The social networking site is in worse shape than CEO Owen Van Natta and his boss, News Corp. digital head Jon Miller, had expected when they were recently hired, Silicon Alley Insider is posting. Two main areas of concern: that the number of active users is inflated, and that Google wants to significantly downscale its massive ad deal. When the renewal comes up, SAI says, Google will probably only guarantee around $50 million per year. That would cut MySpace's annual ad revenues in half, to $300 million. All this is likely to result in lots of layoffs and other big cutbacks. Last week, Fox Interactive, the Bev Hills-based unit that operates MySpace and other online businesses, cancelled plans to move into facilities at Playa Vista (though now News Corp. will have to find tenants to sublease the space).

News Corp. is a cutthroat company. Jon and Owen know they can't let MySpace lose $100 million to $150 million during their first year and keep their jobs much longer. The easiest and probably smartest way for them to keep that from happening will be to cut MySpace's 1,500-strong headcount in half. "If you can't run that site with 750 people, you don't know how to run a business," says a source close to the executives. Another source close to the executives described Owen and Jon as "the new adult supervision" that will "make adult decisions."