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'Bloated' MySpace to slash its workforce by 30 per cent

MySpace, the social networking site owned by Rupert Murdoch's News Corporation, is to slash its workforce by 30 per cent after its new chief executive said staffing levels were "bloated".

The website's huge growth has been eclipsed by that of rival Facebook, which overtook MySpace as the most popular social network in the US last month. Meanwhile, a lucrative alliance with Google, which has been subsidising the company's costs for almost three years, is up for renegotiation.

About 400 jobs will go, the MySpace chief executive Owen Van Natta said yesterday, leaving the company with 1,000 employees. "Simply put, our staffing levels were bloated and hindered by our ability to be an efficient and nimble team-oriented company," Mr Van Natta said in a message to workers, in which he pledged to restore a "start-up culture". "I understand these changes are painful for many. They are also necessary for the long-term health and culture of MySpace."

The dramatic cost-cutting move comes two months into Mr Van Natta's tenure. He replaced one of MySpace's founders, Chris DeWolfe, as chief executive in April. Earlier this year, News Corp hired AOL's former boss Jonathan Miller to oversee all of its digital media operations, and yesterday he said that MySpace "grew too big considering the realities of today's marketplace".

Worldwide, Facebook had more than 307 million unique visitors in April, the latest month for which data was available. MySpace had more than 123 million. In the US, Facebook's edge was narrow, with 70,278,000 unique visitors to its website in May versus MySpace's 70,237,000. The number of MySpace users in the US has been falling since October but, more importantly, the revenue it has been able to generate from advertising placed on its pages has fallen far short of the hopes of 2006, when it signed a $900m (£549m) deal with Google to sell adverts on MySpace's behalf.

Google guaranteed to pay My Space minimum of $300m a year, with any revenue on top of that being shared between the two sides. Analysts expect any new deal to be substantially less lucrative for MySpace.