed by former Intermix CEO Richard Rosenblatt. The deal, which closed last week, was first reported by PaidContent.org.

“Our strategy is to build the next generation of new media companies. To do this requires a proprietary platform that fuels user-driven publishing, social networking and community development,” Rosenblatt, CEO, chairman and founder of Demand Media, told ClickZ.” The acquisition helps us to both build out our proprietary platform and add to our stable of media properties.”

The assets involved include more than 20 Web sites, including casual gaming site Grab.com, entertainment site FlowGo.com, and how-to site SoYouWanna.com; lead-gen network Focalex; and the remains of Intermix’s Social Labs subsidiary, not including MySpace.

According to a FIM spokesperson, “These assets weren’t vital to our long-term plan, and selling them to an interested third party made the most sense from both a strategic and financial perspective.”

Demand Media is a direct navigation network of sites that aggregates domain names and places related ads from Google, Yahoo and other ad networks on those sites. The model is similar to that of Marchex, which operates a large direct navigation network with a focus on local content; and Internet REIT.

About 30 developers will join Demand as a result of the deal. Many of them were responsible for the social networking code for Grab.com, which is in use on several FIM properties, including FoxSports.com and the American Idol site. Demand will obtain a perpetual license to the Grab.com code, while FIM will retain ownership of it. FIM retains a free, perpetual license to a number of gaming engines behind the casual games that belonged to Intermix.

Demand Media launched in April, simultaneously acquiring several thousand domain names, domain registrar eNom, and how-to vertical content site eHow. Demand Media has since been building up its content generation capabilities to better take advantage of its network, acquiring niche content player HillClimb Media in August.

The company plans for most of its content to be user-generated, and that is where these former Intermix assets will come in handy, Rosenblatt said. Prior to this acquisition, Demand Media acquired social Q&A site Answerbag, which is similar in concept to sites like Yahoo Answers, Microsoft Live QnA, and Wondir. It also launced WeHow.com, a sister site to eHow with user-generated how-to articles.

Demand Media is in the process of deciding which of the former Intermix sites to relaunch, sell or close down. Relaunched sites will likely be integrated into Demand Media’s plans in three main verticals: how-to, entertainment, and casual gaming. The company plans to incorporate the Grab.com technology for social networking tools on its sites as well, Rosenblatt said.

When News Corp. acquired Intermix last year, Rosenblatt stayed on first as an executive with FIM, and later as a consultant. Rosenblatt’s predecessor at Intermix, Brad Greenspan, has been a vocal opponent of News Corp.’s acquisition of Intermix, and Rosenblatt’s actions in the deal.

Greenspan is leading an ongoing publicity campaign alleging that FIM vastly underpaid for Intermix, creating personal gain for Rosenblatt and other executives via stock options, but not providing adequate value for shareholders, of which he was one of the largest. News Corp paid more than $580 million for Intermix in July 2005, which was seen by many as excessive at the time, though the MySpace property has recently been valued in the billions.

Rosenblatt joined Intermix as CEO in March 2004. Previously, he had been the CEO of the ill-fated health Web site DrKoop.com from August 2000 until it went bankrupt in December 2001.

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