News Corp. Blows MySpace Targets, Dumps Sales Chief (NWS)

News Corp.'s Fox Interactive Media group, which includes MySpace and other web sites, will miss the company's goals of $1 billion in revenue and $200 million in operating profit. FIM chief revenue officer Michael Barrett will leave and the company will reorg its sales team.

TechCrunch first reported the story late Thursday night, and says FIM will likely hit $900 million in revenue and will be "much closer to break even". We've heard the miss could be even bigger, though FIM execs say the $900 million estimate is reasonable. They do dispute the "break even" assertion; they tell us the company will have a comfortable operating earnings margin. A FIM spokesperson says only that "we expect to be close to our target," with regard to revenue, but wouldn't discuss profits.

We first heard last September that FIM's sales staff was struggling to meet the goals Rupert Murdoch had laid out for the unit last August; FIM missed its goals for July and August 2007. But since then Murdoch and other News Corp. (NWS) execs haved been adamant that the company would hit its numbers, and Murdoch reiterated the promise in February during the company's quarterly earnings call. He said FIM's Q2 performance "adds confidence to our $1 billion revenue, and 20% profit target for the [fiscal[ year," which ends June 30.

We're told that Barrett was offered another job at FIM, which he declined; he's supposed to stay on temporarily during the reorg. FIM tech EVP Adam Bain will run the company's ad network (see memo below); TechCrunch reports that MySpace marketing head Jeff Berman will now head sales, which syncs with what we hear.

Most important: What does FIM's revenue miss mean? Were the goals too ambitious to begin with? Is there a specific problem at MySpace or a different FIM web property? Or is it reflective of larger problems across the advertising business? We don't know, though we expect it's a combination of all three factors.

Earlier this year we were told that FIM was specifically struggling with goals for its non-premium inventory, both with mortgage/financial services ads and with remnant/ad network sales in general. If so, this means that's News Corp.'s ad problems could be everyone else's as well.

Internal memo from FIM head Peter Levinsohn follows:

All,

Since its inception nearly three years ago, FIM and its properties have
experienced phenomenal growth and success as a result of your collective
efforts. You have worked diligently to create the largest, most
innovative content communities in the world, and, as a company, we are
now prepared to take the next step in our evolution.

That next step involves two things: 1) leveraging our industry-leading
advertising technologies to create an entirely new business for the
company and 2) more closely aligning our products and revenue. We will
achieve this alignment through a restructure of our sales and
advertising groups that will begin to take effect in the coming weeks.

FIM Audience Network
First, we have created a new business unit called the FIM Audience
Network. Despite the press in our industry about the challenges of
monetizing social media, we have built amazing Hyper Targeting and
Optimization technologies that dramatically improve our ability to
provide better advertising solutions to our clients. Given these
strengths, Adam Bain - who has been so instrumental in developing this
capability - has been promoted to President of the new unit.

Adam's team will be comprised of FIM's ad technology, ad operations and
performance sales groups. Their charter will be to optimize monetization
across FIM's content network and those of other third-party publishers.
The merging of these groups into a single business unit will provide our
family of brands and new third-party clients with the ability to extend
their reach and enhance their advertising effectiveness across a vast
online audience.

Integrated Sales
In addition to the creation of the FIM Audience Network, we will be
integrating our branded sales teams (including client solutions, sales
development, and traffic generation) into the operating businesses that
they support.

This change recognizes that our individual business units have evolved
to a point where it is clear they are best served by dedicated
professionals who live and breathe those products alone.

For example, at MySpace we have launched our developer platform,
unveiled incredible new features and functionality and, just today,
announced our landmark joint venture with leaders in the music industry
to form MySpace Music. In order to maximize the benefits of these events
it is essential for our product and sales team to work hand in hand.

By integrating the sales teams in this way, each operating unit will be
empowered to assume responsibility for its revenue, growth and
profitability. Further, each operating group will be afforded greater
flexibility to implement processes and programs that meet the unique
needs of their respective markets.

Since the sales teams will now be integrated with their respective
brands, we will no longer have a separate FIM Revenue Group. In the two
years that he's been here, Michael Barrett has built a phenomenal sales
team and driven tremendous results - helping to exceed our News Corp
estimates and achieve profitability as a division. His efforts have
primed FIM to take this important step in the next phase of our growth,
and I want to thank him for his contributions. Michael will remain with
the company for the next two months to guide the transition before
moving on to pursue new endeavors.

Members of affected groups will be transitioning in the next few weeks
and will hear more details from their respective leaders.

Closing

This reorganization is a milestone for FIM that will create many
exciting changes and opportunities for each of you, as well as for our
company going forward.

I am confident that we are moving in the right direction to secure our
long-term success, and I am certain that we have the right leadership
team in place to take us there.

I'm very proud of all of you, and I thank you for your ongoing
commitment to the organization.

Thank you

See Also: News Corp. Internet Unit FIM Missed July, August Revenue Goals

News Corp. Q2 Earnings Call