Outsiders' Pact: Wendi Deng and Masayoshi Son
Wendi Deng and Masayoshi Son join forces to set up MySpace Japan KK. Despite their immense wealth, they are both outcasts in their chosen homes. Perhaps that is why Wendi Deng and Masayoshi Son have inked an agreement that could change the landscape of the online world in Asia.
On paper, the agreement was signed not by Deng but by her husband, Rupert Murdoch, chairman of News Corp. But Deng's hand was very much in evidence, especially if one considers what is happening in Japan will probably be used as a template for a much larger operation in China, Deng’s homeland.
On November 7, Murdoch, through his Fox Interactive Media, entered into a deal with Son's Softbank, a major Japanese telecom and IT concern, to each invest ¥590 million (US$5 million) to set up a new company in Japan called MySpace Japan KK.
Son and Softbank will guide the venture to meet the requirements of the Japanese authorities and the fast changing demands of Japanese online consumers. Fox, which bought the social software site MySpace in July 2005 for US$580 million, will provide the “formula” for operating the site. The company said it expected to draw most of its revenue from advertisements, but gave no details.
MySpace is one of the most popular sites on the Internet, claiming 125 million registered users. In Japan, its biggest rival is Mixi, which has fewer than six million users. News Corp, which has on paper doubled its investment in MySpace by allowing Google to run its search and advertisement functions on the site, is looking to set up a similar venture in China.
Son is an unusual fish in the Japanese corporate sea—he is a naturalized Korean, belonging to the race that has constantly been looked down upon by the majority of Japanese. This helps to explain his unconventional methods, and why he has found it difficult to acquire that sort of long-lasting relationship treasured by Japanese firms with traditional Japanese banks.
Wendi Deng is in the same boat. As Murdoch’s third (and current) wife and mother of his two youngest daughters, she is feted in New York, London and other parts of the western world but does not really belong there. Her natural habitat is China, where she is directing News Corp, through her husband, to establish itself as a major player.
Deng has natural allies in China. Son also has good connections there—he owns a half share in Yahoo! Japan and indirectly controls Alibaba, China’s biggest e-commerce site.
By virtue of the agreement between MySpace and Google, Deng is on good terms with the triumvirate which runs the huge search site. Son, on the other hand, is a long term partner of Yahoo!. It is logical to expect the two will be fighting each other, one siding Google and the other Yahoo!, when it comes to operating in China.
Yet Son is now a partner of Deng. If the two work together, they can play Yahoo! against Google to great effect. They can, for example, use either Google or Yahoo! when it comes to search and targeted advertisements for their new venture in Japan—the choice would depend on the benefits the Internet giants are willing to offer. The same consideration could apply when MySpace sets up in China. Murdoch, in his 70s, is not in good health. Both Deng and Son are relatively young. It is to their mutual benefit to work together long term.
asia! IN A SNAP
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