In this episode we dig down into the very beginnings of social media, where MySpace was streets ahead of everyone else.
And then Rupert Murdoch, the most famous, the most feared and perhaps one if not the most successful media tycoons of the 20th century enters the fray and I don’t know about you, but any business story that has Rupert Murdoch in it is going to be a cracker.
Article: The Myspace Meltdown: Murdoch, Missteps, and the Lost Battle for Social Media
[00:00:15] Welcome to today's episode titled The MySpace Meltdown, Murdoch, Missteps, and the Lost Battle for Social Media.
[00:00:23] And I know I say this about every episode, but I really love this one, because we dig down into the very beginnings of social media, where MySpace was streets ahead of everyone else.
[00:00:34] And then, Rupert Murdoch, the most famous, the most feared, and perhaps one if not the most successful media tycoon of the 20th century, enters the fray.
[00:00:46] And I don't know about you, but any business story that has Rupert Murdoch in this is going to be a cracker.
[00:00:54] But of course, he's not the only tycoon in the story, because this is also the story of how Mark Zuckerberg and Facebook, against all odds,
[00:01:02] beat MySpace to become the number one social media platform.
[00:01:06] How did it all go wrong for MySpace?
[00:01:08] What did Facebook do that was so different?
[00:01:11] And was it all Rupert Murdoch's fault?
[00:01:14] Enjoy.
[00:01:15] It's a cracking story.
[00:01:17] Morning, Kaleem. How are you?
[00:01:19] Good, good, good.
[00:01:20] And this morning, our episode is about focus on MySpace.
[00:01:26] And this was your topic.
[00:01:27] How come you chose this?
[00:01:28] Well, I guess a couple of different reasons.
[00:01:32] I was involved in social media myself.
[00:01:35] We had a company involved in social media marketing in general, but specifically in Facebook, which will obviously focus on the story.
[00:01:44] I remember sort of using MySpace myself.
[00:01:48] Everybody's first friend was Tom from MySpace, of course.
[00:01:51] I remember Tom quite vividly.
[00:01:54] And I just think it's an interesting story and particularly the Murdoch article.
[00:01:58] Sort of anything to do with Murdoch, I think is probably intriguing from the get go.
[00:02:04] I think he's a fascinating, reasonably sinister character.
[00:02:08] So I assume we're going to do a story on him at some point as well.
[00:02:13] But I think there's just so much going on in the story.
[00:02:15] It was sort of an intriguing one.
[00:02:18] Yeah, I concur 100%.
[00:02:20] It was the Murdoch angle really that I loved about this story because the characters, the guys who founded MySpace, and we'll get into that, there's not really a whole lot on them.
[00:02:30] And they don't end up doing a whole lot.
[00:02:32] Well, Tom Anderson really does nothing after MySpace.
[00:02:35] Krista Wolf, who we'll talk about, he's had a pretty successful career and still has a successful career in mobile gaming.
[00:02:41] But having a story where Murdoch is involved is always going to be interesting.
[00:02:47] And I would say in the book that's going to be written about him, and there have been several books, but the book that will tell his whole life story, this will only be a footnote in the whole book.
[00:02:56] A tiny footnote, but his very inclusion in the story just makes it so much more interesting because he is a fascinating character.
[00:03:04] And in terms of sources, what did you use?
[00:03:06] Yeah, so I read a book called Stealing MySpace.
[00:03:12] Yeah.
[00:03:12] Julie Angwin, I think it is.
[00:03:15] And quite an interesting book insofar as it was quite dated.
[00:03:20] Even the, you know, the early parts of the book are kind of supposing that there's a littering future ahead for MySpace.
[00:03:31] So you're reading the book and thinking, you guys really need to revise this.
[00:03:35] This needs a rewrite.
[00:03:38] So it was quite dated, I think.
[00:03:42] Completely coincidental, I would assume, the fact that Murdoch is in, you know, ownership and involved in the publishing media himself.
[00:03:50] And certainly they're coincidental that it hasn't been republished or there isn't a new story out there.
[00:03:55] But that's really the only source and book form that's available.
[00:03:59] I don't know where did you source your research?
[00:04:02] I read that book, but I only got halfway through it because like you said, for our listeners, it was published in either 2007 and 2008 when MySpace was at its peak.
[00:04:12] So the whole tone of the book was kind of, look how great MySpace is.
[00:04:17] And I just couldn't go on with it because you know that MySpace wasn't great and there was loads of issues with it, which we're going to dig into.
[00:04:24] So there was other articles that, now I had loads of articles, but two in particular.
[00:04:28] Matthew Garahan in the Financial Times had a really good article called The Rise and Fall of MySpace.
[00:04:33] And then a guy called Felix Gillette from Bloomberg had a similarly titled article called The Rise and Inglorious Fall of MySpace.
[00:04:42] And both articles were brilliant.
[00:04:44] And then there was this Wired magazine from 2006 where Murdoch is on the cover of it and it's by Spencer Rees.
[00:04:51] And for all our listeners, as always, there'll be a link to the blog post underneath this podcast.
[00:04:58] If you click on that at the top of the article, there'll be the main resources and the Wired magazine will be in there.
[00:05:03] And I really recommend people read that because you're reading it kind of going, oh my God, at this time, this is at the time where Murdoch had just bought MySpace.
[00:05:13] And they really thought they were on top of the world, that they had this internet game sussed.
[00:05:19] So it's a really interesting article to read.
[00:05:22] But I suppose we'll get into it, we'll set the scene for how MySpace came about, how social media evolved.
[00:05:29] And the other interesting thing about this story that I really loved is that it's a battle.
[00:05:35] It's a battle between MySpace and Facebook.
[00:05:38] So Facebook were involved in this as well, which is really interesting.
[00:05:41] And it just shows, I don't think Zuckerberg gets an awful lot of credibility or gets an awful lot of, I suppose, praise for the way he ran Facebook and how he built Facebook up.
[00:05:54] But when you read into how MySpace kind of were so bad, but also what Zuckerberg did that was so good that it helped Facebook win.
[00:06:02] So that's interesting.
[00:06:03] But we're talking about the early noughties.
[00:06:07] And as Walter Isaacson dubbed the noughties, he said it was the decade of disruption.
[00:06:12] And it really was because you had started with the Y2K scare.
[00:06:16] You had the dot-com bubble burst in the middle of the noughties.
[00:06:20] You had the iPhone come out.
[00:06:21] We discussed that in BlackBerry.
[00:06:23] But at that time, you also had then the evolvement of the internet into Web 2.0.
[00:06:29] And that's where it went from being passive to more interactive.
[00:06:33] You had users generating their own content, making connections.
[00:06:36] This was exemplified, I suppose, by TripAdvisor in 2000, Wikipedia in 2001, WordPress.
[00:06:43] And then around 2003, you had the emergence of social media.
[00:06:48] And while all this was going on, the established media was taking such a kick in.
[00:06:54] And this is where Murdoch and those guys come into the story as well.
[00:06:58] Because between 1999 and 2009, established media like Time Warner and New York Times, their shares dropped by 90%.
[00:07:05] And Murdoch obviously had a huge media empire at this stage.
[00:07:10] I suppose one of the best things about, one of the worst deals that demonstrates how badly established media was going was the Time Warner AOL thing.
[00:07:20] Yeah, the AOL Time Warner.
[00:07:22] Yeah, that merge.
[00:07:23] That's a great story.
[00:07:24] It is.
[00:07:25] I read the book on that and will definitely do one on that.
[00:07:27] But that really shows how bad the established media were at the time that Time did get together with AOL.
[00:07:34] And they were like two drowning people just dragging each other down.
[00:07:38] It was a disaster.
[00:07:39] And a lot of it is motivated by fear and panic as well in the context of the disruption going on around them.
[00:07:47] Yeah, that's it.
[00:07:48] That's it.
[00:07:49] But I'm going to open with a quote from Murdoch from this Wired article in 2006.
[00:07:55] And this is where he's talking about the internet as a whole.
[00:07:59] To find something comparable, you have to go back 500 years to the printing press, the birth of the mass media, which incidentally is what really destroyed the old world of kings and aristocracies.
[00:08:10] Technology is shifting power away from the editors, the publishers, the establishment, the media elites.
[00:08:16] Now it's the people who are taking control.
[00:08:18] We're looking at the ultimate opportunity.
[00:08:20] The internet is media's golden age.
[00:08:23] So that was Murdoch back then.
[00:08:26] And he was right in a way in that.
[00:08:28] I don't know if you'd say the internet was media's golden age, but the internet was the ultimate disruptor for old media.
[00:08:36] Yeah, I actually had a conversation during the week with somebody who's tangentially involved in the world of publishing.
[00:08:42] Yeah.
[00:08:43] And specifically in the world of newspapers.
[00:08:48] And what was interesting about that was they were saying they used to have the luxury of maybe a week to work on an article.
[00:08:55] Yeah.
[00:08:56] And they would take their time, they would craft it, they would source it really well.
[00:08:59] Now they're in a world of rapidly generating three and even four small pieces a day.
[00:09:07] Yeah.
[00:09:07] So obviously we know the internet has disrupted many, many careers and livelihoods and industries in fact.
[00:09:18] But even in the context of Murdoch's world, it must have struck terror into what was sort of a static business for what was Murdoch at this stage, maybe 75.
[00:09:31] He was 75.
[00:09:32] He was involved in the family business for years, looked at this at a generation of his fortune.
[00:09:37] And then he sees a huge disruptive iceberg coming straight at them and thinks, what do I do?
[00:09:44] But this is it.
[00:09:45] And this is one of the questions that arose when I was researching this because I was thinking they made such a mess of this.
[00:09:50] But at the same time, I was thinking, what could he have done?
[00:09:53] Like he couldn't have just sat on the sidelines and let this new format come over and steal all his advertising revenue.
[00:10:00] So he had to get involved in some way.
[00:10:02] But I suppose it's the way they got involved and what they did when they got involved that really sowed the seeds of destruction for MySpace.
[00:10:10] So getting on to MySpace, it was founded in 2003 by Tom Anderson and Krista Wolf, who are both based in LA.
[00:10:19] And they had set up a company called Response Space in 2001, which was a newsletter and email business that they would create newsletters for other businesses because this is after the dot-com bubble had burst.
[00:10:32] So, you know, people weren't advertising a whole lot on the internet.
[00:10:36] And advertising on the internet was kind of patchy.
[00:10:39] You couldn't get a good ROI or you couldn't get a grasp of what your ROI was.
[00:10:42] It was just all banner ads because Google Ads had only started in 2000.
[00:10:46] So this is all very new.
[00:10:47] But they did well.
[00:10:48] Within a year, they sold the company for 3.3 million to another company called eUniverse.
[00:10:54] Yeah, these are an interesting bunch.
[00:10:58] eUniverse had the moniker or they were known as the trailer park of the internet.
[00:11:04] eUniverse, they had loads of different internet sites that they just drive traffic to.
[00:11:10] And then on these internet sites, they had just full of spammy ads where they promote crappy products like books on how to grow taller or cream to prevent wrinkles.
[00:11:22] And again, this was the start of the internet.
[00:11:24] People were a bit more naive when they went on to websites and when they saw these products being advertised.
[00:11:29] But perhaps their most infamous scam was during the Gulf War when they preyed on people's patriotism by offering them an American flag cursor that they could download.
[00:11:40] But of course, when the person downloaded this, it came with malware that they deliberately put on it.
[00:11:47] So they were a very scammy company.
[00:11:50] It was quite smart though.
[00:11:52] I read about that too.
[00:11:53] And it was sort of sending targeting information back to home, which improved the ad experience.
[00:12:00] Yeah, yeah.
[00:12:01] But still, very under-ad.
[00:12:03] Very shady.
[00:12:04] Very shady.
[00:12:06] And they eventually...
[00:12:06] Smart or cute as we call it here.
[00:12:09] Cute, yeah, as we'd say.
[00:12:10] And they eventually got sued by Elliot Spitzer, the New York Attorney General.
[00:12:14] And so they changed their name from eUniverse to Intermix Media.
[00:12:17] They tried to become a bit more legit.
[00:12:20] There was loads of infighting in that company.
[00:12:22] It was a bit of a mess, the whole thing.
[00:12:24] But Christa Wolf and Anderson were tied in there because they had an earn-out, a kind of complex, drawn-out earn-out.
[00:12:30] So they had to stay within the eUniverse company.
[00:12:34] And response-based revenue then started coming under pressure because of spam filter technology had evolved and was getting better.
[00:12:41] So they had to pivot.
[00:12:43] And Anderson was very much keeping an eye on all these bulletin boards.
[00:12:49] And he also saw the emergence of one of the first social media websites, which is called Friendster.
[00:12:54] I don't remember Friendster.
[00:12:55] Do you?
[00:12:56] Oh, I do.
[00:12:56] Yeah, I do.
[00:12:57] Yeah.
[00:12:57] Did you join us?
[00:13:00] I think so.
[00:13:01] Yeah.
[00:13:01] So there was Friends Reunited and Friendster.
[00:13:04] There was a flurry of these.
[00:13:06] There was.
[00:13:06] People probably don't realize that.
[00:13:08] You know, there were so many social media companies.
[00:13:12] You know, even LinkedIn, actually, when you think about it.
[00:13:14] LinkedIn was 2003.
[00:13:15] Now, they were in a different kind of sphere.
[00:13:18] They really stayed on the business side of it.
[00:13:20] Yeah.
[00:13:20] You know, whereas these other ones were very much social person to person.
[00:13:25] And yeah, so Friendster was the first one.
[00:13:27] And they went live in early 2003.
[00:13:30] But they had more of a closed system in that you had to be invited by another member.
[00:13:34] Is that right?
[00:13:35] To join Friendster?
[00:13:36] Yeah.
[00:13:36] Yeah.
[00:13:36] And it was very hard, apparently, to find profiles, if not linked to them.
[00:13:40] And it was heavily moderated.
[00:13:42] You couldn't put up parody profiles.
[00:13:43] You had to be who you said you were.
[00:13:46] Which is kind of the same as Facebook, in a way.
[00:13:49] Exactly.
[00:13:49] Facebook wanted it to be you.
[00:13:52] Yeah.
[00:13:52] You didn't want to be, I don't know, it would have been relevant at that time.
[00:13:55] They didn't want 200 Shania Twains.
[00:13:58] Yeah.
[00:13:58] Yeah.
[00:13:59] You know, set up.
[00:14:00] Or Garth Brooks or somebody who was cool back in those days, you know.
[00:14:04] God, was Garth Brooks ever cool?
[00:14:06] He was big.
[00:14:11] That's true.
[00:14:12] Anderson, anyway, was looking at Friendster.
[00:14:14] And he thought, okay, that's good.
[00:14:16] But he thought he could do it better.
[00:14:18] He believed that by freeing up users to be who they wanted to be.
[00:14:21] In other words, they could create fake profiles.
[00:14:23] And he thought that this would, by giving them more freedom and more creativity, he'd
[00:14:27] be able to create a better social network.
[00:14:30] And so he basically copied Friendster in every way except made these few tweaks to us.
[00:14:34] And they already had a good name for it because Chris DeWolf had bought the URL MySpace from
[00:14:41] a file, online file storage company that had gone bust after the dot-com bubble.
[00:14:46] Yeah, like a Dropbox type service.
[00:14:48] Yeah.
[00:14:48] Yeah.
[00:14:48] So they had MySpace, the URL they launched.
[00:14:52] And because E-Universe had so many emails that they'd use for their spammy campaigns,
[00:14:58] they just blasted out to everyone that MySpace was launching.
[00:15:01] And that had an impact.
[00:15:02] Within a month, they started getting about 6,000 users every day.
[00:15:06] And then a good thing they did was they leaned into the music scene.
[00:15:11] That was really their big thing.
[00:15:15] Because Napster and mp3.com had just gone by the wayside because of, you know, copyright
[00:15:20] infringement.
[00:15:21] And it was scope for an online site where people and musicians could connect.
[00:15:26] And Anderson and DeWolf saw this niche and very, very active.
[00:15:29] They went around to nightclubs.
[00:15:32] They traveled around the country.
[00:15:33] They sponsored events.
[00:15:34] They literally recruited musicians onto MySpace.
[00:15:38] And it proved to be hugely popular.
[00:15:40] Like the likes of the Arctic Monkeys, Calvin Harris, Lily Allen, they all made their names
[00:15:45] on MySpace and launched their careers on MySpace.
[00:15:48] So it was very, very good in that way.
[00:15:51] Yeah.
[00:15:51] So, and I guess it's an opportunity for discovery if you are an obscure sort of artist and you
[00:15:57] pick up some traction, you're kind of going to go viral, really.
[00:16:02] Yeah.
[00:16:02] There's a small number of individual artists in there.
[00:16:04] Great opportunity.
[00:16:06] Yeah.
[00:16:06] And an awful lot of artists had to spend, not that they, they were happy to spend their
[00:16:10] time, but they had to spend a lot of time on MySpace interacting with their fans and
[00:16:13] building up that community and that relationship with their fans.
[00:16:17] But it proved to be massively popular.
[00:16:19] Now, this is all new to me, Keith, because I never joined MySpace.
[00:16:23] I had no idea.
[00:16:23] Oh, did you not?
[00:16:24] No, no.
[00:16:25] No.
[00:16:25] Right.
[00:16:25] Okay.
[00:16:26] Okay.
[00:16:26] No, I didn't go on to, I didn't even join Facebook, I think, till about 2015.
[00:16:31] Like, yeah, I hate social media.
[00:16:34] So when they talk about all these spammy pages and music on the profile pages of MySpace,
[00:16:40] I, I, I've no idea what that even looks like, but it does sound good.
[00:16:45] Well, it's very hard to picture MySpace because it's so different to Facebook or, you know,
[00:16:52] LinkedIn in terms of the uniformity.
[00:16:54] Yeah.
[00:16:55] Of those sites.
[00:16:56] So they are quite restrictive to a user.
[00:16:58] Profiles are very samely apart from maybe your, your, you know, headshot at the top.
[00:17:04] Yeah.
[00:17:04] Background.
[00:17:06] MySpace was like a wild west.
[00:17:09] You could completely customize your background.
[00:17:12] You could have music playing.
[00:17:14] It just, it felt like your MySpace profile was your own personal webpage that reflected
[00:17:20] your personality.
[00:17:22] Yeah.
[00:17:22] Which, which is kind of interesting in, in a user perspective, but in the cold light of
[00:17:28] day, it's very hard to consistently monetize that and, and be uniform about the ad formats
[00:17:35] and for the targeting, because they're not verifying the identity of a user, it makes
[00:17:40] it much more difficult.
[00:17:41] Yeah.
[00:17:41] So users loved it because they could customize it.
[00:17:46] Advertisers, you know, well, until Facebook came along and it was a behemoth, a gorilla
[00:17:51] in the room.
[00:17:52] They loved it, of course, but the uniformity was, was the challenge.
[00:17:56] Yeah.
[00:17:56] And that customization came about from a mistake whereby they were updating it very early on
[00:18:02] and they left the, what is it?
[00:18:04] The open source, whatever it was.
[00:18:06] Codes.
[00:18:07] Open.
[00:18:08] Yeah.
[00:18:08] So the people could go into the HTML part, go view source, go in there.
[00:18:12] You can see the view source on any website, but you can't edit it.
[00:18:15] But the users worry about to edit it.
[00:18:17] And when Anderson saw that, instead of closing that down and saying, oh, we got to stop this,
[00:18:21] he thought, brilliant.
[00:18:22] Let them customize it.
[00:18:23] Let them make this page their own.
[00:18:25] So you got them some kudos for that because that really got the teenagers involved in that.
[00:18:30] They were able to bring their own personality onto their own page and that helped them grow
[00:18:35] massively as well.
[00:18:37] And they did.
[00:18:38] They grew really, really big.
[00:18:40] Like within a few months, February, 2004, they had 1 million users.
[00:18:44] By November, 2004, they had 5 million users.
[00:18:48] Now in January, 2004, the Facebook launched as it was called then because it was just in
[00:18:54] colleges.
[00:18:56] And apparently a year after the Facebook launched, so this is in February 2005, DeWolf met Zuckerberg
[00:19:03] with a view to buying Facebook.
[00:19:06] And Zuckerberg said he wanted 75 million for us.
[00:19:10] Now people will look back and some people have criticized DeWolf for not buying Facebook
[00:19:16] back then, but Facebook only had 1 million users.
[00:19:19] Like 75 million was way too much.
[00:19:21] And as you said, there was loads of other players, loads of other social media sites back then.
[00:19:26] Yeah, 100%.
[00:19:27] And it's reminiscent of that sort of near miss for Yahoo and buying Google as well.
[00:19:33] You know, there's a story there as well.
[00:19:35] I think probably the internet is littered with those near miss stories, I'd imagine.
[00:19:40] So it's not unique to or unprecedented for Myspace not to buy Facebook either.
[00:19:46] No, and it was widely, widely overvalued.
[00:19:50] Like 75 million for just 1 million users in a market where there were several other social
[00:19:55] media sites.
[00:19:55] And there was no guarantee at all that Facebook would become what it became.
[00:20:00] I get the feeling as well.
[00:20:01] I remember hearing Zuckerberg as well put up a price of 1 billion at one time.
[00:20:05] I think it was either Microsoft or Google or somebody when he was in the market.
[00:20:10] It was Microsoft, I think.
[00:20:10] And they walked away from it.
[00:20:12] And again, they were derided for it.
[00:20:13] But I get the feeling, as in this case, that Zuckerberg more or less said, okay, I'm going
[00:20:19] to put out a crazy price there.
[00:20:20] And if you're willing to give me that crazy price, well and good.
[00:20:23] But I don't think you will because I think there's more value in this.
[00:20:26] But here you go.
[00:20:26] Give me 75 million.
[00:20:27] And the Wolves just said, no bloody way.
[00:20:29] So that was the end of that.
[00:20:32] And Myspace had every right to walk away from that because within just a few months,
[00:20:36] they had 22 million users.
[00:20:38] Like they were flying so far ahead of all the other social media sites.
[00:20:43] They had what is widely called, and I think we discussed this on one of our other shows,
[00:20:48] this network effect.
[00:20:50] And the network effect for our listeners is whereby, say now when phones first came out,
[00:20:56] I wouldn't buy a phone unless all my friends had phones.
[00:20:59] You're not going to buy a phone if you've got nobody to talk to.
[00:21:01] But once your friends start buying phones, then you buy a phone.
[00:21:05] And then your friends start buying phones and your family starts buying phones so you
[00:21:08] can talk to each other.
[00:21:09] And that's the network effect.
[00:21:11] And the same with social media.
[00:21:12] You won't join until your friends are already joined.
[00:21:14] And Myspace were getting that network effect because there was so many people coming on.
[00:21:19] And of course, as a result of that, you then had the big boys in the media looking at them
[00:21:24] and kind of going, we want a piece of this.
[00:21:27] And the first ones to open up discussions were Viacom, which is owned by Sumner Redstone.
[00:21:32] And I don't know if we covered it in the Sumner Redstone episode about the Myspace deal.
[00:21:39] Not to the best of my recollection.
[00:21:41] No.
[00:21:42] So Viacom were in a pole position.
[00:21:44] They owned MTV, Nickelodeon, Comedy Central, and they thought they had it.
[00:21:49] In fact, when they didn't buy it and Murdoch came in and swooped and got it,
[00:21:54] Redstone in an interview said that he was humiliated by losing Myspace.
[00:21:57] And he ended up firing Tom Freston, who was the co-CEO of Viacom at that time,
[00:22:03] because he blamed Freston for not closing the deal.
[00:22:07] And Murdoch came in.
[00:22:08] And back then, News Corp was a $60 billion company, which is big for back in the early
[00:22:14] noughties.
[00:22:14] And they were the biggest, I would say, media company in the world.
[00:22:18] Like they straddled the world.
[00:22:20] You're talking about Asia, not so much Mediterranean Europe, but definitely UK and Ireland.
[00:22:26] And then they had moved over to America as well.
[00:22:29] Now, it wasn't News Corp's first rodeo when it came to the internet.
[00:22:34] Back in the 90s, when the internet was booming, News Corp dipped their toes in the market and
[00:22:39] got pretty badly burnt.
[00:22:41] They invested in a company called Let's Buys.
[00:22:43] They invested in a company called Fired Up.
[00:22:45] They almost bought a company called Pointcast for $450 million.
[00:22:50] And that company was sold two years later for $7 million.
[00:22:53] So they had a few bad experiences with the internet and retreated back in the late 90s.
[00:22:58] But apparently Murdoch's big moment or big conversion towards the internet happened at Christmas of
[00:23:06] 2004.
[00:23:07] And this was because of the result of the Indian Ocean tsunami.
[00:23:10] He was on his island over Christmas and the tsunami hit.
[00:23:16] And like everybody else, he was glued to the coverage of it.
[00:23:20] But like everybody else, most of the coverage he was getting was from videos that were uploaded
[00:23:25] onto the internet.
[00:23:26] It wasn't from the traditional media.
[00:23:29] There was news reports, but all the best coverage was from people who were there and
[00:23:34] just uploading videos.
[00:23:35] And this made him realize eventually that, you know, this is the future of media.
[00:23:43] This user generated content is going to be where it's coming from.
[00:23:47] And people are going to go on the internet to get their news.
[00:23:52] And so he decided there and then that I got to get a piece of this.
[00:23:56] I got to get into the internet in some shape or form.
[00:23:59] And so this was also now, which is very interesting as well.
[00:24:04] You think he's 75.
[00:24:05] Wouldn't he just, you know, hang up his boots and just retire at this stage?
[00:24:10] But this was the second chapter in his life in more than one ways, because at this stage,
[00:24:15] he had just divorced his wife of 33 years, his second wife.
[00:24:18] He'd married Wendy Deng, who was 37 years his junior.
[00:24:22] He was working out.
[00:24:24] He was eating Chinese diets of seafood and vegetables.
[00:24:28] And far from winding down for retirement, Murdoch saw the sort of changing tides of society
[00:24:35] and he felt invigorated, you know.
[00:24:36] He had this new lease of life with this new wife and this new diet.
[00:24:40] And he wasn't going anywhere.
[00:24:42] It's amazing.
[00:24:43] I think his mother lived to a ripe old age as well, I think.
[00:24:47] Did she?
[00:24:47] Yeah, she was sort of a very hale and hearty kind of late 90s, I think, when she died.
[00:24:54] So he wanted to sort of do her.
[00:24:57] So, you know, our previous article, we talked about Sumner Redstone as well.
[00:25:01] So you have these older kind of gentlemen who think they'll live forever.
[00:25:07] They literally do think they'll live forever, Keith.
[00:25:09] I remember in the Sumner Redstone episode, we mentioned that Sumner Redstone said that,
[00:25:13] you know, he was going to live forever.
[00:25:15] He said something like that and Murdoch has said something similar as well.
[00:25:19] Yeah, yeah.
[00:25:20] So he wasn't for retiring at all.
[00:25:22] You know, I can't wait to do our episodes because I think when we do do Murdoch,
[00:25:27] it'll have to be nearly a three or four part.
[00:25:29] Yeah, it's huge.
[00:25:30] It's huge.
[00:25:31] You're talking about Australia, you're talking about the UK then,
[00:25:33] then you're talking about America and then you're talking probably about his latter years
[00:25:37] in succession.
[00:25:38] So you're going to get at least four episodes after that.
[00:25:40] So anyway, he came back from his holidays all invigorated and he called together his top
[00:25:46] people in News Corp and he also plucked from relative obscurity this guy called Ross Levinson,
[00:25:52] who was head of FoxSports.com.
[00:25:54] But FoxSports.com was the only part of News Corp that had a successful internet element.
[00:26:01] And Levinson also had previously worked for Alta Vista, a search engine, which we bought.
[00:26:06] Oh God, yeah.
[00:26:07] There's a blast in the past.
[00:26:08] Yeah, yeah.
[00:26:09] And so Murdoch brought Levinson in and he started questioning him and he put it to Levinson that
[00:26:15] he was thinking of buying Ask Jeeves.
[00:26:18] Another blast from the past.
[00:26:19] For our listeners, this was another search engine.
[00:26:22] It was kind of like a butler.
[00:26:24] What's Jeeves from?
[00:26:25] It's from Jeeves and...
[00:26:26] Jeeves and Worcester, yeah.
[00:26:27] Jeeves and Worcester.
[00:26:28] And so you'd go in and you'd ask Jeeves a question and he'd give you the answer.
[00:26:31] A search engine.
[00:26:32] And it's gone now.
[00:26:33] Yeah, yeah.
[00:26:33] It's gone now.
[00:26:34] Yeah, yeah.
[00:26:34] Dot com is what it is now.
[00:26:36] Yeah, I think...
[00:26:39] It didn't really give you the answer.
[00:26:41] It just gave me a series of responses.
[00:26:42] Was it?
[00:26:43] You know, for any younger people listening, don't picture chat DPT, whatever you do.
[00:26:49] You're not getting an accurate answer out of Jeeves.
[00:26:52] You're just getting a list of responses with the highest page advertiser at the top.
[00:26:57] Yeah, I remember going onto it once or twice and just thinking, this is crap.
[00:27:01] And it couldn't live with Google.
[00:27:04] It just couldn't live.
[00:27:05] Yeah, well, I mean, any of them.
[00:27:07] I think Out of This was bought by...
[00:27:11] It was bought by, yeah.
[00:27:12] Disney.
[00:27:13] Oh, was it?
[00:27:14] Yeah, yeah, yeah.
[00:27:15] Because Disney had another one called Go.
[00:27:17] They all had these search engines.
[00:27:18] Yeah.
[00:27:18] And I was like, wow, these are incredible.
[00:27:22] And all they did was give you a very rough, sort of vague answer to your question or response
[00:27:29] to your search query.
[00:27:30] And then Google came along and mopped the floor.
[00:27:32] But that's the thing.
[00:27:34] I mean, the search engines before Google were disruptive.
[00:27:37] And then Google came along and disrupted the disruptors.
[00:27:41] Yeah.
[00:27:41] Blew them out of the water.
[00:27:43] Yeah, yeah, completely.
[00:27:44] So Murdoch was saying, should I buy Ask Jeeves and Levinson, quite correctly said, don't.
[00:27:49] You know, they're number four or five in the search engine market.
[00:27:52] And Google anyway is wiping the floor with the few that are there.
[00:27:54] So he went off, did his homework, and he came back to Murdoch.
[00:27:57] And he said, if you're going to spend $2 billion, buy these two internet companies.
[00:28:03] Buy IGN, which is a gaming network, which News Corp subsequently bought for $650 million.
[00:28:08] And then he also said, buy MySpace.
[00:28:11] And Murdoch said, okay.
[00:28:13] And apparently the deal went, well, according to the book that we read as well, that deal went really, really quickly.
[00:28:19] Like he met the head of Intermix over the weekend, then met Anderson and DeWolf for very brief meeting.
[00:28:25] And what Murdoch loved about the social media space was the low input costs.
[00:28:32] Because you've got to think Murdoch is coming from traditional media, where they have to produce quality content.
[00:28:38] And quality content means, for newspapers, it means printing presses.
[00:28:42] It means journalists.
[00:28:44] It means editors.
[00:28:45] It means retailers.
[00:28:46] You've got so many different people in there.
[00:28:48] You're paying them all top dollar.
[00:28:50] And it's costing you a fortune to put out all this quality content.
[00:28:55] And the operating margins for traditional media is about 6%.
[00:28:58] Whereas you look at the likes of Google and Facebook.
[00:29:01] Yes, they have developer costs and they have other costs.
[00:29:04] But the content that they're all getting isn't costing them anything at all.
[00:29:07] Their operating margins are about 40%.
[00:29:09] So Murdoch was looking at this going, I'm in the wrong business here.
[00:29:14] Yeah, he probably, this was the birth potentially of the idea of sort of dispatching editors.
[00:29:22] It's just the beginning of the post-truths of a world that we've all come through.
[00:29:26] Great, you know.
[00:29:28] Where he goes, I'm getting rid of these guys.
[00:29:30] They're just an overhead.
[00:29:32] What do we need to verify if this is true or not?
[00:29:35] I know, but I think, see the thing with Murdoch is he was looking at this.
[00:29:39] He was looking at these sites, taking the revenue away from him.
[00:29:42] He thought, I got a piece of this.
[00:29:44] But in his bones, he was always attached to the print media.
[00:29:48] He could never get out of that.
[00:29:49] You know, that was him.
[00:29:50] That was, his father was a newspaper man.
[00:29:53] He was brought up in newspapers.
[00:29:55] And yeah, he could see that the internet was going to erode and take his revenue.
[00:30:01] But I don't think he could ever truly understand the internet,
[00:30:05] the way he understood print and traditional media.
[00:30:10] Interesting.
[00:30:10] But anyway, so they did the deal.
[00:30:15] And of the 580 million, it's very hard to get a breakdown of exactly who got what.
[00:30:20] He didn't just buy MySpace.
[00:30:22] He had to buy Intermix, the company.
[00:30:24] All their assets.
[00:30:26] Yeah.
[00:30:26] And so Intermix got 300 million from the deal.
[00:30:31] A few VCs who were invested about 30 million in Intermix over the years had gotten 185 to 200 million.
[00:30:37] That left about 80 to 100 million, as far as I can see.
[00:30:41] And that was split between Anderson, DeWolf, and there might have been a few other Intermix executives who got a bit of that.
[00:30:47] But it was very hard to get exactly who got what.
[00:30:50] But so now you've got this.
[00:30:52] You've set the stage where News Corp, probably one of the biggest media companies in the world, with Murdoch at its head,
[00:30:58] have now taken over the hottest social media site in the world.
[00:31:02] And there's that Wired article that I talked about where you've got this 75-year-old Murdoch on the cover of Wired.
[00:31:10] And as I said, the interview is so worth reading because he really feels like, you know, he is holding all the cards now.
[00:31:17] He, in the interview, when the reporter asks him, you know, what's your strategy going to be here?
[00:31:24] How are you going to fit it in with News Corp?
[00:31:27] What Murdoch says is, he says, we'll figure it out, said Murdoch, flashing his cash to the east, the Canary grid.
[00:31:34] So they're very, very, I suppose, confident that they're going to make this work.
[00:31:43] I think just it's such a weird concept of Murdoch, you know, on the cover of Wired.
[00:31:50] I know.
[00:31:51] I mean, you're picturing disruption in the form of a 75-year-old newspaper man versus, say, like, had Zuckerberg even began to shave at this stage?
[00:32:00] I know.
[00:32:01] It's all wrong.
[00:32:02] I mean, a 75-year-old shouldn't be in control of the newest media tech format.
[00:32:08] It's all, it's all wrong.
[00:32:11] That's all right.
[00:32:12] Yeah.
[00:32:13] So, but you can see why he was so confident.
[00:32:17] Because at this stage, like, there wasn't a battle between MySpace and Facebook at this stage.
[00:32:23] MySpace was way ahead.
[00:32:24] MySpace controlled 80% of the internet social media traffic by December 2006 versus Facebook's 7.6%.
[00:32:32] And the rest was held by a mix of companies like Cyword, Mixi, Orcut.
[00:32:38] I didn't know Orcut.
[00:32:39] Orcut was a social media.
[00:32:41] It was in South America, I think, by Google.
[00:32:43] Google owned it.
[00:32:44] Yeah.
[00:32:45] I never heard of that at all.
[00:32:46] Oh, I did.
[00:32:48] Yeah, I was around the malls.
[00:32:49] Were you?
[00:32:50] Yeah, yeah.
[00:32:51] Well, Bebo had launched in 2005.
[00:32:53] So you had all these ones.
[00:32:55] Also in 2006, no wonder Murdoch felt on top of the world because MySpace signed a deal with Google for a 900 million shared revenue advertising deal.
[00:33:05] So they had that going on.
[00:33:06] By January 2007, MySpace was signing up 320,000 new members every day.
[00:33:14] They were number one everywhere in Europe.
[00:33:16] They were at about 10 to 15 times the number of users than Facebook had in Spain, France, Germany.
[00:33:24] And in 2007 as well, there was a proposed merger between MySpace and Yahoo.
[00:33:30] And when that merger was being discussed, MySpace was now valued at 12 billion.
[00:33:36] So things were going well.
[00:33:38] They also had revenues, advertising revenues in 2007.
[00:33:42] I suppose as a result of their tie-in with Google of 550 million.
[00:33:46] Now, having said that, on that 550 million, they still lost 48 million because they were pouring tons of money into an awful lot of stuff that was wrong with MySpace.
[00:33:58] Yeah, the infrastructure was in bits.
[00:34:00] The infrastructure was in bits.
[00:34:01] And this is one of the reasons that we'll see why Facebook managed to catch up to them.
[00:34:08] And, you know, in this as well, in the Wired interview, they're talking about how it's going to fit in with our...
[00:34:16] I don't know if it's a Wired interview actually or another interview I read.
[00:34:18] It might have been the Financial Times interview.
[00:34:20] The established routine at this stage up to now, when an internet company was bought by another big company, was that the founders were usually replaced with industry veterans.
[00:34:29] And that really never worked out well for the most part.
[00:34:33] Because if you look at the big forekeep that are around at the moment now, that grew massively from the turn of the century.
[00:34:40] I know Apple's been around for ages, but really its second birth or rebirth was from 2000 onwards.
[00:34:45] So Facebook, its founders still in place.
[00:34:49] Google, Apple, Steve Jobs came back and as the founder grew it.
[00:34:54] Amazon, Jeff Bezos still in place.
[00:34:56] Google, well, people say Eric Schmidt was the boss of Google.
[00:34:59] They called him the grown up in the room actually.
[00:35:01] Yeah, but Larry Page was the CEO from 97 until 2001.
[00:35:05] And Google Ads launched in 2000.
[00:35:07] So Larry Page was the guy who started...
[00:35:10] Interesting.
[00:35:10] Yeah, who got Google on.
[00:35:11] And even when Eric Schmidt was there, from what I can gather, Larry Page was always there.
[00:35:16] And he came back again in whenever Schmidt retired.
[00:35:19] So I think Larry Page was always there.
[00:35:21] He didn't leave the stage at all and was very influential in that.
[00:35:25] So replacing the founders with these so-called industry veterans is a recipe for disaster.
[00:35:30] 100%.
[00:35:31] Yeah.
[00:35:31] Look at Zuckerberg is still at the helm now.
[00:35:33] He did have...
[00:35:34] Don't forget, Sheryl Sandberg was there as sort of...
[00:35:38] Exactly.
[00:35:38] He's grown up in the room.
[00:35:39] But that was a very strong partnership.
[00:35:41] It wasn't as if sort of ceded control to Sheryl Sandberg.
[00:35:45] That was very much a partnership.
[00:35:46] It was.
[00:35:47] And I think that's what you need.
[00:35:48] You need good people in to help the founder.
[00:35:51] But the founder ultimately needs to drive the ship.
[00:35:54] Yeah.
[00:35:54] With that good advice.
[00:35:55] Because they are the people with their finger on the pulse.
[00:35:57] And the vision, I guess.
[00:35:59] And the vision.
[00:35:59] Strategic vision.
[00:36:00] Exactly.
[00:36:02] But News Corp were saying they knew exactly what they were doing.
[00:36:05] Because this is a quote from Peter Chernin, the president of News Corp.
[00:36:09] He says, obviously, MySpace is a world unto itself.
[00:36:12] There's never been a second where we said, how do we put our stamp on it?
[00:36:16] We'd be crazy to interfere.
[00:36:18] And you think, yeah, okay.
[00:36:20] Well, you're not going to interfere.
[00:36:21] Brilliant.
[00:36:22] But of course, they couldn't help themselves.
[00:36:25] But it looked like they weren't going to interfere in that they kept DeWolf and Anderson on board.
[00:36:31] They paid them lucrative contracts of $15 million each for a two-year contract to stay on board.
[00:36:36] And DeWolf was made CEO of MySpace.
[00:36:38] But of course, then News Corp put a layer above him where Ross Levinson and other News Corp executives were above DeWolf.
[00:36:47] And he was still answerable to Levinson.
[00:36:49] And they just started butting heads.
[00:36:52] And, you know, it seemed like there was a real vacuum of leadership from the very get-go within MySpace.
[00:36:59] And that's what caused the problems where you didn't have that problem with Facebook.
[00:37:03] Zuckerberg was always in charge with a very strong board and very good people involved with him.
[00:37:09] But he was, he retained control, which I think was vital.
[00:37:14] Yeah.
[00:37:14] And a great, clear executor on strategy.
[00:37:18] Exactly.
[00:37:19] Exactly.
[00:37:19] Now, the strange thing about social media, not the strange thing, it's hard to have a clear long-term plan.
[00:37:26] But you need to have some sort of vision as to where it's going.
[00:37:28] And you need to be very, very flexible.
[00:37:31] And Zuckerberg was that.
[00:37:32] As you said, like, he was very strong.
[00:37:34] He was very clear on what he wanted to do.
[00:37:36] And he was very good at executing, you know.
[00:37:39] And this is where MySpace really fell down.
[00:37:42] But the first major issue with MySpace was inflicted by Murdoch himself.
[00:37:49] When in 2007, on an earnings call with Wall Street, he casually predicted or casually stated that MySpace would make $1 billion in revenue in 2008.
[00:38:00] And as a news call executive said, that was a big blunder to say that to the street.
[00:38:06] Now, apparently Murdoch didn't mean the declaration to be a threat at all.
[00:38:10] He really believed, given the way that MySpace was growing, given the way that Google Ads had grown.
[00:38:15] Google Ads was now making $6 billion a year.
[00:38:18] He really thought that this target wouldn't have been too hard to make.
[00:38:22] But the fact is, he wasn't involved in the business as much to know that MySpace was having difficulties.
[00:38:29] And advertisers were having issues with MySpace for lots of different reasons.
[00:38:34] First of all, there weren't enough moderators.
[00:38:36] They're signing up 320,000 people a day.
[00:38:40] They didn't have enough moderators.
[00:38:42] This was before the days of AI bots.
[00:38:44] And even with AI bots, a lot still gets true on social media today.
[00:38:47] So, there was the growing perception amongst the public, which wasn't helped by certain TV shows, I think, that made documentaries,
[00:38:56] about the fact that those online predators now on MySpace.
[00:39:00] Yeah, and bullying.
[00:39:02] Yeah.
[00:39:04] Bullying was very...
[00:39:05] There was a big case with bullying where...
[00:39:07] A very unfortunate case where a 13-year-old girl committed suicide after she was cyber-bullied by her next-door neighbour's mother.
[00:39:14] And that was hugely controversial.
[00:39:16] Now, strangely, Keith, just when I was looking up this morning, I was looking up to see if Zuckerberg and Murdoch ever met.
[00:39:22] And apparently, they did meet a few times.
[00:39:24] But there was a lot of conflict between them.
[00:39:26] Because in 2007, when stories came out about MySpace and online predators being on MySpace,
[00:39:34] Facebook believed that Murdoch hired people to set up predatory accounts on Facebook
[00:39:40] and then notify the authorities about these predatory accounts.
[00:39:43] So, there was a lot of dirty tricks going on in the background as well between these two parties.
[00:39:48] So, it did get a bit dirty.
[00:39:49] Yeah, and I...
[00:39:50] It's interesting.
[00:39:51] But again, fundamentally, and I suppose I nerd out a little bit on Facebook because I'm so familiar with it from a previous life.
[00:39:59] They verified your identity and as much as it's possible to do so.
[00:40:04] Yeah.
[00:40:04] So, if you're cyberbullying somebody, they kind of know who you are.
[00:40:10] They know who your friends are.
[00:40:11] Yeah.
[00:40:12] Because they had this fantastic service which aided their growth where it could plug into your address book,
[00:40:17] essentially, on your device, mobile device or computer.
[00:40:20] And not only did it allow it to spread virally so they could, you know, suggest signing up to your friends,
[00:40:29] essentially, or suggest friends for you if they'd already signed up.
[00:40:33] But it also sort of verified the authenticity of your account by virtue of who you are connected to.
[00:40:40] Yes, it had your sort of email contacts, didn't it?
[00:40:43] Yeah.
[00:40:44] So, in terms of that idea of cyberbullying, I mean, if it's Mrs. Smith down the road, you know it's Mrs. Smith down the road.
[00:40:53] Yeah, that's it.
[00:40:54] So, or she signed into someone else's account.
[00:40:57] But they did a lot of work in terms of ensuring that they were advertiser friendly.
[00:41:04] Yeah.
[00:41:05] So, the format was very clean.
[00:41:07] It was standard.
[00:41:08] It felt like a safe space for advertising.
[00:41:11] The targeting was fantastic.
[00:41:12] So, there's a huge contrast there that maybe on face value,
[00:41:16] people who aren't that familiar with how social media work maybe wouldn't appreciate.
[00:41:21] Well, this is one network as the other.
[00:41:24] No.
[00:41:24] No, they were way different.
[00:41:26] And sure, the Facebook, I'm calling it the Facebook because that's how it started off.
[00:41:30] It started in college anyway.
[00:41:31] And it started with college kids wanting to connect with college kids.
[00:41:35] So, you know, there was no reason for them to set up fake profiles
[00:41:39] because they wanted to let everybody know who they were and just connect with people.
[00:41:43] And it started with an older profile.
[00:41:45] And, of course, as these college kids then moved out of college and got into the workforce,
[00:41:50] other people in the workforce saw these college or kids just out of college using Facebook.
[00:41:55] And they started using Facebook.
[00:41:56] It was very much for an older, well, not older, for 80 plus.
[00:42:00] And the other interesting thing was, before we kind of go too deep into Facebook,
[00:42:05] we'll come back up onto the topic.
[00:42:07] But they had a wait list.
[00:42:09] You would literally have to wait.
[00:42:11] Yeah.
[00:42:12] So, it built up this scarcity and anticipation and they added one college after another after another.
[00:42:18] And people would be clambering.
[00:42:20] Right.
[00:42:20] I want to get in.
[00:42:22] Yeah.
[00:42:23] Which is a great tactic.
[00:42:24] Yeah.
[00:42:25] And people would talk about it, you know, I'm profile number whatever.
[00:42:29] Right.
[00:42:29] I made the first 10,000.
[00:42:31] It's incredible.
[00:42:32] So, and that, when you compare that then with MySpace where you have online predators,
[00:42:38] where you have this controversial case of cyber bullying,
[00:42:40] you also have a much younger user base who don't have a huge spending power because,
[00:42:46] and also the customization, while it's great for getting people in,
[00:42:50] and you alluded to this, it's terrible for advertisers because the pages are congested,
[00:42:55] cluttered, they're slow.
[00:42:57] Every profile page is so different that your ad just gets lost in it.
[00:43:02] You know, so it wasn't good for advertising.
[00:43:04] And this was reflected in the price key.
[00:43:07] A normal website back then could charge $2 per thousand impressions.
[00:43:12] MySpace was only getting 20 cents per thousand impressions.
[00:43:15] So, 10%.
[00:43:16] Yeah.
[00:43:16] And the reality is you don't know what sort of user-generated content your ad is going to appear beside.
[00:43:23] So, in terms of brand safety, you could have a brand that has a huge heritage,
[00:43:30] is very careful, and suddenly you find your ad juxtaposed beside something that's completely reprehensible.
[00:43:35] Yeah.
[00:43:36] Yeah.
[00:43:36] So, that's where Facebook or where MySpace started getting into trouble.
[00:43:40] And Murdoch wasn't really aware of those issues when he made the $1 billion statement.
[00:43:47] And what happened as well was, because this was 2007 going into 2008,
[00:43:51] there was the financial crisis, advertising budgets started getting pulled,
[00:43:56] and the news call executives started panicking, going,
[00:43:59] we need to make this $1 billion budget.
[00:44:02] So, they started piling into MySpace and putting more pressure on the MySpace team to focus solely just on advertising.
[00:44:10] And what that happened was, it was twofold.
[00:44:12] First of all, the improvements that the MySpace team wanted to make,
[00:44:16] such as maybe take down pages that were inappropriate,
[00:44:19] take down more pages so that the site could get faster.
[00:44:22] The news course executive said,
[00:44:24] no, because less pages meant less pages to put ads on.
[00:44:27] And the flip side of that was that the increased number of ads started aggravating MySpace users,
[00:44:32] because they were just, you know, now their profile pages and other,
[00:44:36] their friends' profile pages were just covered in ads as well.
[00:44:39] And they were getting spammy ads because they were desperate to get any kind of ads.
[00:44:43] So, it had a really, it sowed the seeds for its ultimate failure.
[00:44:48] And, you know, as we contrast that with Facebook, as you said, nice, clean pages,
[00:44:54] no fake profiles, older profile, all over 18s.
[00:44:59] And actually, I think Facebook only opened up to under 13s in 2006.
[00:45:04] So, it was strictly over 18s up until 2006.
[00:45:07] And then they opened it up to over 13s.
[00:45:10] Over 13 to 18.
[00:45:11] Yeah.
[00:45:12] And I think it had, because of the clean look, that's an important point as well to say,
[00:45:19] there was a restricted number of ads shown to users because they were only in certain placements.
[00:45:24] Yeah.
[00:45:25] So, it was, it was, the user experience wasn't intrusive either.
[00:45:30] Yeah.
[00:45:31] So, you became used to the ads and appreciated and were comfortable with that exchange of value.
[00:45:38] I get my experience, you get your ad revenue.
[00:45:41] Yeah.
[00:45:42] And this is reflected in the revenue from Facebook.
[00:45:44] They didn't launch their ads until 2007.
[00:45:46] And in the first year, they only earned 153 million.
[00:45:50] You compare that to 2007, where Facebook or MySpace were bringing in 550 million.
[00:45:55] In 2008, only 272 million.
[00:45:58] Then it grew, you know, 2009, it was up to 770 million.
[00:46:02] And then by 2010, Facebook was at 1.19 billion.
[00:46:05] But it was all very gradual because obviously, Zuckerberg wasn't under the type of pressure that Murdoch had put MySpace under by saying,
[00:46:13] we're going to be making a billion this year.
[00:46:15] And then you had all these execs breathing down MySpace's neck to make sure that they got that target.
[00:46:21] And also, Facebook took the time to see what worked.
[00:46:24] They did stuff like they did the news feed and the news feed apparently didn't go down well at the start.
[00:46:30] But they kept on tweaking it until eventually the feedback was, okay, people are starting to really like the news feed.
[00:46:36] They also opened up their website to third-party developers.
[00:46:40] And this was a game changer because then you had the likes of Farmville.
[00:46:44] I presume you played Farmville, did you?
[00:46:47] I did.
[00:46:47] And we had, again, in the previous life, we built our business around the Facebook API.
[00:46:54] So I'm familiar with it as a developer as well.
[00:46:57] Yeah.
[00:46:58] And that was huge, wasn't it?
[00:47:00] Incredible.
[00:47:00] Yeah, it was massive.
[00:47:01] The games are massive.
[00:47:02] Yeah, we ran ads on Farmville.
[00:47:07] Yeah.
[00:47:08] Yeah.
[00:47:08] Ran ads on Farmville by Zynga, I think it was, on Facebook.
[00:47:13] Yeah.
[00:47:14] So how meta is that?
[00:47:15] No pun intended.
[00:47:18] So Facebook were doing everything right while MySpace were doing everything wrong.
[00:47:23] And again, you've got to understand, MySpace had such a head start.
[00:47:27] They were so much bigger that they really were throwing us away.
[00:47:30] Facebook shouldn't have won this race at all.
[00:47:34] But they were.
[00:47:36] They were.
[00:47:37] They were just by dent of the fact that Zuckerberg had a better grasp for how this thing could work.
[00:47:43] And again, I've got to stress, it's not as if anybody knew how all this was going to end.
[00:47:48] Because social media was totally new.
[00:47:50] But you just had to have your finger on the pulse.
[00:47:53] And Zuckerberg did.
[00:47:54] And he iterated at the right time.
[00:47:58] He pivoted at the right time.
[00:48:00] He just played it really, really well.
[00:48:03] Whereas MySpace, under the thumb of news core, this big bureaucratic traditional media just wasn't as agile.
[00:48:12] And they weren't given the control as well.
[00:48:15] So another thing that MySpace did was when they opened up into new markets, they opened up offices in these markets.
[00:48:22] Spending millions upon millions.
[00:48:23] They opened up 14 offices worldwide in 2007.
[00:48:28] Facebook didn't open up any overseas office until 2010 when they moved to Dublin.
[00:48:33] And that was their first overseas office.
[00:48:35] MySpace, 14 offices in 2007.
[00:48:37] So a huge waste of money.
[00:48:41] Now, when I was doing the research, Keith, an awful lot of the news core executives said that the big problem was that in 2006 or 2007, Murdoch got distracted because he went off and bought the Wall Street Journal and the Dow Jones Index for 5.6 billion.
[00:48:57] And this is what one executive said.
[00:48:59] He said, Rupert took his eye off the ball on the internet.
[00:49:02] He got obsessed with Dow Jones and stopped paying attention to MySpace.
[00:49:05] That's when all the trouble started.
[00:49:08] Now, I would say to that, you know, that's bullshit.
[00:49:13] I don't think Murdoch ever...
[00:49:16] Was his eye ever on the ball?
[00:49:18] It wasn't.
[00:49:18] I think his gaze was diverted momentarily to the internet.
[00:49:22] And then he reverted to what it was comfortable with.
[00:49:26] Yeah, to his passion.
[00:49:27] He just loved print media.
[00:49:29] This idea that in 2007 he was diverted by the Wall Street Journal.
[00:49:33] He'd had his eye on the Wall Street Journal for years.
[00:49:35] He's a print guy.
[00:49:37] And the biggest newspapers are what drew his attention.
[00:49:40] The internet was something that he knew was going to be important.
[00:49:43] But his passion just wasn't in it.
[00:49:46] And even if it had been in it, he wouldn't have known what to do.
[00:49:49] Trying to say that, you know, at this stage, at 77 years of age, that Murdoch could have his finger on the pulse of social media in the way that Zuckerberg had is just nonsense.
[00:49:59] It just couldn't... He couldn't have competed with Zuckerberg.
[00:50:03] So I think that's a non-starter saying that the Wall Street Journal diverted him.
[00:50:07] And that's why it failed.
[00:50:11] So as we progressed into 2007, we can see where this is going.
[00:50:16] Facebook are really starting to take off.
[00:50:18] In April 2007, they had 20 million users.
[00:50:22] By October of that year, they had 50 million.
[00:50:24] And while MySpace was still going at 19% in 2007, Facebook was going at 125%.
[00:50:33] And the revenue target that they had set for 2008, that 1 billion target, they didn't fall short by a huge amount.
[00:50:41] By all estimates, they maybe made about 800 million in revenue.
[00:50:45] But they still made a loss on that year because they were throwing money around so foolishly.
[00:50:52] And as you said, there was a lot of money that had to be invested in infrastructure and developers and moderators.
[00:50:57] But finally, it was in May 2008 that Facebook finally overtook MySpace.
[00:51:03] They got 124 million unique visitors that month versus MySpace's 115 million.
[00:51:10] And so once you take them over like that, you can see and when you understand that the foundations of MySpace and the leadership in MySpace and everything else that's going on in MySpace, it can only go downhill from there.
[00:51:22] And they did.
[00:51:23] They started losing 1 million users every month.
[00:51:26] Then News Corp said, OK, we need a shakeup of management.
[00:51:30] That's going to fix everything.
[00:51:32] So Anderson and DeWolf were removed or I don't know if they left themselves or if they were just told to go in 2009.
[00:51:41] They slashed headcount by 30%.
[00:51:44] They brought in these three new executives.
[00:51:47] One of them came from Facebook, but the guy who came from Facebook only hung around a few months because the level of bureaucracy and the slow pace that everybody was moving at.
[00:51:57] He just said, it's not going to work.
[00:51:59] It must have been the polar opposite of that dynamic environment that we're used to.
[00:52:04] I would say it's a hacker culture from Facebook into this.
[00:52:08] I would say it would be a very dispiriting place to work in then when Facebook has overtaken you.
[00:52:16] Your numbers are just going down and down.
[00:52:19] You've got these, you know, executives from News Corp kind of looking at you going, what are you doing?
[00:52:25] After them haven't really gone in and ruined the whole thing for everybody.
[00:52:28] I'd say you're coming from a world of hoodies and T-shirts and, you know, probably slippers or some sort of weird footwear and then turn around and everyone's in a suit.
[00:52:40] It must have been a culture shock.
[00:52:42] So they relaunched in 2010.
[00:52:44] By this stage, they were down to 60 million users and they'd given up attempting to compete with Facebook.
[00:52:49] By this stage, they said, we're going to focus on music.
[00:52:51] That's going to be our niche.
[00:52:54] But, you know, News Corp demonstrated that if they couldn't handle MySpace while it was on the up and had such a clear runway ahead of them, there was no way they were going to be able to handle it when it was on the way down.
[00:53:04] And the relaunch was a disaster.
[00:53:06] One figure that really jumps out at me is that by 2011, MySpace had 34 million monthly users and revenue of $180 million.
[00:53:16] By the end of 2011, Facebook had 845 million users and a revenue of $3.7 billion.
[00:53:24] My God.
[00:53:26] And did MySpace, I can't really remember them having a mobile offering because that was the other big sort of push that was going on here at that context.
[00:53:35] So Facebook had been challenged to come up with a mobile proposition because mobile was exploding and they executed that incredibly well and quickly.
[00:53:44] I don't actually remember a mobile offering from MySpace.
[00:53:47] MySpace did have a mobile offering.
[00:53:49] Did they?
[00:53:49] Yeah, but it wasn't done with the focus.
[00:53:52] I remember when the whole mobile thing started coming out, Zuckerberg really had a call to arms more or less.
[00:54:01] We have to go 100% into mobile.
[00:54:03] It was, this is the way it's going to go and we have to be there.
[00:54:07] MySpace didn't have the same as that.
[00:54:09] MySpace did something, you know, created some sort of app that allowed them to be on a mobile.
[00:54:13] But it wasn't with the same level of intensity and focus that Zuckerberg had.
[00:54:18] Again, just showing the difference between them.
[00:54:20] Yeah, yeah.
[00:54:21] He just executed so well.
[00:54:23] So they're, you know, by this stage now, News Corp just want to read.
[00:54:28] They're talking about MySpace.
[00:54:30] They're hawking it around looking for $100 million for us and they don't even get $100 million.
[00:54:36] In the end, a company called Specific Media buy it off them for $35 million.
[00:54:43] And the news story goes that it's Specific Media and Justin Timberlake have bought it for $35 million.
[00:54:49] Right?
[00:54:50] And the thing is, their story was that, no, Justin Timberlake is going to be creative director and he's also an investor in this.
[00:54:56] But I found an article from some MySpace people where they said that Timberlake wasn't an investor or such.
[00:55:04] Specific Media was an ad traffic company run by two brothers.
[00:55:09] And they gave Timberlake a million dollars and said, now, if you can put that million dollars back in, you can be an investor in this.
[00:55:17] And we also want you to be the public face so that they could get a bit of extra publicity for this.
[00:55:21] Because otherwise, it was a dead story.
[00:55:23] It was like, you know, MySpace is dead and this company have bought it for $35 million.
[00:55:27] But now it was like, oh, this company and Justin Timberlake have invested in this and they're going to reinvigorate it and relaunch it as this music site where musicians can connect with their fans.
[00:55:39] And so they bought it for $35 million.
[00:55:41] It's strange, Keith.
[00:55:42] MySpace really came around in a full circle.
[00:55:44] They started off with a spammy ad traffic website in the universe.
[00:55:49] And then eight years later, they were sold to another ad trafficking website.
[00:55:54] And these brothers actually did okay out of this.
[00:55:58] They sold it in, I think, 2016.
[00:56:02] Their company was rebranded as Viant.
[00:56:04] And they sold it for $87 million to Time Inc.
[00:56:09] is what it was called by that stage.
[00:56:10] So they made some money out of this.
[00:56:13] But that was the end of MySpace.
[00:56:16] But I was then reading, I was trying to look for what people thought as to, you know, what we've outlined, why MySpace failed.
[00:56:22] But it was interesting to get some feedback from other people.
[00:56:25] And Sean Parker, who coincidentally was played by Justin Timberlake in the Social Network movie.
[00:56:33] The Facebook one, yeah.
[00:56:35] The Facebook one.
[00:56:36] He's a former president of Facebook.
[00:56:38] He's also the founder of Napster.
[00:56:39] Napster.
[00:56:40] Early investor in Spotify.
[00:56:41] He'd be an interesting character to do some story on.
[00:56:43] I know he's a very polarizing character.
[00:56:46] He's one of the first artists or compilations of artists.
[00:56:51] His playlists on Spotify were fantastic.
[00:56:55] Were they?
[00:56:55] Yeah, fantastic.
[00:56:57] He was one of the first people I would have followed when I jumped into Spotify.
[00:57:01] Yeah, I was at Parker Research.
[00:57:03] I was listening to an interview that Daniel Elk had where he was talking about Parker.
[00:57:07] And he was saying, Parker is brilliant.
[00:57:09] He said, he is the most unreliable guy ever.
[00:57:12] He said, if you have a meeting with him at three o'clock in the day, he mightn't come till 12 o'clock that night.
[00:57:17] He said he's all over the place.
[00:57:19] But at the same time, fantastic in his observations and his read of the internet.
[00:57:26] But anyway, Sean Parker said this about MySpace.
[00:57:30] He said, there was a period of time where if they had just copied Facebook rapidly, they would have been Facebook.
[00:57:36] They were giant.
[00:57:38] The network effects, the scale effects were enormous.
[00:57:41] The only reason we won was because of gross incompetence of MySpace systematically over a period of many years.
[00:57:50] Damning.
[00:57:51] Murdoch himself, later on in 2012, he said he made a huge mistake, Murdoch said, of the MySpace acquisition.
[00:57:58] We then proceeded to mismanage it in every possible way.
[00:58:02] So he held his hands up and said, yeah, we screwed up big time.
[00:58:07] But the one thing that when I was thinking about this story, there was two things that came to mind.
[00:58:13] The first thing was, what should Murdoch have done?
[00:58:16] I don't think he could have stood by and not done anything when social media websites were coming out.
[00:58:23] Yeah, that's true.
[00:58:24] How can you buy something for 600 million and then not have your own people not control it?
[00:58:32] Like, it'd be very hard to buy it and then just let Krista Wolf and Anderson run it freely.
[00:58:36] I don't know.
[00:58:38] I don't know what he could have done.
[00:58:40] Yeah.
[00:58:41] That's an interesting what if, isn't it?
[00:58:44] Well, the other what if, the other interesting what if, I know people give out about sucks an awful lot.
[00:58:49] But what if Murdoch had won that battle?
[00:58:52] How would the media landscape look now?
[00:58:56] And I was thinking about this.
[00:58:57] Terrifying.
[00:58:58] Yeah, terrifying.
[00:58:58] Now, the social media landscape might look similar in that you'll have Murdoch owning all the social media, maybe.
[00:59:04] But it'd be the landscape outside of that because Murdoch, with the spending power that he'd now have from his social media websites and his voracious appetite for all other formats of media, he could own all the media all over the world.
[00:59:19] Now, there are laws in place for each individual country, but there's no laws in place for a worldwide monopoly.
[00:59:25] He'd be buying up media everywhere if he had the money and the cash that was coming in from his social media websites.
[00:59:31] Yeah, but almost scarily more so, I think, that that is the influence he'd have.
[00:59:38] Yeah.
[00:59:39] If you think about, I don't know, the British tabloid media and their influence in politics.
[00:59:45] This is it.
[00:59:46] Extrapolate that up to every country in the world.
[00:59:49] This is it.
[00:59:49] Back in the 2000s, News Corp was a $60 billion enterprise.
[00:59:54] Now, because of the missteps that they've made and the encroachment of the internet, they're now down to a $15 billion enterprise.
[01:00:02] Can you imagine if Murdoch had won this battle?
[01:00:05] News Corp would possibly be one of the most valuable companies in the world.
[01:00:09] But also back then, in the early 2000s, people were complaining about the power that Murdoch had over the media sphere.
[01:00:18] If he had won this battle, his power over media worldwide would be very, very scary.
[01:00:25] So why people might give out about sucks, I think it's better that he won than Murdoch winning that battle.
[01:00:32] I'd have to agree with that.
[01:00:33] Yeah.
[01:00:34] A hundred percent.
[01:00:35] Yeah.
[01:00:35] Very interesting.
[01:00:36] Sorry, and tragic in some respects, you know.
[01:00:39] Well, what do you mean?
[01:00:41] Like for the MySpace people?
[01:00:43] Yeah.
[01:00:44] Yeah, yeah.
[01:00:44] Such a waste of potential in some respects, you know.
[01:00:47] I know.
[01:00:48] Such a great start.
[01:00:49] Such an astronomical growth and sort of a hacky mentality.
[01:00:53] Yeah.
[01:00:53] I think that's the other part that maybe, I think the contrast between them.
[01:00:58] The guys on Facebook are coders.
[01:01:00] They're hackers.
[01:01:01] Yeah.
[01:01:02] They experiment.
[01:01:03] They move fast.
[01:01:04] They break things, as they say.
[01:01:06] These guys move slow and live in fear.
[01:01:10] I mean, as soon as the Murdoch crew came in, the writing was on the wall as far as I'm concerned.
[01:01:17] Yeah.
[01:01:18] Yeah.
[01:01:19] But yeah, I love that story.
[01:01:22] It raises a lot of interesting what they've saw right.
[01:01:25] And it's just interesting.
[01:01:27] It gives us a glimpse as to what Zuckerberg did.
[01:01:31] But I definitely am looking forward to, at some stage, maybe doing a deep, deep dive into, I mean, a lot of people know the Zuckerberg story.
[01:01:38] But I think there's still a lot of granular detail that I'd love to find out to see exactly what he did and what the dynamics were in there between him and Sheryl Sandberg and the board with Peter Thiel involved and all that.
[01:01:50] So there's a fascinating story there as well.
[01:01:52] And not to mention Twitter.
[01:01:54] Don't forget those guys.
[01:01:57] I'm reading the new book that you recommended on Elon Musk.
[01:02:00] You know what it's called?
[01:02:01] It's from the New York Times people.
[01:02:02] Oh, yes.
[01:02:06] Oh, you've got me now.
[01:02:08] I just started it myself, actually.
[01:02:10] So I should.
[01:02:11] Character Limit.
[01:02:12] Character Limit.
[01:02:13] Is that it, yeah?
[01:02:14] Yeah.
[01:02:16] Yeah, there's a couple of podcasts in there too, I think.
[01:02:19] There is.
[01:02:20] It is.
[01:02:21] Anyway, listen, nice one.
[01:02:22] It's my turn next time.
[01:02:23] So I'll get one.
[01:02:24] Do let me know.
[01:02:25] All right.
[01:02:26] Cool.
[01:02:26] Cheers.
[01:02:27] Bye.
[01:02:27] Bye.