A year ago Rupert Murdoch's News Corp. was an Internet also-ran. Now his Web presence rivals that of giants Google, Yahoo! and America Online, due in large part to his $629 million purchase of Intermix Media, and its MySpace social-networking business.
Two-year-old MySpace is a next-generation Friendster--a series of individualized Web pages maintained by some 46.7 million users, who generate 12.5 billion page views a month. Natalie Pace, CEO and founder of i-Sophia.com, talked to co-founders Chris DeWolfe and Tom Anderson about creating an Internet brand overnight, and the challenges of sustaining it in the future.
You did this in two years. Was it as easy as it looks?
Anderson: Actually, things did go remarkably easy for us. I cant say that we struggled for a long time; we only struggled for about a month. When we were about a month into it, I remember thinking, This may not work out. Just one day, in particular, we saw this huge spike because of people telling each other. It just went crazy from there. We didnt have this big, long struggle behind it. We put it up, and it got popular very quickly.
DeWolfe: One of the major reasons it worked so well is that we had a very experienced management team. Weve worked together for the last seven to eight years. With respect to timing, when we launched the site, social networking began to take off, and the advertising revenue stream came roaring back. Two of the most interesting points were that we had no content costs and no customer acquisition costs. We had to make sure we had enough money to cover engineering and bandwidth costs, and we were confident that we understood the advertising business.
How do you get 46 million people to find out about your product without buying advertising?
DeWolfe: It was really key to create a set of functions that were compelling to our users and an efficient way to use them. Users socialize to figure out what theyre going to do on the weekend. They use MySpace to discover new music and post events. Musicians upload their music. People use it for entertainment purposes or to sell goods in the classified area. MySpace makes what they do in the offline world a) more efficient or b) more interesting. If you have ten friends, and nine are on MySpace and youre not, you feel pretty left out. People end up joining sooner rather than later. The bigger the network gets, the faster it grows. We are now registering 160,000 people per day with no marketing.
Anderson: We didnt do traditional marketing, but we did try to find photographers and creative people because we thought that would make the site more interesting. In the beginning, it was all Los Angeles--actors, photographers and musicians. That made for an interesting community, and brought in a lot of people. A lot of the early growth, however, had to do with the features and what our competitors were not allowing people to do.
Anderson: On Friendster, if you were a band and you made a profile, they would delete it. They didnt want bands on their site. If you made a profile for your company or for where you lived or a neighborhood or an idea, youd get deleted. We recognized from the beginning that we could create profiles for the bands and allow people to use the site any way they wanted to. We didnt stop people from promoting whatever they wanted to promote on MySpace. Some people have fun with it, and others try to get more business and sell stuff, like a makeup artist or a band, and we encourage them to do that.
Music has become particularly important to MySpace. How did you attract over 660,000 artists and bands to the site?
DeWolfe: Tom has a deep passion and understanding for what emerging musicians go through. He understands the frustration. I understood the macro trends of the music business. Labels were signing fewer acts, giving them less time to prove themselves and spending less money on marketing. We saw a need to develop a community for artists to get their music out to the masses. With MySpace, when they went out on tour, they could actually tour nationally. The band might have 20,000 friends on their list and send out a bulletin saying, Im going to be in Austin on Tuesday night. Come see our show. It has allowed bands to make money on music without having a deal.
You can create a professional-sounding CD, sell merchandise and get your touring revenue in and make a living. It gives those artists a longer period of time to develop themselves before they get signed, or make a living without getting signed at all.
In the early days, there were a lot of bands signing up. They told us that theyd like to post their lyrics and tour dates. Users told us what they wanted to see, and we just built it. Thats how we do a lot of our updates. We catalog what people tell us that they want. Its not super-complicated.
You've been growing at breakneck speed. How did you manage to stay on top of your business?
DeWolfe: Ive run businesses before. The other people on my team have worked in senior positions in other businesses. Your partners are the most important things. If you dont have good partners, it cant work. Some of our competition had extremely high turnover. It wrecks the continuity of running the business. You need to have similar sensibilities and people you trust to fill in your weaknesses with strengths that they have. That is underrated.
Another trap that people fall into, when you start to grow and there is a little bit of success, is that people get on the soapbox, like pundits and venture capitalists, who tell you how to run your business. Its important to be very disciplined in terms of not listening to them. We were resolute to do what our users wanted. Having discipline and saying no is why we ended up being successful.
Anderson: In a way, its our lack of experience that helps--definitely for me. The thing I like about Chris is that hes not like all the other people Ive met in business. Hes able to cut to the chase right away. We dont waste time on things. We didnt sit down and write up this big plan and spreadsheets and try to force that imagined plan. Weve been quick and nimble on our feet. I was working from common sense. Even though Chris does have that background, hes never been pushing me to that mold, and he doesnt follow it himself.
So we are not doing what everyone else is doing. When we were getting popular, people were saying, Why arent you doing this or that? I thought they were ridiculous, and they thought I was ridiculous.
DeWolfe: They said that we were trying to do too much--music, instant messaging, blogs, etc.--and that we should just focus on one of those. That was the antithesis of what we aimed to do. Most of the sites that did that became boring after a while.
With that said, once you chose your product road map, then it becomes very important to focus on the top three to four initiatives and get those things done. Others try to do too many things at one given time. Our overall strategy was to build the next-generation portal that would be extremely sticky and layer those features in and around a social network. At any one time, we focus our developers on the top three to four initiatives and dont get distracted with what others tell us we ought to do.
There's a good deal of buzz today around two different kinds of communication technologies: text messaging and podcasting. What are you planning on those fronts?
DeWolfe: Podcasting is not really that different from streaming music, which weve done for quite a long time. Having a traditional podcast that people subscribe to--the hype is ahead of the quality. Podcasting is essentially a download, and you run into copyright issues. What youre left with currently is podcast talk radio. If its an established station, like NPR, its fabulous. The average person having a talk radio show will not be that great. Well keep our eye out and may undertake it at some point. We have a couple of different ways that people text-message one another. There is instant messaging on the site. We also have an Internal e-mail product, where people write messages. You can also leave testimonials on your friends pages.
You've now launched MySpace Records, which you are using to promote bands who are popular on the site but haven't signed with a major record label. Do you have more products coming through the pipeline?
DeWolfe: Were always looking for the right opportunities. We are going to be doing some events in Sundance, in conjunction with our independent filmmaker section on MySpace. Well be doing more festivals, at least one major one over the summer.
Youve certainly won the allegiance of some great bands and music fans in the U.S. Do you think that MySpace can be as successful at attracting the independent film community?
Anderson: Another part of my background was that I was in film school. It made a lot of sense to me that the music part of our site would work for filmmakers as well. Theyll be able to upload clips. There will be a section where you can watch what they are doing. Theyll tell where their screenings are. It took a lot longer than we wanted to because we were growing so fast. For actors, directors and everyone associated with film and television, this will become as big of a resource for them as it has been for musicians.
Googles founders hired Eric Schmidt to run Google, and since then, the company has grown to $127.4 billion market capitalization. Do you imagine a time when the multibillion-dollar executive should come in and run things? Or, on the contrary, do you think that would be the kiss of death for a hip, young business?
DeWolfe: We feel really comfortable with our progress. We have huge plans for next year--international, wireless and expansion into other mediums. Were hiring quickly, but in a controlled manner. We have set a plan that we believe everyone at News Corp. will bite off on.
At the end of the day, time will tell. Continuity with senior management is very important. Its been one of the reasons why weve won. If wed hired a big-time media executive a year ago, we wouldnt be where we are right now. We have a great relationship with our new bosses at News Corp.
Culturally and aesthetically, News Corp seems like the opposite of the youth-based brand that you've created at MySpace. Did you get much fallout from your users after the acquisition?
Anderson: When this was announced, people were worried. It went away pretty quickly when we didnt change. If anything now, people will see it get better. We have more money to grow, faster bandwidth and more programmers working on more features. We arent getting pressure on designing it this or that way. Its our baby on what we want the experience to be. News Corp. has been great about that. I think were going to continue to do well.
Do you see any other benefits about being part of a large media conglomerate, like News Corp.?
Anderson: I just came back from a screening at 20th Century Fox, and they were asking me what bands to put in the movie.