News Corp has sold Myspace for $35m, a fraction of what it paid for the once-hot social media site. The deal comes as a new generation of web-based start-ups is enjoying sky-high valuations.

Advertising company Specific Media will team up with the singer Justin Timberlake to acquire Myspace in a deal that caps a tumultuous period of ownership under Rupert Murdoch's News Corp, which swooped in to buy Myspace for $580m in 2005.

At the time, Myspace was among the the world's most popular websites, and News Corp's success in beating rival Viacom was viewed as a major victory for Murdoch.
Since then, however, Facebook has eclipsed Myspace in popularity.

Last night's deal contrasts sharply with the current frenzy over social media companies, including LinkedIn, Twitter and Groupon, among investors looking for the next big thing.

Under the Myspace deal, News Corp will retain a minority stake in the website, the companies said in a statement, confirming a deal that was reported earlier.

Specific Media, which specialises in digital advertising, did not disclose financial terms. It announced, however, that Timberlake - who happens to have played Facebook adviser and investor Sean Parker in the movie 'The Social Network' - would take an ownership stake and serve a 'major role' in developing a strategy for Myspace.

A source familiar with the transaction said the deal is worth $35m and is a mix of cash and shares. News Corp will retain about 5%, the source said.

Additionally, more than half of Myspace's 500-strong workforce is expected to be laid off because of the sale, the source said.

The deal comes after a four-month bidding process in which a number of different possible buyers surfaced, including other social networking sites and private equity firms. The auction had been expected to fetch in the region of $100m.

Founded in August 2003 by Chris De Wolfe and Tom Anderson, Myspace was conceived as a way for friends and fans to connect with one another as well as with their favourite bands and artists.

At its peak in 2008, Myspace attracted nearly 80 million people in the US, almost double that of Facebook. By 2011, the number of US visitors to Myspace fell to about 40 million while those visiting Facebook totalled about 150 million.