MySpace CEO Chris DeWolfe talks about why he thinks he has a better business than Facebook and what it's like to work for Rupert Murdoch.
MySpace CEO Chris DeWolfe got a hero's welcome when he showed up at his alma mater, the University of Southern California's Marshall School of Business. His former professors surrounded him and shook his hand. Then DeWolfe walked onstage to applause from the 300 MBA students who packed the auditorium.
MySpace owes its beginnings in part to a paper DeWolfe wrote at USC. Five years ago, he and business partner Tom Anderson launched the social-networking site, which subsequently reigned as the hottest gathering place on the Web. In July 2005, Rupert Murdoch's News Corp. bought MySpace for $580 million. The following year, MySpace entered into an exclusive ad-placement deal with Google for $900 million, giving MySpace the kind of revenue that has so far eluded competitors such as Facebook.
But the site has suffered indignities of late. Last year, it launched MySpace Music, boldly trying to tilt the recording industry away from charging for downloads and toward MySpace's model of letting users listen to any song for free. But the music service has not caught fire. In the past few months, numbers have shown Facebook usage surpassing that of MySpace for the first time, giving weight to the sentiment that MySpace has lost its cool factor to Facebook. (DeWolfe says that 60 percent of Facebook users are also on MySpace, so they're both cool.) In February, MySpace announced that it had ousted 90,000 sex offenders from the site, which was both good publicity (MySpace took action!) and bad (wait-there were 90,000 sex offenders prowling MySpace?).
DeWolfe was interviewed in the USC auditorium by Cond Nast Portfolio contributing editor Kevin Maney. While looking like a rock star in a slim-cut pinstripe suit, boots, and an open-collared shirt, DeWolfe often seemed to stick to savvy corporate answers. This is an edited transcript.
How has the economy affected MySpace? For the first quarter, year-over-year, our revenue was up 17 percent. We think we're pretty well-positioned for the rest of the year.
Seventeen percent?Do you consider that good or bad? Good. I think in a normal economy, it would've been up 30, 40, 50 percent.
What's the next big thing coming from MySpace? We're allowing our users to export their profiles onto other websites. The internet is becoming totally mashed up. Imagine you're on Flixster, which is a movie-review site. You're probably not going to want to set up a profile on that site. You're probably not going to be able to find any of your friends on that site. But if you can log in through your MySpace user name and password, you can see if any of your MySpace friends are on there too. You can write reviews and see which movies your friends recommend.
How about being compatible with your competitors, so a MySpace profile can be transported to
Facebook, or a LinkedIn profile to MySpace? We'd be fine with that.
So you'd like that? I think LinkedIn would be fine with that. I'm not sure if Facebook would. They're not using any of the open standards. LinkedIn and MySpace usually use open standards.
Is that a conversation you've had with LinkedIn founder Reid Hoffman? No, but it's a conversation we would be open to having. We think that you can't really control the users. If users want to take their data and use it on any other site in the world, they should be able to.
How about Twitter? If Twitter wants to integrate into MySpace, that's fine. Definitely more people are using Twitter. But it's still very small. They haven't proven in any way that there's a business model arYou feel like you have a better business? I think that leads to a bigger problem of what is happening in Silicon Valley. Over the past two years, every venture capitalist threw money into companies and said, "Don't worry about making money, just get as many eyeballs as you can, get as many applications installed as you can." And then all of a sudden, two months ago, they said, "You gotta make money." It's not the kind of thing where you can just flip a switch and start monetizing your traffic. It took us four or five years to build the infrastructure we have now.
There's a perception that Facebook is the hot site and MySpace isn't. You can't pay too much attention to that. I try to do as much press as I can, and it gets tiring after a while.
I understand that MySpace came out of work you did while you were here at business school. Is that true? In one class, I did a paper-a business plan, actually-for a company I called SiteGeist. The whole idea was to have internet communities in every city, where people could connect around shared interests-whether nightlife or shopping or entertainment-and to have all the communication tools that went along with that, including email and instant messaging.
You and MySpace co-founder Tom Anderson started one company, sold that, and then did MySpace? Yes. Before 2003, there was sort of a stigma about socializing online. It was kind of creepy, almost desperate. It's like if you met someone on a dating site, it would've been really weird.
When did you realize MySpace was going to change that? I was at a dinner with five people, and two of them went, "Oh yeah, I'm on MySpace." That was a pretty big deal for me.
Why did you decide to sell to News Corp.? I really thought that we would fit well with a media company. We'd have access to content, we'd have access to unlimited capital, and we'd have access to international markets. There were a few doubts in the beginning, because you hear all these really negative stories about Rupert Murdoch and how he runs an evil empire.
All true, I'm sure. [Laughs.] But when you dig into it and look at his life history-you know, he started at a community newspaper in Adelaide, Australia, and he was, I think, 22 years old and had about three or four days left of cash in the bank. So he goes in there and makes all the headlines really sensationalistic, and ends up tripling the circulation.
It was really the entrepreneurial spirit of News Corp. that made that a perfect home for us. At the time, we had 23 million unique users. Now we have, I think, 135 million. So they allowed us to stay in our own silo and grow and find synergy-or whatever word you want to use-within the other groups in News Corp.
The record of synergies in these kinds of deals is really dismal. Yahoo has made, I don't know, probably 100 acquisitions at least. Viacom has made 20 or 30. And almost every time they take on one of these companies, they kick out the founders, and a lot of times they get rid of the brand within literally months. The promise that we would be able to develop the brand and maintain creative control was really the deciding factor.
So you never thought of MySpace as a company that was going to live on as an independent entity?
Obviously, you don't do a startup just for the money. It's really trying to start a company, and grow it, and build a team, and build camaraderie, and all those amazing things. But you also do it for some kind of financial payoff. And I didn't want to be like those other people in the first dotcom boom who were worth hundreds of millions of dollars on paper and then worth nothing.
What's an example of something that News Corp. has done for MySpace that you wouldn't have been able to do otherwise? Right after we sold, we were beginning to expand internationally. And I was really excited, because we had set up an office in London, and there were, like, three people, and I told Rupert that we were going to have another three offices open in the next year. And he goes, "How about 13?" We ended up opening 15 offices that year.
How much do you actually work with Rupert Murdoch?
You know, he's been spending a lot of time with the Wall Street Journal lately. But he takes a keen interest in everything we're doing.
Does he really get what MySpace is? Yes, he's very engaged, yeah.
Does he have a MySpace page? He does, but I don't think he probably uses it.
You seem to have crossed into being a celebrity yourself, to the point of popping up in tabloid rumors. Why do you think you get so much attention, and how do you deal with it? Well, that's very flattering, but honestly I don't pay a lot of attention to it-so much of it is completely fabricated, which makes it hard to take it seriously.ound it, and I think it's going to be difficult.
Are you looking at a location-based service so you can tell where your MySpace friends are in the real world-like whether they're at a certain bar or at home? Yeah, we're kicking it around. But then it gets a little bit creepy. [Laughs.] I don't think I would use that myself.
What is MySpace going to be like five years from now? You'll see MySpace on virtually every site. And then, MySpace.com will be your home on the internet, where you'll be able to get whatever it is that you're really into-from your Gmail to your newsfeeds. The other primary trend that we're seeing right now is a big switch to mobile. And we're working really hard on continuing to improve our music product.
About MySpace Music-what are you learning? The revenue model is really in tune with the one that Ticketmaster and Live Nation are trying to adopt, meaning the money is no longer in CD sales. It's in advertising, live events, and merchandise. So we have the advertising piece down, and we have the download piece down, and we're going to be adding a ticketing and merchandise piece. Together, it makes for what we think is going to be a profitable business in the next couple of years.
What about Facebook? Is that your biggest concern? From a pure social-networking standpoint, the sites are very different. Facebook has definitely done a great job. They've created more of what they would describe as a social utility that makes it really easy to send messages and manage your address book, which makes them successful. But they haven't focused on monetizing much.VisitÂ Portfolio.comÂ for the latest business news and opinion, executive profiles and careers.Â Portfolio.com© 2007 Condé Nast Inc. All rights reserved.