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As expected, today MySpace -- which is wholly owned by News Corp. (NYSE: NWS) -- has agreed to purchase iLike. The terms of the deal were not disclosed (although, the buzz is that the deal came to roughly $20 million).Tech veterans (and brothers) Ali and Hadi Partovi started iLike back in 2006 (I actually had a chance to talk to them back then). The goal was to create a social music discovery site, leveraging emerging platforms like Facebook, Orkut, hi5 and Bebo. In fact, iLike was able to attract more than 50 million registered users.
While impressive, there were some problems. First, a big chunk of the traffic came from Facebook. So, the concern has always been: what if Facebook wants to compete in the space?
Next, the music category is extremely brutal, with powerful competitors like Apple Inc.'s (Nasdaq: AAPL) iTunes. Finally, with the recession, it is getting more difficult to monetize ad-supported sites.
So, why does MySpace want iLike? Simply put, the site has a strong technology platform, which works seamlessly across key web destinations. It also has powerful artificial intelligence to suggest music. In fact, it looks like MySpace wants to extend this capability to other areas, such as gaming and films.
True, Facebook has eclipsed MySpace. Yet, the fact remains that MySpace is a strong #2, with a massive user base and strong brand recognition (especially in entertainment). And with valuations coming down across the Web, the MySpace is certainly in a good position to add new platforms.
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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