Building an Internet Empire

How much does it cost to build an Internet empire?

One billion dollars.

That's what it costs to turn a traditional media empire into an Internet powerhouse, give or take. Don't worry about cleaning up the mess afterwards. The one billion covers that, and it gets you 70 million online users, more pageviews than Google(GOOG Quote), and growth rivaling Yahoo!(YHOO Quote).

News Corp.(NWS Quote), led by media tycoon Rupert Murdoch, has recently spent $1.2 billion buying two Internet properties that could propel News Corp.'s business growth and stock price into the ranks of Yahoo! and Google. A traditional media empire (TV, film, print newspapers), News Corp. has not done as well as its Internet media peers lately, and a brief look at its stock performance over the past year may lead one to believe something is not working in Murdoch's empire.

In this time, News Corp. has underperformed both the broad market and its competitors, namely Time Warner(TWX Quote). That said, I still feel there is value to be found in the stock for two reasons. Its new Internet unit, specifically the acquisition of Intermix, is a breath of fresh air in this old media empire. Further, page six of the New York Post alone might be worth several billion, given its gossip dominance.

But the Internet is the primary opportunity.

On July 15, News Corp. announced the formation of Fox Interactive Media (FIM), "the new unit that will leverage the strength of Fox's distinctive entertainment, news and sports brands across the Internet to offer a richer online experience to its millions of users. Veteran media and interactive executive Ross Levinsohn will become president of FIM, which will be based in Los Angeles." This announcement acknowledged the company's need for an Internet unit and put forth strategic leadership by installing Levinsohn as president.