No Silver Bullets @ MySpace: Sacking Chris & Tom Was Easy; Now What?

Posted by: Spencer Ante on April 23, 2009

So the new surprising news is out that MySpace founders Chris DeWolfe and Tom Anderson are leaving the helm of the pioneering social network.

The two big questions here are: Why did DeWolfe and Anderson get pushed out of their executive roles? And what does this mean for the future of MySpace?

I don’t know for sure what prompted their departures but I suspect it had much to do with the April 1 appointment of Jonathan Miller as Chairman and Chief Executive Officer, Digital Media Group and Chief Digital Officer for News Corporation, reporting directly to Rupert Murdoch. Until Miller’s appointment, the buzz in tech and media circles was that News Corp probably wanted to retain DeWolfe and Anderson. After all, the two founders built up the site from nothing, creating the world’s largest social network in terms of revenue. Then Miller took charge and gave the two founders the boot.

Miller is clearly under pressure to pull some big and bold moves to help get MySpace back on a sustainable growth path. Sacking DeWolfe and Anderson is an easy first move, though I am not sure it is the wisest. In his new job, Miller was given control of Fox Interactive Media, including its primary asset MySpace, and News Corp’s interest in the Hulu online video site. He will also collaborate with operational heads and digital executives through all lines of business around the globe to develop and refine digital efforts.

Reports have said that Miller hadn’t been planning on getting rid of DeWolfe in the near future until TechCrunch reported this week that the company had hired a headhunting firm to look for possible replacements. But clearly Miller was not gung-ho on keeping the founding team in charge or he would have locked up that deal as soon as he took charge.

And now the bigger question: What is the future of MySpace? Getting rid of DeWolfe and Anderson is not going to solve its problems—and it may make them worse in the near term by sapping morale and spurring an exodus of managers who remained loyal to Chris & Tom.

The key issue for MySpace is strategic. Until now, MySpace had positioned itself as the anti-Facebook. While Facebook’s strategy is all based on maximizing user growth and rolling out translations of the site in every imaginable language, MySpace, as part of a publicly traded company, has been pursuing a more conservative tack of dialing back on growth to maximize profits.

Last November, MySpace head of international operations Travis Katz told me that the horse race wasn’t that important. Since about 85% of the world’s online ad spending is concentrated in five markets—the U.S., Britain, Japan, Germany, and France—Katz said we are “not worried about rolling out in every single country.”

If Miller does bring in former Facebook Owen Van Natta to head up MySpace, it suggests that the company may be shifting course and turning up the dial on growth. The risk, of course, is that by pursuing growth, the units profits and margins get crushed.

If Miller & Co. do not go for growth, then they will surely need to overhaul the company’s business model. The company’s hyper-targeting program for advertisers has helped but MySpace needs to find ways to generate sources of revenue other than advertising. Making matters more challenging, is the impending end of MySpace’s $900 million advertising deal with Google in the second quarter of 2010. If that deal is renewed, which is far from a lay-up given Google’s disparaging comments about monetizing social networks, it is sure to be at a much lower rate.

So any way you look at it, it seems like it’s going to be another tough year for MySpace. The company is facing some hard decisions during a deep recession, and it just lost its two visionary anchors.

- Spencer Ante also publishes the Creative Capital blog. Click here to see more.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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