• Business Week, Thursday, April 5, 2007 10:45 AM

How about this for numbers that don't add up: MySpace last year generated an astounding 31.5 billion page views per month, yet the social network earned a measly $90 million in ad revenues. By our calculations, that represents a paltry $0.2 cents per monthly page view. Surely, parent News Corp. can do better.

Big talk yesterday from News Corp. President Peter Chernin said the media conglomerate expects MySpace to turn a profit by 2008, and that its operating margin would be 20%. Those claims were backed up by a research note from Merrill Lynch & Co. analyst Jessica Reif Cohen, who said MySpace could generate ad revenues of $271 million this year, lifting FIM into the profit zone for the first time with an estimated $208 million, thanks in part to MySpace's lucrative search agreement with Google.

However, MySpace is aging, and growth is slowing. This is underscored by the fact that 41% of its traffic comes from over 35s versus 35% a year ago. Meanwhile, tomorrow's international bright young things could be headed elsewhere--in part because News Corp. continues to extend its corporate influence over the site in the form of more ads and greater restrictions. That's why the new content distribution deal between News Corp. and NBC Universal is integral to the company's strategy going forward. "It's free content and a guaranteed piece of advertising sales," says Chernin.

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