How Did Dewolfe and Anderson Recognize the Opportunity for Myspace?

Name:

Desiree Kloecker

QUESTIONS

How did DeWolfe and Anderson recognize the opportunity for MySpace?

After DeWolfe’s and Anderson’s first enterprise Response Base was taken over by eUniverse, they wanted to launch a new company. Consequently, they started to explore the Internet to find something that did not exist on the market.

They noticed the existence of several social network platforms such as the dating site Friendster, the information guide Tribe and Facebook, which tried to attract new users via e-mail. DeWolfe and Anderson researched these platforms, thereby finding out that social networking was a niche market and that each company seemed to have poor prospects to become huge players. Both realized that there was much potential left on the market and they decided to launch a social network combining all of the functions offered by the existing platforms. They wanted to create a network giving users the possibility to personalize their pages with no restrictions or rules. There was an opportunity of using the techniques of existing social networks while simultaneously improving and extending these concepts. Since the competition on the market was initially low, they got the chance to become a huge player.

With the help of eUniverse, they finally launched the company MySpace at the end of 2003 with the aim of starting a new era of social networking. One day after this launch, DeWolfe realized that the system didn’t have the capability for more than 200 people to use the platform at the same time. He immediately instructed his developer to solve this problem in order to make it possible for millions of users to enter MySpace at the same time, thus illustrating that he expected tremendous growth for this social network.

What mistakes were made with Xdrive that ultimately made MySpace go more smoothly?

After DeWolfe graduated from the University of Southern California, he was hired by the Internet data-storage company Xdrive and became the head of sales and marketing. In the article, Xdrive is described as a “typical dot com company of the day” which means that they earned a lot of money in the beginning, causing a boisterous attitude. Consequently, money was spent for parties, exaggerated advertising and the recruitment of too many people instead of investing it efficiently to improve and develop the company’s concept. That was finally the reason why Xdrive went bankrupt. DeWolfe and Anderson gained from this experience as they knew what not to do when launching MySpace. Ironically, the reasons behind the failure of Xdrive are some of the key drivers of MySpace’s success. The founders realized that it is not important to earn much money in the beginning, but to continue to improve and adapt to market conditions as well as to consumer needs. After a company’s establishment in the market, you have to put effort into developing further because a company does not run automatically. Fortunately, DeWolfe and Anderson internalized this core essence and that is the reason for MySpace’s success.

How did MySpace differentiate itself from the competition?

MySpace differentiated itself from the competition as this social network allowed its users to personalize their own profile by adding photos, sharing posts or music etc. Summarized, there were no restrictions or rules on what to publish on your own page. Basically, the users themselves created the features of MySpace and controlled the platform and that is the reason why this social network was expected to attract many users. No other network provided an equal opportunity. On the other hand, its competitor Friendster paid attention to the insides of its site and was interested in maintaining the core business of the company, namely Internet dating. Accordingly, users were restricted on what to post and share, thus creating a feeling of being controlled.

Moreover, MySpace dealt with the problems users had with competing websites, such as the speed of access, and they were able to find appropriate solutions. This was helpful to poach even more users of other social networks who were unsatisfied with the service provided.

In general, DeWolfe’s and Anderson’s strategy to attract new customers was really successful. First, they invited bands and club owners in Los Angeles with the intention of creating their own profiles and inviting new users. Consequently, bands were able to share their songs and communicate with each other and so more and more people joined MySpace. Their initial concept was to make “use of influencers from entertainment to drive interest in the site”. One can conclude that they built a leverage effect, thus speeding the growth of MySpace and enhancing its popularity.

Another advertisement strategy was the idea of giving MySpace a face which was represented by one of the founders Anderson. Every user that registered saw his picture on the screen, thus making him “the biggest celebrity on MySpace”. That was a good tactic to build a connection to this network in the users’ mindsets as these always related Anderson’s face to the business.

Evaluate the acquisition of MySpace as part of the Intermix package.  Would you have made that decision?  Why or why not?

I am not sure whether I would have sold MySpace to News Corp or not because there is a huge range of advantages and disadvantages that have to be taken into consideration.

Having a look at one disadvantage of this acquisition, it was obvious that News Corp would take control of MySpace as this company was the most successful one included in the Intermix package. Consequently, they wanted to make sure that MySpace was growing steadily and they would intervene if they were not satisfied with the results. Although this has negative consequences for the founders, DeWolfe and Anderson, this could be beneficial for the platform itself since it is necessary to adapt it to the current market conditions and consumer needs.

The most powerful advantage of this acquisition is represented by the possibility of investing in MySpace in order to create new features and attract new customers. The article illustrated that News Corp gave the chance to recognize a huge number of different products and projects at the same time by providing the required resources.

Nevertheless, there is the danger that News Corp could try to change the “no-rules culture”. In order to attract global market players such as Procter and Gamble it was necessary to guarantee the website’s safety, which might have negative effects in the future if MySpace’s safety guidelines restricted the user’s freedom. Although development and adjustment are crucial to succeed on the market, the company should continue to adhere to their core concept because it is the reason why MySpace has so many followers. There is often the risk of changing too much resulting in customers that are no longer satisfied with the service offered.

On the other side, the resources from News Corp can be used effectively, for example by cooperating with other strong companies such as Google or by launching new products. The article implies that News Corp made a great effort to realize this idea. Intermix probably would not have been able to develop MySpace in these dimensions.

After having analyzed the advantages and disadvantages of this acquisition, I came to the conclusion that I would have made the same decision as Rosenblatt. Although there was much potential left to develop and improve MySpace, the resources provided by Intermix were limited. The platform probably would not have had the chance to expand to that extent without this acquisition. On the contrary, in my opinion MySpace would not have been as successful as it was in the past. Without these investments, other competitors might have forced them out of the market earlier. Unfortunately, this social network was eventually not able to compete with the huge player Facebook and other upcoming social networks, which means that the new owner was not able to lead the company in the right direction. Maybe this would have been different, if MySpace was not sold to News Corp, but it is questionable if they could have had the necessary resources elsewhere. Nevertheless, from the past point-of-view where Rosenblatt, Anderson and DeWolfe did not know how MySpace would develop, I probably would have acted the same.