BUSINESS CLASS: Rupert's digital disaster

Our travels this week take us to News Corp headquarters where Rupert Murdoch is rapidly transforming MySpace into a social media Frankenstein, and to New York, where Goldman Sachs' PR man is taking the firm's new European image crisis in his stride.

Forget the share price, the analyst reports, the criticisms of the commentariat; the surest indicator that a business is going south is when it finds its way onto an episode of Saturday Night Live. Such was the ignominious fate of social networking site MySpace, when it was described as the internet's "abandoned amusement park" in a recent skit on the famous New York sketch show.

"Where once it bestrode the world," says The Independent's Stephen Foley. "It has been eclipsed by Facebook as a forum for communicating with one's friends, and has failed to capitalise on all that early buzz surrounding online music, a buzz that once catapulted the Arctic Monkeys to number one in the UK charts."

Indeed, things have gone from bad to worse for MySpace since Rupert Murdoch snapped it up it for $US580 million in 2005. Not only has it been losing some serious ground to rival Facebook – the world's number social network with 470-odd million active users per month; MySpace has about 122 million per month – but lately it has been haemorrhaging executives, too. In the past few months News Corp has laid off more than 30 per cent of MySpace's workforce, says Foley, the latest casualty being ex-Facebook alum Owen Van Natta, who was unceremoniously dumped this week, just nine months after being hired to replace the website's co-founder Chris DeWolfe.

"Van Natta, largely considered a safe pair of hands, especially after his tenure at major rival Facebook, was meant to bring about the drastic changes [MySpace] needed," says The Telegraph's Emma Barnett. Just "four months ago he was brimming with optimism that MySpace could shift focus away from being a social network and become a platform 'where people socialise around content'. He wanted it to become the place people found and shared music, TV, film and games content online."

But now, says Barnett, the "rather unsettling" reality is that MySpace seems to be losing its grip on its music and celebrity audience – "an area still not dominated in the same way by any other site."

Meanwhile, analysts seem doubtful that MySpace will be able to renew its lucrative $US300-million-a-year search advertising deal with Google when it expires this year. Even the high priest of digital hubris Murdoch himself conceded earlier this month that MySpace is "not where we want it", says Foley. Not a good sign.

So where's it all gone wrong? Well, New York journalist and sometime Murdoch biographer Michael Wolff has some rather frank thoughts on the matter. "It certainly is not [Van Natta's] fault," Wolff told The Guardian's Bobby Johnson. "He inherited a business in which you could only manage decline."

"[News Corp] made every mistake you can possibly make on this: they under-invested ... they imposed their own top-down culture ... they saw [it] as an extension of their fundamental content business, the media business,' said Wolff.

"The thing that's going on at News Corp right now is total, total desperation over this digital stuff," said Wolff. "Rupert, the guy who knows nothing about this whatsoever – is suddenly commandeering this whole thing. It's got everybody completely freaked out... It's impossible to explain to him that it's not working because it's over, because this is the way the technology business goes. Once it's past, it's really past. There is almost no way to get that back."

"He absolutely has no idea – I cannot stress this enough, how much Rupert is out to lunch on this. If people really quite understood how little feeling has for this business, they would fall down laughing – or crying."

But as Tim Edwards of The First Post points out, not everyone thinks Murdoch is a media Luddite. When he announced in November 2009 that News Corp would block Google from indexing his news websites, The Register's Andrew Orlowski "saw method in what everyone else in the internet world views as madness."

"Orlowski said Murdoch's strategy would devalue Google's search offering, which would lead to a reduction in its advertising revenues. 'What Murdoch has done is say the unspeakable,' said Orlowski. 'He's offered a roadmap for taming Google – and a re-ordering of everything we take for granted about the web today.'"

But giant-slaying aside, it's too late for MySpace, says tech blogger Om Malik. "I bet if you showed up with a decent offer for, say, IGN or MySpace, News Corp would be willing to make a deal. I don’t blame them. With Avatar bringing in more revenues than all their digital properties put together, COO Chase Carey, I am told, doesn’t care much for these headache businesses... The web doesn’t hold much attraction for Rupert Murdoch, who is now enamoured with e-readers and tablets."

Goldman 's Greece stain

As if being one of the arch villains of the global financial crisis wasn't enough for Goldman Sachs, the too-big-to-fail investment bank has now been implicated in the Greek financial crisis. It seems Goldman undertook currency swaps with the Greek government eight years ago that may have masked the true state of the EMU member's finances.

This is bad news and even worse timing for a bank that was recently described as "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". As our own Alan Kohler wrote on Friday, "Goldman’s Lloyd Blankfein is keeping his head down at this stage, but one imagines him saying 'What?', with arms outstretched, palms up, and chocolate around his mouth."

But then Lloyd probably doesn't need to say anything. Why would he, when Goldman partner/PR master Lucas van Praag is doing such a bang-up job?

Or is he? Certainly he is managing to momentarily distract the press's focus from his employer's evil-doings, but only, it seems, by turning the focus onto himself and his rather old-school pour-scorn-on-the-problem approach.

"It isn’t just that the cooed-over firm has become the iconic scoundrel of an entire era. It’s also how much worse they’ve made things for themselves with a continuing communications and PR policy that’s basically a stiffly extended middle finger, waved in the air for all to see," says Max Abelson in The New York Observer.

"Mr van Praag owns a dazzling vocabulary that’s allowed him, in the last three weeks alone, to bemoan the shoddy tittle-tattle of the Sunday Times and The Wall Street Journal’s preposterous effluent," says Abelson. "[But] all of these majestic Victorian taunts might not be in the best interest of a firm that large sections of a beleaguered country are quick to pounce on every time the Dow takes a dip. Nevertheless, the message from ...van Praag and his team has been that criticism of the firm is not only moronic – 'chimera produced by a febrile mind' – but that criticisers are troublemaking simpletons who, as he likes to say, are doing their readers a great disservice."

And The Epicurean Dealmaker agrees that van Praag does seem to be doing rather a good job of "buffing the most-hated aspect of Goldman Sachs' image to a blindingly brilliant shine."

One problem with this is that van Praag's modus operandi of delivering his ripostes in a way that says "not only are you wrong, but also he is smarter and better-educated than you... tends to play better in [his] native Britain, where the art of sharp, witty, spirited debate is still seriously practised by public figures and enjoyed by most spectators," says the blog. America, on the other hand, "is just not a country where you can use words like 'egregious,' 'febrile,' and 'chimera' in public without running the risk of being lynched for general asshattery."

So what van Praag's story? One theory is that he is just incompetent, says Epicurean Dealmaker. Another is that "Mr van Praag is actually fighting a clever and resourceful rear-guard action. By slapping upstart journalists down hard and turning the messenger rather than the message into the story – normally a big no-no in public relations – he is distracting attention from other, potentially more damaging stories and revelations."

But ED's preferred theory (and BC's too, we might add) is that "van Praag is completely on-message. I think he is conveying exactly what Lloyd Blankfein and the other executive managers of Goldman Sachs want him to convey: that Goldman Sachs has done nothing wrong, that we deserve our fearsome reputation and our outsized compensation, and, if you don't like it, you can all go fuck yourselves."