Hollywood Reporter Mermigas on Fox Interactive Media and MySpace

"I think everything you see people doing today with the video downloads and online today is 100% experiment. I think three to five years from now it will look nothing like what you are seeing today. The next wave will be how everyone explores the ad platforms versus pay-for-downloads. And the consumers will dictate a lot of it," Levinsohn said. "The value that creators of content are sitting on is the future of the Internet. You have wireless, Internet, WiFi, WiMax, VOD platforms, and God knows what's going to come next. You have to feed the beast with content, and you don't necessarily have to own all of it."

That kind of intense research and genuine interest helped News Corp. to snatch IGN, MySpace and other Intermix Media properties out from under rival bidder Viacom last year. Levinsohn has been the driver behind News Corp.'s nearly $2 billion investment in social networking, gaming, sports and other interactive media acquisitions. Scout has been a perfectly matched Web site compliment to Fox's regional sports networks. The karaoke-oriented Ksolo.com is a good Web match for "American Idol." IGN, the dominant games download site, is becoming a vital online watering hole for the gaming creative community. News Corp. may raise its profile in that world even more by acquiring a major games developer.

So what will FIM and MySpace look like a year from now?  "All our focus is around monetizing what we have. We have to build internal technology better to understand how to better target those opportunities to consumers. We'll have the platform done within the new fiscal year," Levinsohn said, with utter confidence.

Fox Interactive Media is in the midst of a massive push to harness the power of MySpace and its other Web-based businesses to redefine online advertising and marketing, e-commerce, digital video-on-demand, blogging, instant messaging, classified advertising and other interactive services in a user-friendly way that is poised to add hundreds of millions of dollars to News Corp.'s revenue base by the end of next year.

What's next for FIM is leveraging MySpace's online community and communication into a peer recommendations framework for leads on everything and anything: the best children's playgrounds in Los Angeles to the best concert seats in Madison Square Garden to the best steakhouse in Dallas. Such peer recommendations provide a gentle seaway into targeted, fine-tuned behavioral marketing for national and local advertisers wanting to reach MySpace's 15- to 34-year-old core user.

News Corp.'s challenge is to utilize that viral marketing and communications to develop a host of next-generation media services in-house so as to keep the lion's share of the revenue they will generate. Most significantly, FIM is developing refined advertising tracking, pricing and sales tools that will cater to every new-media platform and device, and quantify the collective reach of content and services reaching consumers anywhere, anytime. If FIM can remain in control of the advertising and marketing experience, generating 80% of FIM's revenue and 30% of News Corp.'s overall revenue, it won't have to share as much of that money with the likes of Google.

Google's stable of advertising-related support, including its newest online checkout service, could provide MySpace with turnkey support in search, commerce and advertising.

"We have no interest in partnering with Google or anyone else on either advertising in general or e-commerce. Those are things we are going to do ourselves," News Corp. president and chief operating officer Peter Chernin said. "The only thing we are talking about is whether we partner with somebody on search, and mostly on the sponsored links side of search."

Successfully harnessing the user experience and social network's unbridled power will partly hinge on how effectively FIM can develop vertical miniportals for topics and interests that cut across MySpace users as well as developing an ecosystem of third-party platforms and devices like the wireless Helio phone and the push-button access it offers to MySpace. Chernin believes that cell phones will be the most critical global distribution platform for News Corp. content.

Sports and games soon will join the music, comedy, film and blog gathering places that are a springboard for less overt, viral advertising. They will be powered by Fox's branded entertainment, sports and news assets also created for the core demographic the company calls "Generation Fox."

Little wonder, then, why a search and advertising powerhouse like Google wants a piece of the action given that MySpace generates more than 8.5% of all Google's traffic and 5% of all general Internet searches, according to Hitwise. The billion-dollar question nagging at News Corp. executives is how to enter an alliance with the likes of Google and not lose control.

FIM still has nearly $1 billion in spending money to buy or invest in businesses that would be strategically important content, advertising or support services.

At present, plans are being formulated to provide MySpace users improved instant message, Voice over Internet Protocol and possibly e-mail through alliances with telephone companies and other service providers, sources said. The popular America's Sports Blog on FoxSports.com has been the impetus for giving MySpace users their own tools to blog with. There also is intensified focus on streaming video in response to the ramping 35,000 user-generated video uploads daily to MySpace.

Even the revenue of those other FIM Web sites such as the video game-centric IGN and sports-themed Scout are growing annually by at least 30% and attract about 29 million unique users. Since acquiring MySpace nine months ago, its user base and revenue have more than tripled, and News Corp. makes a profit on every registered friend.

That same quality can make it difficult to win over advertisers, which is why FIM is hard at work developing a new set of cogent tools to track, price and sell ads across all of its and News Corp.'s media platforms and devices. It is the infrastructure designed to increase revenue per page and pay view. Destination pages on movies, books and comedians that are gradually being introduced to MySpace have been readily embraced by such display sponsors as Sierra Mist, Cingular and Aquafina. It is easier to place ads on the MySpace home page and its 20 million views. In June, MySpace was second only to Yahoo! Mail in capturing 17% of online display ad impressions, according to Nielsen//NetRatings AdRelevance.

About 80% of MySpace revenue will continue to be generated by advertising, with the remainder coming from subscriptions, fees and transactions. Much of it is driven by MySpace's unique viral word-of-mouth user communications. The most effective evidence was the 1.6 million MySpace users who had embraced the specially created Web site profile for Fox's "X-Men: The Last Stand" before it opened in theaters.

That is why he has established FIM Labs: a stealth group of smart, talented engineers "who just get at it" and pursue new ideas, create companies and identify those to invest in or acquire. The new group is headed by FIM technology chief Adam Bain. Research includes daily online focus groups with MySpace members who are eager to be part of the creation process.