Rupert rides back in

Down the road from Rupert Murdoch’s Californian ranch, a group of media executives gathered last weekend to discuss a subject close to their boss’s heart.

He may have run out of town in the 1990s, but comeback kid Rupert Murdoch is determined to make News Corporation a major online player. Given his skill at cross-promotion, and his deep pockets, only the brave will bet against this self-confessed ‘digital immigrant’. By David Benady

Down the road from Rupert Murdoch’s Californian ranch, a group of media executives gathered last weekend to discuss a subject close to their boss’s heart.

Some 45 top managers from the News Corporation empire were summoned by chairman and chief executive Murdoch to discuss the internet, his latest – some might say belated – obsession.

As the executives, believed to include Sun editor Rebekah Wade and News International boss Les Hinton, were arriving at their destination on Thursday, News Corporation was announcing its latest Web acquisition. Murdoch had lassoed internet gaming and entertainment company IGN Entertainment for some $650m (&£360m). This adds to his purchase of Intermix – which owns, the fifth-most visited site on the internet – and sports website company Scout Media earlier this year. News Corporation is now believed to be the fourth-largest internet company in the world by page impressions, after Yahoo!, Time Warner and MSN.

The $1.5bn (&£820m) spent so far this year is a good part of the $2bn (&£1.1bn) Murdoch has set aside for Web purchases. He reportedly held talks to acquire Skype, which was eventually bought this week by Ebay; he is in talks to buy search engine Blinkx; and there are even rumours he will bid for Friends Reunited.

But observers are asking what grand online strategy the 73-year-old media mogul is pursuing – or whether he has one at all. Murdoch’s previous foray into the digital world at the end of the 1990s was a costly disaster, which included an attempt to launch, an internet service provider for Sun readers.

It’s not easy to change horses

Many question whether it is possible for a man so wedded to the “old” media of mass marketing, such as newspapers and television, ever to make much of an impact on the Web. After all, few other old media practitioners have managed to migrate successfully onto the Web – the BBC and The Guardian being among the exceptions.

While his failed strategy of the 1990s was based on buying fledgling companies or starting up new sites, the recent US acquisitions reveal a different approach. News Corporation is snapping up established players with substantial online audiences. It has chosen community-based sites that offer local news and personalised content.

The purchases were foreshadowed earlier in the year, when Murdoch gave News Corporation’s US editors an ear-bashing over the newspaper industry’s poor showing on the Web.

He also gave a speech outlining his fears that the internet would lure away existing newspaper readers and siphon off huge swathes of advertising revenue. The media magnate admitted he was a “digital immigrant”, rather than a “digital native” like today’s youth.

Gartner media analyst Adam Daum says of the speech: “It was an acceptance that print readers are dying off, so media owners have to embrace the internet. If they make money out of advertising, there is no choice. That doesn’t constitute a strategy. It was more a cry of despair.”

Daum says Murdoch’s experience of cross-promotion between The Sun newspaper and Sky television was a factor in the success of the satellite broadcasting service. He suggests that Murdoch is likely to pursue a similar strategy with his internet push: “He needs a network of online assets analogous to his offline assets, to exploit the power of cross-promotion.”

The key point for Murdoch is that newspapers are losing touch with 18- to 34-year-olds, a key demographic group for his empire.

A recent study by the Carnegie Corporation in the US showed that 44 per cent of young respondents use an internet portal at least once a day, compared to only 19 per cent who read a printed newspaper. Just nine per cent thought newspapers were trustworthy and only four per cent thought they were entertaining.

But Murdoch did outline the bare bones of a strategy. He acknowledged that a lot of his newspapers’ websites simply repurposed content from print to the Web. He proposed making the sites a destination for bloggers and creating “virtual communities”, linking like-minded readers.

The challenge for newspapers, he says, is to “create an internet presence that is compelling enough for users to make us their homepage”.

This is a huge shift in perspective for an organisation such as News Corporation – it is moving from pumping out news and entertainment to acting as a forum for community activity.

Murdoch admits he is worried about the industry’s ability to make the cultural change “to meet the new demands”. He continues: “We may never become true digital natives but we can and must begin to assimilate to their culture and way of thinking. It is a monumental, once-in-a-generation opportunity, but it is also an exciting one, because if we are successful our industry has the potential to reshape itself and to be healthier than ever before.”

Indeed, some have noticed a general improvement in Murdoch-controlled websites of late. “News Corporation is becoming smart in the way it uses online marketing, and the design is getting cleverer. You can see the company learning as it goes along,” says Andrew Pinkess of digital media agency Rufus Leonard, talking about the UK websites of The Sun and The Times.

Is a fistful of dollars enough?

One big challenge for Murdoch will be attracting the talent and technical know-how for his Web ventures, given that many talented internet workers might pursue employment at pure internet players rather than a “scrappy entrepreneurial company”, as News Corporation second-in-command Peter Chernin describes his employer. But with his deep pockets, Murdoch will surely have the cash to lure these experts.

However, money is not everything online, according to Wayne Arnold a co-founder of Profero. He points out that there are few barriers to entering the internet market, unlike the television and newspaper markets – you just need a computer. Success is about capturing a mood, as did successfully after the July 7 London bombings.

“Money doesn’t guarantee you success. It is not what Murdoch can buy, but whether he can create new content and media channels and ideas,” says Arnold. “In the old days, he could buy out the competition, but how does he master the Web when money isn’t the solution?”

Murdoch is reported to have hired consultant McKinsey earlier this year to advise him on his internet strategy, yet some see his recent purchases as revealing a scattergun approach. Online communities and blogs are the latest internet fad, but Murdoch needs to be in at the beginning of the next big thing.

Watching a self-proclaimed old media dinosaur such as Murdoch try to muscle his way onto the Web will make a fascinating spectacle. And any failure to do so could signal the eventual extinction of his species.

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