Note: the following article is based on extensive research that I undertook prior to the recording of the episode. A complete list of sources is linked underneath the article- but the following links are well worth looking at and are the ones that we reference at the start of the episode. All other sources are linked at the bottom of the article and we are grateful to all of our sources.
Most Interesting Resources
Fantastic detailed article in the Financial Times on Murdoch's purchase and mis-management of MySpace
Another very detaiuled article from Bloomberg on the rise and fall of MySpace
The Rise and Inglorious Fall of Myspace
Interesting article from Forbes on how Facebook beat MySpace
Excellent profile of Murdoch in Wired magazine after he purchased MySpace
The 2000s weren’t just the dawn of a new millennium; it was a time of change all over society. The 9/11 terrorist attack on the World Trade Center marked a before and after in the history of global politics and the American consciousness.
The Y2k scare, Dotcom bubble, global financial crisis and Great Recession turned the financial world upside down. Hurricane Katrina, the Indian Ocean tsunami, and several devastating earthquakes rocked the natural world. Pop culture icon Michael Jackson died, and Beyonce and Eminem rose to stardom. Over the course of the decade, cell phones went from being rare to ubiquitous, giving rise to the first Apple iPhone in 2007, a release that would fundamentally change society over the years to come.
Journalist Walter Isaacson dubbed the 2000s “The Decade of Disruption”. The one thing that you could count on at the time was that things would change.
At the same time, the internet was evolving. As more and more people got online, websites started transitioning from passive to interactive experiences. Users didn’t just want to consume information on static websites; they wanted to generate their own content, make connections with other people, and share their thoughts and experiences.
This shift in the internet is referred to as Web 2.0. Rather than any specific technology, Web 2.0 refers to the changing attitudes and expectations that internet users had of websites. Web 2.0 (also sometimes called the participatory or social web) emphasized user generated content and interactive websites. Many websites that came to define Web 2.0 are still popular and in use today, including Wikipedia, Reddit, and Youtube. Services like Amazon Web Services, Flash, and Wordpress were created to help developers create the dynamic websites that modern internet users desired.
As people started going online to get their daily news, established media companies began to get nervous. In younger demographics, fewer people were watching the daily news and reading newspapers. Between the years 1999 and 2009, the stock performance of big media conglomerates plummeted. The stock price of several household media names, such as Time Warner, CBS, and the New York Times, dropped 90%, and the rest of the industry wasn’t that far behind.
Financial rocky times prompted consumers to not renew their subscriptions, and advertisers to slash their budgets. For the first time in decades, traditional mass media companies not only didn’t experience growth, but had to drastically tighten their belts to save themselves from going under.
Robert Murdoch, the then 75 year old media elite and owner of News Corporation, was ready for change. As the chairman and CEO of one of the biggest mass media companies in the world, he was well aware of changing consumer tastes, the financial difficulties his company faced, and the threat posed by new technology. But rather than despairing at the thought of his industry facing their own Ragnarok of the media gods, he could barely contain his excitement.
“To find something comparable, you have to go back 500 years to the printing press, the birth of mass media – which, incidentally, is what really destroyed the old world of kings and aristocracies. Technology is shifting power away from the editors, the publishers, the establishment, the media elite. Now it’s the people who are taking control.” Murdoch told an interviewer, unable to suppress a smile.
“We’re looking at the ultimate opportunity. The Internet is media’s golden age.”
It was the start of a second chapter in his life, both personally and professionally. Murdoch had recently married his second wife, a Chinese 30 year old named Wendi Deng who had worked in Star TV, a Hong Kong network owned by Murdoch. He began working out and eating a healthy and natural Chinese diet focused on seafood and vegetables. Far from winding down for retirement, Murdoch saw the changing tides of society and was ready to steer News Corporation into the uncharted waters of the future.
The year was 2005, the dead center of the decade of disruption, and News Corporation had just purchased a cultural phenomenon and one of Web 2.0’s hottest websites: Myspace.
How MySpace came to be
The domain name Myspace.com started out as a small file hosting website, similar to DropBox or Google Drive. Like many other internet businesses, it failed when the Dotcom bubble burst in the early 2000s. The domain name was bought by Chris Dewolfe, who liked the sound of the name and thought it could be useful but didn’t have any immediate plans to use it.
Chris Dewolfe teamed up with a friend and fellow early internet pioneer Tom Anderson to start up Responsebase, a direct email marketing firm that specialized in writing email newsletters for companies. Few businesses at the time had the expertise to set up their own email newsletter, so Responsebase took off. In less than a year, they sold the business to the marketing firm eUniverse for $3.3 million dollars.
EUniverse owned many smaller websites, some of which were very sketchy. Called by some “The trailer park of the internet”, websites owned by eUniverse became known for malware infested flashing banner advertisements, spam emails, and snake-oil products that depended on the naivete of early internet users to stay in business.
The company lost what little remained of their good name during the Gulf War, when one of their websites offered users a download that would change their mouse cursor to look like an American flag. Preying on the patriotism many felt during the war, the website used these downloads as cover to install spyware that tracked the user’s activity on other websites. When the story broke, the backlash and publicity was bad enough that the company changed their name to Intermix Media.
After being sued by the New York Attorney General Eliot Spitzer for including intrusive spyware in their software, they started reigning in the skeeviest of their websites. They even considered shutting down Responsebase, since spam filter technology had evolved and was beginning to flag newsletters from the site as spam.
Anderson and Dewolfe had continued to work on Responsebase throughout the controversy. But now that the writing was on the wall for their website, they knew they needed to branch out into a new project to stay in business. They turned their attention to the growing new phenomenon of social media. Internet forums and message boards were a popular way to chat online at the time, but there was an itch for social connection that these platforms just weren’t scratching.
As a teenage hacker, Tom Anderson was very familiar with online message boards, such as the highly popular Usenet distributed discussion system. These online message boards were a great way to connect and chat with people from around the world, and were the predecessor to the bulletin board systems (BBS) and internet forums popular prior to the rise of social media.
But while there was a social aspect to all of these message boards, they weren’t the ideal platform for keeping up with friends and family. They were typically arranged by topic, and not by individual profiles. For example, if you were a fan of video games, you could easily find threads and discussions on particular games or genres. But if you wanted to see what games your friends were playing or see what your favorite developer was doing, the platform wasn’t designed to follow individual people. This unmet need was open for a whole new kind of online business, a network where you could connect with and follow people, not just topics.
One early evolution of social media that inspired Anderson was the website Friendster. Friendster was founded in 2002 and, like modern social media, allowed users to make a profile and interact with profiles of friends and family. It enjoyed some success and limited popularity (especially in Asia) for a time, peaking at 115 million users before going into decline. However, the website featured a closed system and heavy moderation, which along with performance issues hampered the usability of the website. It wasn’t easy to find profiles of users you didn’t already know in real life, and parody profiles based off of popular figures or fictional characters were deleted when they were found.
Anderson thought that the heavy handed approach that Friendster took was a mistake.
“Identity is provisional. Who we are is whom we choose to be at any given moment, depending on personality, whim, temperament or subjective need.” he said. He believed that by freeing up users to be who they wanted, he could unleash the true untapped potential of social media.
Anderson and Dewolfe approached their bosses at Intermix with their pitch for a new website: Their own version of Friendster, but with fewer restrictions and more creative freedom. DeWolfe even already owned the perfect domain name for the new venture: Myspace.com. Intermix thought the idea had potential and was eager to rebuild their image as a legitimate business, so they gave the online entrepreneurs the green light to start development.
Myspace launched in August, 2003. As a marketing company, Intermix already had an extensive list of email contacts that they could promote the new website to. This gave Myspace an important early boost in the network effect, a crucial component for a social media network.
The network effect is a phenomena where the value of a good or service increases as more people use it. This is especially critical for a social media network, where the main selling point to users is the ability to connect to other people. If a social media network has few users, the users that are already there will quickly become bored and stop visiting the site. The more people sign up, the better chance that users will be able to connect to people they care about, and the better the chance they’ll keep coming back to the website. This is also the reason why it’s so hard to start a new social media company today. As many startups have learned the hard way in recent years, it’s difficult to lure customers to a new network if all of their friends and family are already on Facebook, X, or some other large social media network.
In another great marketing move, Myspace pitched itself as a way for musicians to connect to their fans. Napster and MP3.com, two highly popular but questionably legal and ethical file sharing sites popular for music, had recently been shut down over copyright infringement. This left fans of music looking for a new place to find and share music, and Myspace was happy to fill the gap. Anderson and DeWolfe travelled to nightclubs, music festivals, and music venues all over the country to get into contact with musicians and sell Myspace as a way to promote their music and connect with fans online. They sponsored events and threw parties as a way to get Myspace’s name out in the public eye for artists. This became a big draw for the website, even with users new to the concept of social media.
Myspace leaned heavily into its connection to the music industry. In 2005, Anderson founded Myspace Records, a record label specifically made to promote artists who used the social media network. Myspace allowed niche and previously unknown bands, such as Lily Allen and Arctic Monkeys to break out and build fan bases they would never have had access to prior to social media.
An early music star that rose to fame on Myspace was the controversial pop star and rapper Tila Tequila. After being kicked off Friendster, Tequila migrated to Myspace as a way to market her music. She became one of the first examples of a social media influencer, gaining 1.7 million followers and the moniker “The Queen of Myspace”. She was the most popular figure on Myspace for a time.
In 2004, the alternative rock band R.E.M teamed up with Myspace to offer the site’s users an exclusive online streaming preview prior to the album’s official release. Fallout Boy, Panic! At The Disco, and other hot bands of the 2000s flocked to the growing site. In 2008, Guns N Roses and Paul McCartney pre-released their latest albums for streaming on their Myspace pages prior to the album’s official release. Myspace became the place to go to enjoy music and find new hits online.
When creating Myspace, one of the key features that Anderson and DeWolfe wanted to push was greater freedom, yet the one of the biggest examples of this occurred by accident. After pushing out an update, the developers forgot to block web markup. On all websites, you can view the code that makes up a website if you select “view page source”, but you won’t be able to change the code. This broken update meant that users of Myspace were able to go into the HTML code of their profiles and edit the pages themselves.
While its release was by mistake, this feature was a huge hit with Myspace users. Profile pages were now fully customizable, and users could change their backgrounds, fonts, color schemes, and page layouts. They could even program their profiles to play songs when viewed. It offered a great way for teenagers to learn HTML, some of which would go on to become web developers and coders.
Within a month of its release, Myspace was registering 6,000 new members each day. In February 2004, less than a year since its release, Myspace registered its millionth user, and wasn’t showing any signs of slowing down. With the network effect in full swing, Myspace was the place to be online in the mid 2000s.
The News Corporation Deal
On December 26th, 2004, a magnitude 9.1 earthquake struck deep under the waters of the Indian Ocean, just off the coast of Sumatra. The earthquake generated the deadliest tsunami in recorded history, killing approximately 230,000 people across Sumatra, Thailand, Indonesia, and other nearby Southeast Asian countries, even drowning beach goers as far away as the African coast. A rushing mountain of water over 100 feet tall obliterated nearby coastal towns only 20 minutes after the initial earthquake, before many locals and tourists even realized the danger they were in.
Back in his Oyster Bay, Long Island home, Rupert Murdoch watched footage of the unfolding disaster. Along with the rest of the world, he saw heartbreaking videos of loss, heroic rescues, total destruction, and the sheer awful power of nature. But the best of the footage wasn’t shot by professional crews with expensive equipment and shown on the nightly news; the footage was shaky and grainy, shot using consumer-grade cameras by horrified onlookers sheltering in tall buildings or on hilltops and uploaded to the internet for everyone in the world to see instantly. It was then that Murdoch realized the power and potential of the internet. The news media mogul was hooked, and he steered News Corporation on a course for online acquisitions.
Draw a parallel between Bill Gates famous Internet memo- 10 years earlier- where Gates saw that the internet posed an existential threat to his business- similarly Murdoch could now see how the internet was threatening his business.
But also put in here that this wasn’t Murdoch’s first foray into online business- and mention some of the earlier disasters that left him licking his wounds.
Murdoch sought out internet expertise by contacting Ross Levinsohn. Levinsohn was already working for News Corporation, running their FoxSports.com website in the digital division. He had experience working with internet startups, and had been involved in an early search engine called AltaVista.
Initially, Murdoch considered purchasing the search engine Ask Jeeves. Levinsohn advised him against joining in to the highly competitive search engine market, especially by spending so much to purchase only the 4th or 5th biggest player.
‘If you’re going to spend $2bn, we could put together a plan for something better.’ Levinsohn said.
Levinsohn was given the go-ahead to search out a better target for acquisition. He narrowed down the search to two targets, the then social media giant Myspace, and the computer games network IGN. Both websites had strong followings of young people, which appealed to Murdoch. He had observed that younger generations were “watching less television and reading fewer newspapers”, and knew that News Corporation would need to adapt to changing tastes if they were going to maintain their standing.
After quick consideration and one interview with cofounders Tom Anderson and Chris Dewolfe, Murdoch chose Myspace. The website already had 20 million profiles registered, with another 100,000 people signing up every day. All of these profiles generated around 6.2 billion page views per month, a potential goldmine for advertising. In only 18 months, Myspace had grown from infancy to the 5th most visited website in the United States. In its short run so far, it had generated a few million dollars in annual profits, but one very appealing aspect was its low input costs. In the traditional media that Murdoch was used to, content needed to be made and presented to customers, both of which carried costs. In Myspace, the users themselves created content, distributing it to friends and followers without needing any input from the company but functional digital architechture. Myspace offered a new potential low-cost and high-profit way of doing business.
The free content part, put in stats about newscorp operating margins vs Facebook, now FB doesn't have highest operating margins, who does? But for adverting sector FB margins were excellent
Myspace was already in negotiations with Viacom, the owner of massively popular cable channel MTV and arch-rival to News Corporations. With its connection to music, videos, and younger age demographics, Viacom thought that Myspace would be the perfect internet companion to their cable television channels, which included MTV, Nickelodeon, and Comedy Central. A frantic bidding war erupted over the weekend, with News Corporation emerging victorious for a bid of $580 million dollars. Murdoch purchased all of Myspace’s parent company Intermix just to gain control of the budding social media giant.
A Strong Start
In Silicon Valley, there’s an established routine for handling startups run by internet visionaries. After buying the company, you thank the founders, replace them with industry veterans, start monetizing your new asset, and cross your fingers and pray that the changes don’t drive customers away. News Corporation had a different plan, at least at the start.
“That’s not News Corp.’s style,” Levinsohn said. “A media company depends on people with creative vision.”
Corporate president Chernin said “Obviously MySpace is a world unto itself. There’s never been a second when we said, ‘How do we put our stamp on it?’ We’d be crazy to interfere.”
This wasn’t just another media company they were acquiring; it was something special, a step out into the changing world of Web 2.0. They didn’t want to mess things up. Anderson and Dewolfe were offered $15 million dollar bonuses as part of a 2 year contract to stay on and direct the company.
At the start of this new venture, Myspace’s user base was still growing rapidly. Within a year, it surpassed both Yahoo Mail and Google to become the most visited website in 2006. During 2006, Myspace controlled 80% of the internet’s social media traffic, compared to Facebook’s 7.6%.
Note: MySpace was launched in Aug. 2003, Facebook or rather The Facebook was launched in January 2004, LinkedIn launched in May 2003, Bebo was launched in 2005
In 2006, Myspace was already earning its keep. Google struck a three year deal with News Corporation to sell advertisements related to user searches on Myspace. The deal earned News Corporation $900 million dollars in shared revenue from Google.
“In one fell swoop we have paid off two-thirds of our internet investments. We have gotten a 70 per cent premium on our MySpace investment and are now playing with house money.” said Chernin after negotiating the deal.
Under the terms of the deal, Google would use their search engine to help power Myspace’s search function. Google was also granted the right to be the exclusive provider of keywords for advertisements and had the right of first refusal for handling advertising displays from third party sources.
Yet, despite News Corporations plans to run Myspace in a hands-off way, there were changes that needed to be made. To start with, the servers that ran Myspace prior to News Corporations purchase were stuffed way too close together in a Los Angeles data center that charged per square foot, and were constantly overheating because of it. They were all also in one location, so a local Los Angeles power outage could potentially temporarily take all of Myspace offline. Intermix hadn’t been able to fix the situation with the servers while dealing with spyware lawsuits, but News Corporation could, now that they owned Myspace.
With the server situation solved, the next order of business was fixing the functionality of the website itself. One of the problems that had crippled Myspace’s predecessor, Friendster, had been a glitchy and poorly functioning website. With the rate of growth that Myspace had, they needed more staff to scale the website up without breaking it. They also started developing new features, such as a drag and drop menu that would allow users who didn’t want to edit HTML code to still customize their profile page.
For a time the sale of Myspace seemed like a great thing for both companies. Myspace gained access to higher budgets to fund the growth of their growing social media empire, and News Corporation gained a profitable financial foothold in an industry popular with demographics they wanted to target. But it wasn’t to last, and how it all fell apart became a cautionary tale for tech startups for years to come.
How It All Went Wrong
Today, Myspace still exists, but only as a shadow of its former self. In June 2022, Myspace had 6.9 million visits, down from its 2006 peak of 29 billion. As of 2019, around 7 million users continue to use the site, a far cry from their hay day of 300 million users. In 2011, News Corporation sold Myspace for $35 million dollars, a fraction of what they paid for the company. Yet only as far back as 2006, RBC Capital Market analyst Jordan Rohan gave a note to clients making the bullish prediction that Myspace would be worth $15 billion by 2009. So what happened between the years of 2005 and 2011? How did Myspace go from being on top of the world to yesterday’s news in only 6 years?
While there are several angles one could take to frame the fall of Myspace, it all comes back to one big problem: mismanagement. Mismanagement externally from News Corporation, mismanagement internally from the Myspace team, and even a bit from Murdoch himself. No one seemed to quite understand how to handle the runaway train of growth and popularity that Myspace had become, and the result was a cautionary tale for the next big social media networks that would eventually replace it. After the dust settled, Sean Parker, former president of Facebook said about Myspace “The only reason we won was because of the gross incompetence of MySpace systematically over a period of many years.”
“Incompetence” may be too strong a word to describe the fall of Myspace. The suits at News Corporation were smart and great at business; they had to be, or they wouldn’t be successfully running one of the biggest mass media corporations in the world. Before the business split up in 2013, it was the biggest mass media company in the world measured by assets, and the fourth largest by revenue. You don’t reach those heights without being good at what you do. Neither was the Myspace team incompetent. Anderson and Dewolfe had clearly struck gold with their idea for Myspace despite limited technical training, and they were willing to stick with the company through the sale of Intermix to continue to nurture and grow Myspace through its infancy. However, social media was new, and it wasn’t clear how the industry would develop. It’s easy to look back now and see every misstep that was made. But when you’re a pioneer in a brand new industry with no information on what the future holds, sometimes you’re going to make the wrong choices.
While News Corporation bought Myspace with the intention of minimizing interference in the website, it wasn’t long before dark clouds started forming on the horizon. Although the company had been known to occasionally dabble in controversial content (such as the then edgy Simpsons cartoon), their business model was very conservative. They were used to carefully creating appropriate content to lure in viewers, and then profit off of advertisements. The website was generating billions of views, and it seemed like the perfect vehicle for integrating advertising. But this is when the rose-tinted glasses started to slip off.
Myspace had a content problem. The light moderation and freewheeling attitude that fueled the growth of the company made advertisers leery. Even to this day, advertisers are nervous about their advertisements appearing on pages with risque, violent, or even just distasteful content. They worry that their brands will be associated with negative content, and suffer financially as a consequence.
Clamping down on questionable content wasn’t just a matter of freedom or creativity, it was also a matter of practicality. When you have so many accounts generating tons of new content constantly, how do you keep track of it all? Nowadays, we have bots, algorithms, and AI to patrol social media looking for illegal or immoral content, and things still slip through all the time. Back in the mid 2000s, you needed to hire employees to sift through mountains of content to find things that should be taken down. It was a labor intensive process, and not cheap to maintain a team to do the work. Myspace had rules against explicit content, but a rule is only as strong as its enforcement, and Myspace struggled to keep up with the volume of content being posted.
The lack of content moderation also began to worry parents. Myspace was especially popular among teenagers, who would sometimes sign up without telling their parents. People were just recently becoming aware of the dangers of online predators, and the youth-filled social media site seemed like an ideal hunting ground for adults with bad intentions. Myspace consulted with the online safety group WiredSafety seeking advice on how to keep younger users safe. WiredSafety recommended lowering the minimum age to make accounts, with the idea that people would be more honest about their age and be easier to keep a watchful eye on.
Despite the company’s efforts, there was just too much content and not enough moderators to catch all potential problems. In 2006, 13 year old Megan Meier committed suicide after being cyberbullied on Myspace. Lori Drew, a neighbor and the 49 year old mother of a previous friend of Meier, created an account posing as a 16 year old boy to befriend and get close to the lonely teenager. After gaining Meier’s trust and friendship, Drew used the account to berate and torment Meier. For the bullied and depressed 13 year old, this betrayal was the final straw, and she killed herself after a particularly intense bullying session online from Drew. Meier’s case was the first cyberbullying case that gained media traction all over the United States, generating headlines and coverage all over the news. While the company wasn’t held responsible, it was a black eye on the public perception of social media, especially for concerned parents.
Myspace also experienced technical problems. While Tom Anderson had some experience hacking, neither he nor Dewolfe were dedicated software engineers. Myspace had been originally developed using a simplified coding language called ColdFusion. This language, described by Dewolfe as “Mickey Mouse technology”, was great for prototyping, it wasn’t designed to power an enormous project like Myspace. It had been ideal for reaching market fast, but now that the website needed to scale up it was causing technical problems. Switching to a more appropriate technology wasn’t possible because it would delay and diffuse Myspace’s meteoric rise in popularity.
This was one area where Myspace and its main competitor, Facebook, differed. Anderson and DeWolfe were at their strongest in business and marketing, and needed to learn the tech side to make Myspace work. Zuckerberg was a hardcore programmer from the start, and just needed to learn the marketing and business angle of social media to succeed. Marketing was in Myspace’s DNA, but coding was in Facebook’s. When releasing new features, Facebook had the engineering skills to fix the bugs that inevitably came up, while Myspace struggled to keep their features up and running.
A compromise was reached by switching to Microsoft’s .NET framework. The idea was that this would be the least disruptive way to fix the technical issues plaguing the website, but it came with problems of its own. While the potential disruption to users was lessened, switching to .NET meant that the developers needed to spend much more time (up to 15 times longer) to build code for Myspace than they would have if they were able to use a more appropriate technology.
A tangential issue to the trouble coders had working on Myspace was finding coders themselves. Myspace’s headquarters was located in Los Angeles, a nearly 6 hour drive away from Silicon Valley. In an era before remote work, being so far away from the central location where aspiring software engineers were congregating made it that much harder to attract top talent.
The site also lacked much of a security team. In 2005, a teenage hacker named Samy Kamkar took advantage of Myspace’s exposed code and lax security to release one of the fastest spreading computer viruses of the day via Myspace. The Samy worm, as it came to be called, infected over a million users within 20 hours of its release. The worm started out on Samy’s profile page, and infected anyone who visited. It would then spread to anyone who visited an infected page, growing exponentially. The only way to stop the spread of the worm was for Myspace to temporarily go offline and remove it. Fortunately, Samy wasn’t a black hat hacker. He wasn’t after sensitive information or money. His worm only forced other accounts to accept his friend request and display the message “But most of all, Samy is my hero”. While there wasn’t much real damage done in this particular incident, it highlighted the security vulnerabilities of Myspace and showed how easy it would be for a real malicious actor to take advantage of the site.
Right around this time, Myspace made a decision that would alter the course of the company forever. In 2005, Chris Dewolfe met with Mark Zuckerberg. They discussed the possible sale of Facebook, at the time a new and budding social media network with few users compared to Myspace. Facebook was offered for a price of $75 million dollars, which Dewolfe rejected as being too expensive. While no one could have known at the time, this failure to assimilate their eventual rival and successor while it was still small and vulnerable would seal the fate of Myspace. If Myspace’s marketing ability had been combined with Facebook’s technical expertise, it’s unlikely that any other social media network would have ever dethroned them.
While content problems and technical issues were significant challenges, they weren’t insurmountable. If Myspace had continued to grow, neither was a death sentence for the company. The trouble that ended Myspace’s reign as the king of social media came from within News Corporation and the Myspace team.
When they bought Myspace, News Corporation intended to remain hands-off about the operation of the site. But old habits built over decades of successful business die hard. The winds started to change when Ross Levinsohn abruptly left News Corporation. While he had been instrumental in building up Fox Interactive Media, he had clashed with the Myspace team from early on, and was a frequent and vocal critic of the way Myspace was run. He had even hired his own team to try and professionalize the scrappy start up and integrate it better with News Corporation.
“I had a vision about what I wanted to do with the company and it definitely conflicted with what Chris and Tom wanted to do. I said to Peter [Chernin] and Rupert: ‘If you want me to run the company, let me run the company.’ I think they felt Chris and Tom were talent – and that we should have left them alone.” said Ross, recounting his disagreements with the Myspace team.
He was replaced by a distant cousin, Peter Levinsohn.
Peter already worked for News Corporation, and was a long-time veteran in their television division, dealing with digital media. It was thought that an experienced executive like Peter could help integrate television and film content into Myspace. But while Peter had experience with digital content, he was much more used to the traditional top-down way of dealing with media. He just wasn’t dialed in to social media. Even as Youtube and other user-generated video sites were taking off in popularity, his expertise and experience lay with professionally produced material. Under Peter, the site promoted reruns of shows like Silver Spoons and Different Strokes, and even produced a Myspace exclusive miniseries called Roommates, but it just wasn’t what people were looking for on Myspace. The way that News Corporation dealt with Myspace was about to change, and not in a good way.
The first truly deadly blow was dealt by Murdoch himself during a 2007 earnings call. Murdoch declared with confidence that Fox Interactive Media would generate $1 billion dollars in revenue in the coming year. This was news to Myspace, who were the primary breadwinner for Fox Interactive.
“It came out of thin air,” said a former MySpace executive about the earnings call.
Murdoch hadn’t meant the declaration as a threat; he was still enthusiastic about his new social media company, and expected it to continue its path of explosive growth. But this small move was like a snowball rolling down a mountain; growing and becoming more destructive as it went along. Many of the issues that took down Myspace can be traced back to this earnings call. The number wasn't an impossible one to reach, but it wouldn’t be easy and it gave News Corporation more of a reason to get involved in the day to day dealings of Myspace. In a desperate bid to reach the earnings call number, Myspace tried to sacrifice long term growth for short term gains, with little success.
The first attempt to reach $1 billion in revenue was to increase the number of ads on the site. But the number of advertisements was becoming aggravating to users. They cluttered pages and sucked up bandwidth, hampering the usability of the site. Additionally, taking down inappropriate pages became a problem because fewer pager meant fewer ads, and therefore less revenue.
“We had to get approval for everything.” said one former Myspace executive.
Even as ads started choking the user experience, revenue wasn’t as good as expected. Advertisers were aware of Myspace’s content problems, and weren’t willing to pay top dollar on a site where their ads might be shown next to unsavory content. While other similar websites were being paid $2 per thousand views, Myspace only received twenty cents for the same number of views. The quality of the ads also began to drop. Similar to the Intermix Media days, pop up ads for questionable diet pills and other scammy products started to become common on Myspace.
One of MySpace's early selling points was creative freedom on profile pages and fostering the wild-west spirit of the early 2000s internet, but while that initially helped them grow their user base, it came with drawbacks as well. There wasn’t a standard look to the pages, as they were so easy to customize. There was a growing perception among advertisers that Myspace was trashy and that their large audience was primarily teenagers and others with low incomes. Facebook, by contrast, was much more limited in customization. You would change your profile picture or information, but all Facebook pages had a standard look. The neater and more streamlined Facebook seemed like a more mature and professional alternative, and less like the digital equivalent of a row of high school lockers plastered with graffiti and band stickers. On Myspace, there were few standards that developers could depend on, and dodgy Flash applications proliferated on the site contributing to the low-class feel of the website.
Myspace started a frantic cycle of simultaneously chasing shiny new innovations, and also being too cautious to implement new features that would let them get ahead of competitors. As one example, Myspace dragged it’s feet on implementing Ajax (a web technology that would allow users to comment, send emails, and send messages without opening a new page) into Myspace. Myspace executives blamed News Corporation for dragging its feet approving Ajax because fewer pages meant less ad revenue. News Corporation blamed Myspace, saying it was too little too late by the time they got around to pursuing Ajax, and that Facebook already had too much of a lead to put time and money into the feature.
With so much pressure to reach the earnings call target, it was difficult to trial new features. On any website, new features aren’t always a hit right off the bat, but may be the best long term decision. For example, Facebook’s newsfeed was initially very unpopular with users, but today it can keep people scrolling for hours. At this point in Myspace’s timeline, their hands were tied on any similar decisions that they may have had in development. With executives breathing down their neck, they needed to be able to prove that anything they did would be an improvement right from the start.
“The bureaucracy crept back in when he bought the Journal [and] Murdoch became less interested in MySpace. Then the recession hit and every finance guy at News Corp became involved in what we did so we had to spend all our time doing PowerPoint presentations.” said one former Myspace executive.
To make things even more complicated, Myspace tried to keep development of new features in-house. The software engineering team was spread thin trying to develop several key features and innovate at the same time. Facebook, on the other hand, opened up to third party development. This way, others could take the time and risk to develop new applications, and they could just buy and integrate the best into Facebook itself.
Another missed opportunity was implementing an e-mail address importer, which would make it faster and easier for Myspace users to invite their friends to sign up for their own Myspace accounts. Facebook would eventually implement this feature to catch up to and surpass Myspace’s user count, but the idea was originally implemented six months before Facebook on a UK based social media network called Bebo.
“It caused a real spike in growth,” a former Myspace executive said. “But six months before they [Facebook] launched the importer, Bebo had done the same thing. We were neck and neck with Bebo in the UK but the number of their users suddenly started spiking. We knew we had to launch something similar straight away but Tom didn’t think it would make much of a difference. He wasn’t convinced it was that important. We discussed it for six months but he wouldn’t focus the team on building it. It wasn’t until Facebook launched with that feature and had several months of 40 per cent growth that we started working on it. That was a judgment call and it was a mistake … it ended up costing us a lot of users that went to Facebook instead of MySpace.”
Meanwhile, even as these important features were missed, Anderson also received criticism for chasing too many innovations without following through on them.
“We moved into too many product lines. One week we were focused on Facebook, the next we were focused on Twitter. We weren’t choosing our own way.” said one former executive.
Instead of coming up with their own innovations, Myspace was in a constant game of catch-up with other social media companies, and never seemed to quite make it.
As the months ticked by, it became clear that Myspace wouldn’t make it to the $1 billion dollar target. In an attempt to bridge the gap, the Myspace team started trying to cut costs anywhere they could rather than growing the business, including cutting staff. This kicked into overdrive when the 2008 financial crisis and recession hit, and News Corporation was looking to save every penny they could find. Despite the attempt, Myspace closed out 2008 with $34 million lost in operating profit. In the same year, Facebook overtook Myspace in the number of site visitors. Myspace’s usership started a steady and unrelenting decline as Facebook’s rose.
In 2009, News Corporation went through a series of managerial changes. Murdoch’s attention shifted when he moved in on a $5 billion dollar deal to acquire the Dow Jones Index and the Wall Street Journal, both of which operated much more in a way he understood than social media. Chernin, who had played a key role as the go-between for Myspace and Murdoch, stepped down and was replaced with Jonathan Miller, the former chief executive of AOL. Shortly thereafter, Dewolfe left, followed by Anderson a few weeks later. News Corporation hired former Facebook COO Owen Van Natta as the new CEO of Myspace. Van Natta continued the layoffs, slashing the staff headcount 30%, from 1,000 to 700 employees. But before he could do much else, he left the company, citing the firm’s “slow pace of change and entrenched culture” as reason why he couldn’t continue.
In June 2011, News Corporation had had enough. Myspace was sold to pop star Justin Timberlake and Specific Media for $35 million dollars, a fraction of what they had paid for it just a few short years prior. The plan was for the two to partner together to revitalize the failing network and promote it as a way for artists to connect to communities of fans. However, not even the Prince of Pop could bring users back from Facebook.
The experience wasn’t financially devastating for News Corporation, since Myspace had done well enough initially to pay for itself, but it was a disappointing experience nonetheless. Murdoch admitted candidly that News Corporation had “screwed up in every way possible” in regards to Myspace. But the internet is still the future for media, so instead of striking out into something new, News Corporation shifted their strategy into developing distribution platforms for their extensive existing content.
"I think we learned a lot from Myspace but our focus in digital now is how do we take our core businesses and extend them in meaningful ways over digital platforms," said News Corp spokeswoman Julie Henderson.
Pursuing the internet wasn’t necessarily the wrong choice, but Murdoch chose to go about it the wrong way for his company. News Corporation’s market cap dropped from $60 billion in 2006 to only $15 billion in 2024. Of course, this wasn’t all from the Myspace situation. Consumer tastes didn’t stop changing, and TV and newspapers just aren’t what they once were. But with a shift in focus, who knows what the future holds for legacy giants like News Corporation.
Myspace’s user count dropped as quickly as it had risen. By February 2011, Myspace’s user count dropped down to 37.7 million U.S. visitors, down from a 300 million only a few years prior. As the visitor counts fell, advertisers lost interest in doing business with Myspace. Long-term advertising deals, like the Google deal in 2006, weren’t renewed as planned. A reverse version of the network effect began to kick in. As fewer and fewer users used the network, the less valuable Myspace became, even to users who otherwise would have still enjoyed the site. People joined Facebook and Twitter to connect with friends and family who no longer used Myspace. The steady decline continued, until only the most niche music aficionados remained.
In 2018, Myspace broke headlines for one last time, but once again it wasn’t good news. During a server migration, an error occurred and deleted around 50 million songs that had been stored on the site, along with countless old videos, photos, and digital memories. The Internet Archive was able to recover about half a million songs that had been downloaded as part of a research project, but all of the rest disappeared into the digital void, never to be heard again. It was a loss that marked the end of an era as much as a childhood home burning to the ground.
Myspace had a lot of potential and initial success, but they just weren’t ready or able to handle their meteoric rise to the top of the internet. But while it didn’t last, the story is still a fascinating snapshot from a tumultuous time in the world and in the development of the modern internet, and a cautionary story for new start ups to learn from. There are so many “what ifs” where the story could have changed course along the way. If they hadn’t been racing neck and neck with Facebook during the Great Recession, who knows if we’d still be picking out which songs to play on our profiles today.
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