MySpace buying online music sensation iLike

Financial terms of the deal were not disclosed, but technology blogs claiming inside sources have valued the deal at approximately $20 million.

“The iLike acquisition advances our relentless pursuit of innovation and the need to create new distributed social experiences in music and beyond," said MySpace chief executive Owen Van Natta.

Since being founded two years ago by brothers Ali and Hadi Partovi, iLike has become a favorite way for people to find new music, live performances, and concert tickets.

“MySpace is trying to recapture relevance from Facebook and attempting to use iLike to broaden their potential customer base and create a more viable future," said analyst Rob Enderle of Enderle Group in Silicon Valley.

“It isn’t a bad idea, iLike is a well-regarded property and catching Facebook organically is likely not in the cards."

It appears iLike was under pressure from investors eager to reap profit, according to Michael Gartenberg, vice president of strategy and analysis at market research firm Interpret.

“It was a way for them to get out," Gartenberg said of iLike’s backers. “These guys were the high-flying Web 2.0 company and they sold for a lot less than their perceived valuation not long ago."

The value of iLike had recently been pegged at more than $50 million.

People can visit iLike’s eponymous website or install the startup’s applications at Apple’s online iTunes shop or social networks including Facebook, MySpace, Bebo, hi5 and Orkut.

ILike reports having 55 million users.

Gartenberg believes iLike’s dependence on other websites as stages for its applications proved to be a weakness.

“It’s a problem any time you are totally dependent on someone else for your core platform," Gartenberg said. “The dependence on Facebook really was an issue."

MySpace expects to close the iLike deal quickly and said there are no plans to yank the service from arch-rival Facebook.

“ILike is a great application across many social networks and we expect to extend that," Van Natta said.

ILike will remain based in Seattle. MySpace indicated it is eager to apply iLike discovery and sharing technology to other areas of entertainment such as videogames and film.

“It’s a humbling moment for Ali and me," the brothers wrote in a message posted at iLike’s website.

“Having built the most popular music services on the other social networks, we never imagined that we’d someday team up with MySpace, and we’re excited to see what we can accomplish as one team."

The iLike.com website and applications will continue to operate as they always have “except that we’ll be working to make them even better," the brothers wrote.

ILike said it will continue testing a service selling digital music downloads and its goal is to eventually enable people to “impulse buy in-page" from anywhere they can access the Internet.

“Launching another store is going to be challenging in a universe that is so dominated by Apple and iTunes," Gartenberg said.

“But we are still in the early stages where no one is willing to roll over and concede the market to anyone."

News Corp-owned MySpace has focused on connecting music makers and song lovers since being eclipsed last year by Facebook as the world’s most popular social-networking service.

“By itself this doesn’t do what MySpace needs done, but as part of a larger acquisition strategy and blended with targeted improvements this could eventually work," Enderle said.

“I worry, however, that this may be less a part of a broader strategy, which hasn’t been articulated, and more of Hail Mary pass to make it look like they are doing something strategic. If it is the latter this won’t end well at all."

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