By Jessica Shambora
July 24, 2009

Less than six months into his new role as head of News Corp. (NWSA), digital chief Jon Miller has no acquisitions planned. Instead, he said Thursday, he’s going to seed innovation from inside the company and spoke of “putting the house in order” first.

While he didn’t comment on News Corp.’s rumored plans to release a kindle-like digital device (News Corp. has denied that it will) he also talked at length about coming platform shifts and how industries will be experimenting with business models into the fall and figuring out how to adapt them.

Miller expressed faith in the potential for “third screens” like e-readers, to monetize content. He admitted to paying for content on his Kindle that he would be reluctant to pay for online.

But, he said, content producers have to act quickly to leverage their assets. “While you have that market position you need to move,” he said.

Miller believes that media conglomerates like News Corp. and Viacom (VIA.B)  have an advantage because of their ability to both produce and distribute content.

“You have to look at how you get different pieces of the pie,” he said, offering online video site Hulu as an example. The site is a joint venture between News Corp., NBC and Disney.

Miller is becoming “more convinced fundamental changes are taking place” in the advertising industry. As digital media makes marketing more efficient, thanks to behavioral targeting and exploding supply, he said those budgets will shrink. Advertising spending online is lagging behind the time consumers spend with media online.

“You don’t have as much room for everyone to take cuts,” he explained.

Miller sees that pool of digital ad dollars splitting into two categories: premium experiences and commoditized inventory. This second tier can become more valuable, however, through behavioral targeting, which Miller says will provide “a lift out of what otherwise is a big undifferentiated environment.”

Premium content meanwhile will benefit as more brand advertising migrates online, Miller predicts. While 9% of advertising has moved online, brand advertising accounts for only a third. News Corp. is preparing its “processes and environments” for that coming shift.

Another focus for Miller is revitalizing MySpace. In May, the social networking site News Corp. acquired in 2005 for $580 million was eclipsed by rival Facebook in the number of U.S. visitors. Last month the company laid off 30% of its staff after installing new leadership in April.

Profits have fallen short of expectations and in the most recent quarter, News Corp. reported a significant drop in revenue at the unit that includes MySpace. The company reports fourth-quarter earnings on August 5.

Miller has compared his strategy to what Tim Armstrong, his successor as chief of AOL, also faces. It’s about going back to the core of the brand, he said, “and focusing on how to make it relevant today.” That also means concentrating on a few things, he said. “You can’t do everything even though you want to.”

To accomplish this, Miller is committed to building small teams that work on specific product areas. “We have to develop specialized areas and let them win,” he said. “Only then can you broaden out.”

Figuring out which specialized areas to target involves going after new behaviors, rather than trying to play catch-up, he said, mentioning video and games. Awed by the time users spend online playing games, Miller claimed, “Myspace will be an even better gaming platform in the future.”

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