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Founders step aside at MySpace

The founders of MySpace are leaving the helm of the pioneering Web site that made social-networking a mainstream phenomenon, as owner News Corp. seeks to reinvigorate the once-hot property it scooped up four years ago.

The stepping aside of Chris DeWolfe and Tom Anderson, whose contracts weren't due to expire until October, represents a pivotal test for the viability of social-networking sites. While social-networking sites such as MySpace and Facebook have exploded in popularity in recent years, they have struggled to generate the kind of revenue and earnings prospects that can sustain them as businesses over the long haul.

News Corp. now aims to show that a large conglomerate, with a portfolio that includes many old-media properties including newspapers, can succeed at that task.

People familiar with the situation said News Corp, was completing a deal to name former Facebook Chief Operating Officer Owen Van Natta as chief executive to succeed Mr. DeWolfe. He would report to Jon Miller, the former AOL chief executive who was recruited to join News Corp. this month in a newly created position of chief digital officer. Charged with all News Corp.'s stand-alone digital properties, he was particularly given the mission of shoring up MySpace.

Spokeswomen for News Corp. and MySpace both declined to comment beyond a news release. Messrs. DeWolfe and Anderson and Van Natta couldn't be reached for comment.

News Corp. sees MySpace as critical in its transformation from a conglomerate of traditional television, movie and newspaper businesses to a new-media titan. But while MySpace grew quickly following News Corp.'s purchase, last year its revenue fell short of executives' targets, according to people familiar with the matter. News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.

MySpace is still the dominant social-networking site in the U.S. But its U.S. audience has fallen this year. In March, MySpace attracted 70.1 million unique visitors, down 3.6% from a year ago, according to comScore Media Metrix. Meanwhile, Facebook is nipping at its heels. Facebook surpassed MySpace's world-wide audience a year ago, and is growing fast in the U.S., with 61.2 million unique visitors in March, up 72% from a year earlier. Facebook also has made international expansion a priority, pressuring MySpace.

More broadly, MySpace, like other social-networking sites, still must overcome doubts about the medium's viability. Advertisers, for one, remain leery."Advertising doesn't fit so neatly into a conversation that people are having among themselves," says Tom Bedecarre, chief executive of independent digital-ad firm AKQA."The interruptive model of advertising hasn't been successful."

MySpace was founded in 2003 by Messrs. DeWolfe and Anderson. Their email marketing division of a Los Angeles company called eUniverse, which later renamed itself Intermix, was floundering, so they imitated a popular site at the time, Friendster.

They made two key improvements on Friendster: they allowed users to customize their profile pages, and they allowed users to create any identity they liked. Friendster, like Facebook today, encouraged members to use their real names.

But just as MySpace was taking off, fueled in large part by its popularity with musicians, it was sold to News Corp. MySpace's parent company, Intermix, negotiated the $650 million deal directly with News Corp., leaving the MySpace founders out of the loop until the last minute.

News Corp. Chairman Rupert Murdoch immediately sought to mollify the founders with lucrative two-year pay packages of $30 million each, but Messrs. DeWolfe and Anderson still chafed at the fact that MySpace ad sales were taken over by executives at Fox Interactive Media, according to people familiar with the situation.

The rank and file of MySpace was also angry that their stock options were canceled after the acquisition and that they were forced to move from Santa Monica to Beverly Hills, the people said.

Relations fell apart further. Mr. DeWolfe ignored suggestions from Fox Interactive Media President Ross Levinsohn about ways to improve the site. Mr. DeWolfe also sought to amend the $900 million advertising deal that News Corp. cut with Google -- delaying its implementation, the people said.

Mr. Levinsohn also clashed with Mr. Anderson, who is president of the site. Mr. Anderson controlled the product development and was criticized for not moving fast. In April 2006, MySpace bought the online karaoke service kSolo. MySpace launched the karaoke feature on its site in April 2008 -- two years later.

The tension between the MySpace founders and News Corp. eventually led to Mr. Levinsohn's dismissal in November 2006. He was succeeded by his distant cousin, Peter Levinsohn, who eventually gave Mr. DeWolfe control of the advertising sales at MySpace that he had sought.

All this time, Facebook was steadily gaining on MySpace. Founded by Silicon Valley computer programmers as a social network for Harvard students in 2004, Facebook expanded to other college campuses and opened to everybody in 2006.

Facebook focused on building innovative features and encouraging third-party software developers to write applications to run on Facebook.

Meanwhile, MySpace, with its marketing and music background, fought back with entertainment, such as a celebrity news site and an expensive music joint venture.

Last April, Facebook edged out MySpace in terms of world-wide unique visitors and has continued to steadily gain in the U.S.

Three top MySpace executives, including Amit Kapur, former chief operating officer, left the company in March to work on a start-up. MySpace has yet to name successors for those positions.

Mr. Miller began discussing the job with potential candidates including Mr. Van Natta, but hadn't finalized anything when the news of the talks leaked, according to people familiar with the situation. Mr. Van Natta helped expand Facebook but stepped into a less prominent role as chief revenue officer as the site grew, ultimately leaving the company in February 2008. At MySpace, he could serve as a bridge between Silicon Valley and MySpace, which has struggled to match Facebook's technology prowess.

Hearing of the talks, Mr. DeWolfe offered to resign, these people said.

Источник: Total Telecom

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