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write a summary for the case,be clear and direct,do not just repeat the case.;provide 2 to 3 pages;Attachment Preview;Myspace.pdf;The Rise and Inglorious Fall of Myspace;It once promised to redefine music, politics, dating, and pop culture. Rupert;Murdoch fell in love with it. Then everything fell apart;By Felix Gillette;In 2006, Jeremy Jacksonthe buff, bronzed former Baywatch child starcouldn't;imagine a world without Myspace. He was a single, underemployed actor in Los Angeles;an exhibitionist in need of an audience, and Myspace filled almost every need. He spent;hours every day on the edgy social network, which was known as a pop music hub where;artists such as Lily Allen and My Chemical Romance helped launch their careers.;Jackson had more than a thousand "friends." He sold trucker hats and flirted with women.;His profile page was decorated with Trojan Magnum XL condoms. He was the poster;child for the Myspace lifestyle.;But things changed.;I tried to cling to Myspace for a long time, hoping that someone there would come up;with some idea to keep it alive," says Jackson, 30. "But my assistants and business;partners finally beat it into my head that it was a dead horse. It's done. It's a joke. If you;do stuff on Myspace, you just look sad.;Jackson still hustles for attention on the lower rungs of famehe currently stars in season;five of Celebrity Rehab, in which he battles his addiction to growth hormones for cable;television viewers. But he now does his digital communing on Facebook and Twitter. He;hasn't checked his Myspace page since 2009.;At its December 2008 peak, Myspace attracted 75.9 million monthly unique visitors in;the U.S., according to ComScore (SCOR). By May of this year that number had dropped;to 34.8 million. Over the past two years, Myspace has lost, on average, more than a;million U.S. users a month. Because Myspace makes nearly all its money from;advertising, the exodus has a direct correlation to its revenue. In 2009 the site brought in;$470 million in advertising dollars, according to EMarketer. In 2011, it's projected to;generate $184 million.;In February, News Corp. (NWS), which bought Myspace and its parent company;Intermix, in 2005 for $580 million, started officially looking for a potential buyer at an;asking price of $100 million, according to a person familiar with the sale process. Yet;even in the midst of a frenzy for social media that has seen LinkedIn (LNKD) valued at;$6.4 billion and Groupon rebuff a $6 billion takeover offer from Google (GOOG), barely;anyone wants to buy Myspace. On June 9 the News Corp.-owned tech blog; reported that a group of investors led by Activision Blizzard (ATVI);chief Robert Kotick was closing in on a deal. "Getting people to come back to something;that in their minds has become less useful is an incredible challenge on the Webjust;ask AOL," says Richard Greenfield, an analyst with BTIG. "Myspace has become an;eyesore for News Corp.;It's an eyesore for users, too. Many Myspace pages appear to be host bodies for the worst;kinds of advertising parasites. On the upper right-hand corner of the page for Zaiko;Langa Langa, an African band Googled at random, a photo of a blonde in a tight T-shirt;appears, asking, "Want a Girlfriend? View Hundreds of Pics HERE!" (It's an ad for a;dating site called True.) Farther down, someone has posted footage of nearl y naked;jiggling buttocks. There hasn't been an update from the musicians in weeks.;Mismanagement, a flawed merger, and countless strategic blunders have accelerated;Myspace's fall from being one of the most popular websites on earthone that promised;to redefine music, politics, dating, and pop cultureto an afterthought. But Myspace's;fate may not be an anomaly. It turns out that fast-moving technology, fickle user;behavior, and swirling public perception are an extremely volatile mix. Add in the sense;of arrogance that comes when hundreds of millions of people around the world are living;on your platform, and social networks appear to be a very peculiar businessone in;which companies might serially rise, fall, and disappear.;Danah Boyd, a senior researcher who studies social networks at Microsoft Research;(MSFT), attributes their instability to the way users can bind themselves by race and;class, taste and aesthetics. Influential peers pull others in on the climb upand signal to;flee when it's time to get out. "The thing about user adoption and user departure is that it's;not a steady flow," says Boyd. "Think of it as, you're knitting a beautiful scarf, and you're;knitting and knitting, and you get a bigger and bigger scarf. Then someone pulls a loose;thread at the bottom. And it all unravels."In 2007, News Corp.'s belief in Myspace;was best represented by architecture. The company was considering a redevelopment;plan that would have moved its headquarters to the far west side of Manhattan. Sketches;from the time show an alternate vision of the company's future anchored, front and;center, by a gleaming Myspace pavilion. The other elements of Murdoch's old-media;empirethe Wall Street Journal and New York Post newspapers, the Fox News;television networkwould be scattered around the company's new beating heart.;The building was never built, and Myspace's centrality to News Corp. was fleeting.;Interviews with more than a dozen former Myspace and News Corp. insiders reveal how;a rocky six-year marriage ultimately undercut Myspace's once-dominant social media;position, leaving the field wide open for Facebook's rise and potentially squandering;billions of dollars of future revenue along the way. According to two former News Corp.;executives, Murdoch, who was initially enamored of his new digital plaything, lost;interest in Myspace as his pursuit of the Wall Street Journal, which News Corp. bought;in 2007, consumed his attention. A News Corp. spokesman, Dan Berger, citing ongoing;negotiations with potential Myspace buyers, declined to make current executives;available for comment.;In February 2009, with the threat of Facebook's growing popularity looming over their;company, Chris DeWolfe and Tom Anderson, the co-founders of Myspace, appeared on;The Charlie Rose Show. DeWolfe explained that Myspace was more than a social;network, it was a portal where people discovered new friends and music and moviesit;was practically where young people lived. "We have the largest music catalog in the;world," DeWolfe said. Anderson predicted that by 2015, Myspace would have up to 400;million users. DeWolfe said the site's worth was "in the billions.;Rose mentioned how Murdoch had bought Myspace's parent company, Intermix, for;$580 million. "Are you happy you made the deal?" asked Rose.;Um," said DeWolfe.;Rose looked at Anderson, who grinned awkwardly. DeWolfe took a gulp of water.;That's a tough one, right?" said Anderson.;DeWolfe doesn't work for News Corp. anymore and has previously declined to speak in;depth about the acquisition. He broke his silence to give Bloomberg Businessweek his;assessment of Myspace's collapse.;DeWolfe still has a Myspace page, but he doesn't check it much. When he does, he says;he cringes. "I'm a little disappointed in the music product, given that we spent so much;time and effort to get more music licenses than anyone in the world. I haven't seen;Myspace Music evolve how it should have.;I think any time a startup is acquired, there's always a certain amount of culture clash,;DeWolfe continues. "There are more meetings during the day with a big company. There;are three different levels of finance that you need to go through. There are people that;want to meet with you in other divisions, and it's a professional courtesy to see how you;can work with them. So from that perspective, you sort of end up taking your eye off the;ball.;After we left, the guys that took over were never Myspace users," says DeWolfe, who;now runs a startup called MindJolt. "They didn't have it in their DNA." According to a;source familiar with the sale, DeWolfe is also a finalist to buy the company. DeWolfe;declined to comment.;DeWolfe, 45, and Anderson, 40, started Myspace in 2003 while working at EUniverse, an;Internet marketing company in Los Angeles that sold everything from printer cartridges;to skin cream. The colleagues dreamed up Myspace as a more freewheeling version of;Friendster, an early social media network that became popular and, in a foreshadowing of;things to come, was eventually abandoned en masse by its users.;For a time, Myspace was blessed with the improvisational luck that seems to grace all;successful startups. One of the site's first breakthroughs, for example, came by accident.;Shortly after launching in August 2003, Myspace developers realized they had;accidentally permitted users to insert Web markup code, allowing them to play around;with the background colors and personalize their pages, leading to the site's;kaleidoscopic, techno-junkyard aesthetic, which became its trademark.;DeWolfe and Anderson went out and strategically recruited up-and-coming bands such as;the Billionaire Boys Club and pinup girls such as Tila Tequila to join the site. Initially;you had to be a Myspace member to see the resulting profile pages, listen to the music, or;check out the bikini pics. In April 2004, Myspace dropped the requirement, and anybody;could cruise around. Voyeurism spiked, page views skyrocketed, and Myspace engineers;raced to keep up with the growth.;In the summer of 2005, Murdoch swooped in and bought Myspace, surprising Viacom;(VIA/B), which had been finishing up a bid for the company. To help integrate his;growing family of Web companies, such as the video game fan site IGN and;Photobucket, into News Corp., Murdoch formed a new division called Fox Interactive;Media, or FIM, and appointed a then-41-year-old executive named Ross Levinsohn, who;had been working in the relative backwaters of, to lead it. Murdoch also;kept DeWolfe and Anderson in their jobs running Myspace. A few months later, News;Corp. moved the Myspace staff out of their hipster digs in Santa Monica to FIM's;headquarters in Beverly Hills.;DeWolfe and Anderson were supposed to report to Levinsohnin theory. In practice;according to three former FIM and Myspace employees, DeWolfe and Anderson;routinely sidestepped their would-be bosses. DeWolfe says that despite the perception he;found numerous executives to be positive influences during his News Corp. tenure;including Wall Street Journal Managing Editor Robert Thomson, Fox News chief Roger;Ailes, and Peter Chernin. "I learned a lot from Roger Ailes about trying to buck;bureaucracy," says DeWolfe.;Part of his challenge, DeWolfe says, was the pressure to monetize the site. While;developers at Facebook, Tumblr, and Twitterstartups backed by venture capitalwere;more free to design their products without the immediate pressure of advertising goals;Myspace managers had to hit quarterly revenue targets. That pressure increased;dramatically in the summer of 2006, when Google paid $300 million a year for three;years to be the exclusive search-engine provider on Myspace on the condition that the;social network hit a series of escalating traffic numbers.;In retrospect, DeWolfe says, the imperative to monetize the site stunted its evolution;When we did the Google deal, we basically doubled the ads on our site," making it more;cluttered. The size, quality, and placement of ads became another source of tension with;News Corp., according to DeWolfe and another executive. "Remember the rotten teeth;ad?" DeWolfe says. "And the weight-loss ads that would show a stomach bulging over a;pair of pants?;At one point, according to DeWolfe, Myspace asked the sales team at FIM to stop selling;the gross-out ads, even though they had high click-through rates. "If we were doing $500;million of revenue, it meant taking a $20 million haircut," says DeWolfe. "It was the right;thing to do from a long-term growth perspective. But it took a lot of work to get through;the various different levels at News Corp. We had to jump through hoops.;There was a lot of pressure to drive revenue," adds Shawn Gold, Myspace's former head;of marketing and content. "There were things that we knew would be more efficient for;the user that we didn't act on immediately because it would reduce page views, which;would have hurt the bottom line.;The site continued to add users, which disguised a growing unease about Myspace's;vision for its future, according to former Myspace and FIM employees. Under Anderson's;leadership, the products division introduced a dizzying number of features;communication tools such as instant messaging, a classifieds program, a video player, a;music player, a virtual karaoke machine, a self-serve advertising platform, profile-editing;tools, security systems, privacy filters, Myspace book lists, and on and on. (Anderson did;not respond to an interview request.);While Facebook focused on creating a robust platform that allowed outside developers to;build new applications, Myspace did everything itself. "We tried to create every feature;in the world and said, 'O.K., we can do it, why should we let a third party do it?' " says;DeWolfe. "We should have picked 5 to 10 key features that we totally focused on and let;other people innovate on everything else.;Some ideas, such as classifieds, represented real business opportunities, DeWolfe says;but didn't get enough manpower. Others, such as karaoke, were niche products that;diverted energy from less glamorous, more practical concerns. "There were simple things;we just didn't execute well on, like address-book importing," he says. "It's a blockingand-tackling sort of feature that we didn't really have nailed down.;Another recurring problem is that there was not enough of a culture at Myspace of;testing, measuring, and iterating. New products were often buggy, making the site slow;and difficult to navigate. "Myspace went too wide and not deep enough in its product;development," Gold says. "We went with a lot of products that were shallow and not the;best products in the world.;Part of the reason Myspace struggled to keep up with emerging technology companies;was its site architecture. DeWolfe says that when he and Anderson conceived of;Myspace, speed to market was essential. Friendster knockoffs were popping up;everywhere. Myspace's founders decided to build the site using ColdFusion, a simplistic;programming language. "ColdFusion, even back then, in the engineering world, was;thought to be a sort of Mickey Mouse type of technology," says DeWolfe. "But it was so;easy to use that we could just crank it out quickly. We blew out Friendster. We blew out; We blew out everyone.;They also created what DeWolfe calls "technology debt." By 2005 the site had outgrown;ColdFusion. At that point it was too late to switch over to the open-source-code software;favored by developers, changing would have delayed the site for a year or two just as it;was exploding in popularity. The easiest move, says DeWolfe, was to switch to.NET, a;software framework created by Microsoft.;Using.NET is like Fred Flintstone building a database," says David Siminoff, whose;company owns the dating website JDate, which struggled with a similar platform issue.;The flexibility is minimal. It is hated by the developer community.;The troubles at Myspace hardly went unnoticed by its corporate owners. But the site's;continued success muted any alarms that the social media network was on an unstable;path. "When you're growing at 300,000 users a day," says Gold, "it's hard to imagine that;you're doing anything wrong."One of the reasons social networks are so;combustible is that they have proven to be particularly sensitive to public perception. In;February 2006, Connecticut Attorney General Richard Blumenthal announced that he;was launching an investigation into minors' exposure to pornography on Myspace. The;subsequent media frenzy helped establish the site's reputation as a vortex of perversion.;If you have a teenager at home, odds are they've visited the blog site,;Hannah Storm warned CBS News viewers in 2006. "And there are fears that this popular;social networking website, and others like it, have become places where sexual predators;easily prey on children.;Researcher Boyd of Microsoft believes that alarmist press ended up crippling the;company. "The news coverage of teenage engagement on Myspace quickly turned to, 'Oh;my gosh, there are all these bad teenagers doing bad things and this is crazy!' " says;Boyd. "Quickly, it turned into a big narrative about how this was a dangerous, dangerous;place.;Pretty soon, attorneys general from around the country were launching investigations into;Myspace's safety, which put Myspace on the defensive as the company scrambled to;develop basic safety and privacy measures. "Myspace got to a point where they were not;innovating technologically," Boyd says. "They were having to do all technical;innovations to address the various panics that are happening. Basically their development;cycle turned into one of crisis management, not one of innovation." The company;eventually signed on to a safety plan with the attorneys general.;In the meantime a group of new, specialized social media companies began targeting;Myspace customers. Tumblr offered an eloquent environment for self-expression. Twitter;introduced a more efficient way of broadcasting ruminations to strangers. "Myspace had;the right idea, where a band would have 900,000 friends," says Kent Lindstrom, the;former CEO of Friendster. "That's what became Twitter. Myspace spent all their time;working on tools around that, like media players, playlists, video. It turned out you didn't;really need all of that.;Mark Zuckerberg's Facebook, meanwhile, introduced more sophisticated tools for;communicating with users' real-life friends, through a clean, ad-free interface. "Facebook;did a fantastic job of hiding behind the panic around Myspace and basically saying;We're totally safe,' " says Boyd.;Myspace's inability to build an effective spam filter exacerbated the public impression;that it was seedy. And that, says Boyd, contributed to an exodus of white, middle-class;kids to the supposedly safer haven of Facebooka movement she compares to the "white;flight" from American cities in the second half of the 20th century. Myspace was;becoming Detroit.;Rob Norman, the CEO of GroupM North America, one of the country's largest media;buyers, says perception drove advertisers away as well. "Advertisers, in general, have;some difficulty with content and environments that they perceive to be edgy," says;Norman. "Especially when the audiences that they value are available in environments;that are less edgy."By the time Myspace's founders sat down with Charlie Rose in;2009, they had been isolated from the rest of News Corp. In the early days, during the;honeymoon period, Murdoch had lavished attention on them. Any dispute with their;overseers at Fox Interactive was promptly addressed. But after 2007, when Murdoch;accelerated his pursuit of Dow Jones and the Wall Street Journal, DeWolfe and Anderson;dropped off his list of pet executives. Their contracts were set to expire in October, and;negotiations on new deals were going nowhere. The Charlie Rose appearance was a last;bid for Murdoch's ear.;Anderson told Rose that, yes, he was glad, looking back on it, that Myspace had done the;deal with News Corp. "I'm personally happy," said Anderson. "We got a lot of money.;We're happy at that level.;News Corp. for us has always been easy to work with," Anderson continued. "They;respect our opinions, and they let us run the site we wanted to. They were buying into;what Myspace was, and the founders. It's been very good for me. That was my main;concern. That it would be taken away from us. And it wasn't.;The following month, Murdoch hired a former AOL executive named Jonathan Miller for;a new position, chief digital officer. At the same time, Peter Chernin, the second-mostpowerful executive at News Corp., who was based in Los Angeles and had served as;DeWolfe's mentor and supporter, announced that he was leaving the company. Suddenly;Myspace found itself without a protector.;In March 2009, according to a former Myspace executive, roughly 10 people gathered in;a conference room in the Beverly Hills offices to discuss the direction of the business.;The Google search deal was on the verge of expiring. Myspace's chief operating officer;senior vice-president for engineering, and senior vice-president for strategy had just;announced they were quitting to form a startup. And it was becoming clear that;Myspace's global effortfueled by extravagant new offices around the world (the;Smashing Pumpkins headlined the rollout in Madrid)wasn't working. Facebook was;attracting international users at a rapid rate without the expense of opening offices.;Facebook was winning.;In April the Myspace staff received an e-mail from Miller: The founders were out. "I;want to take this opportunity to thank them both for their incredible contributions to the;Company, and for pioneering one of the greatest social media revolutions of our time,;Miller wrote in the memo. DeWolfe was leaving the company but would remain a;strategic adviser," and Anderson was relinquishing his Myspace presidency for a lesser;role. DeWolfe maintains that despite evidence to the contrary, Myspace was on solid;ground when he left.;Owen Van Natta, who had worked as Facebook's chief operating officer and chief;revenue officer from September 2005 to February 2008, became Myspace's new CEO.;Jason Hirschhorn, who years earlier had led Viacom's failed effort to buy Myspace;became the new chief product officer. Mike Jones, who had worked under Miller at AOL;was named chief operating officer. DeWolfe was bewildered. "O.K., so you're going to;have three guys to run this company that have really never worked together and have;really never been on the site and don't really understand it?" DeWolfe asks. "It was a bad;decision." (Van Natta and Hirschhorn declined to comment.);DeWolfe suggests that Murdoch, the brash mogul who has spent much of his life bucking;elite culture, ultimately abandoned Myspace because of the perception that it was;dclass. "Part of it might have been the zeitgeist around him," says DeWolfe.;[Murdoch] not being surrounded by the kid playing football in the middle of Texas and;all the cheerleaders still using Myspace and the different demographics that Myspace still;owned in a huge way.;In the months following DeWolfe's departure, Myspace executives laid off nearly 30;percent of its U.S. staff and 66 percent of its workers overseas.;Morale among those who remained plummeted. Employees were accustomed to working;long hours in a relaxed environment at Myspace. On a top floor of the Beverly Hills;campus there was a cafeteria where workers were given a generous per diemenough to;eat several meals a day without ever leaving the building. In 2009, News Corp. suddenly;raised the prices and cut the per diem, causing an uproar, according to Jason Raich, a;social media manager at the time.;To dispel the gloom, Myspace employees bought a slushy machine and instituted Friday;happy hours. One day the actor Pauly Shore was wandering through the Myspace offices;and was cajoled by Raich into posing with the slushy machine. Pretty soon the photo of;The Weasel" bending down to suck some red brew out of the machine's spigot was;ricocheting around the offices and getting posted all over Myspace. It felt for a moment;like old times.;When HR caught wind of the photo, however, happy hour was snuffed out, and the staff;was forced to sell the slushy machine on EBay (EBAY). It was the final, unglamorous;end to a once rollicking era.In February of 2010, less than a year after joining;Myspace, CEO Van Natta left. He was replaced by co-Presidents Hirschhorn and Jones.;Four months later, Hirschhorn departed.;Jones recently unveiled a redesign of the site aiming to reposition Myspace as a social;entertainment hub. "It serves a very useful purpose, it is highly valued by a core of;usersoften Hispanic, African-American, often C and D counties, not A and B counties;economically," says Norman of GroupM. "There's an interesting paradox here. My own;sense is that Myspace had remained very valuable to a subset of its original community;and in many ways become even more valuable. Yet at the same time it has not managed;to translate that into a durable and growing value to advertisers.;Inside News Corp., analysts say Murdoch has turned his focus to his IPad-only news;outlet, The Daily. Myspace is yesterday's future. "What happens to newspaper advertising;is way more important to the News Corp. story than whether they get anything from;Myspace," says Laura Martin, a managing director at Needham & Co. "From News;Corp.'s point of view, what happens to Myspace doesn't even matter.;Whoever ends up owning Myspace, DeWolfe wishes them well. "Myspace can be;something again, but I think you have to have someone that can really reimagine what it;is," he says. "The direction it's going right now is not the right answer.;If, as seems likely, there is no retro revival, former Myspace celebrity Jeremy Jackson;says he has no regrets. As a onetime child TV star, Jackson knows better than to cry over;lost glories. "As far as Myspace goes," he says, "it is better to have loved and lost than to;have never loved at all.


Paper#34486 | Written in 18-Jul-2015

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