The guys behind MySpace.com

By Matt Krantz, USA TODAYTue Feb 14, 7:23 AM ET

 

The founders of MySpace wish they had a little more space of their own.

 

On a recent morning at a restaurant at this popular Southern California beach, Chris DeWolfe and Tom Anderson barely finished their eggs before they were approached. This time it's an executive of an obscure website looking to form a partnership. Other times they're rushed by rabid fans of their personal Web page community. (Related: Police say kids expose too much on social websites)

 

"I usually let Tom talk to them," says DeWolfe, chuckling as he looks at Anderson. "He's better at getting rid of them."

 

Talk about instant entrepreneurial success. A little more than two years ago, MySpace didn't even exist. Today, it's one of the Web's hottest sites - beating eBay, Google and Amazon.com in the number of page views in December, says ComScore Media Metrix.

 

Even U2 and Madonna have pages on the site, which lets people build personal Web pages to express their interests and display their personality. The outpouring of interest in MySpace has been so strong DeWolfe and Anderson won't even list the company's name on the office lobby directory. Employees shuffle quietly in an out of an unmarked door. As a condition of agreeing to cooperate with this story, the company said no information could be provided about its location other than it's in Santa Monica.

 

It's not that DeWolfe, 40, and Anderson, 29, are unfriendly, standoffish or anti-social. It's just that the groundswell of interest in the website they created has overwhelmed them. Their success in such a short time is breathtaking and in some ways an entrepreneurial case study: a once-obscure website that has become a cultural phenomenon for the under-30 set, much as MTV captivated the generation before.

 

It's apparently captivated some of the over-30 set, too: Last year Rupert Murdoch and his News Corp. (NWS) bought MySpace.com and parent Intermix Media for $580 million. When the deal was announced in July, Murdoch said in a release, "Intermix's brands, such as MySpace.com, are some of the Web's hottest properties and resonate with the same audiences that are most attracted to Fox's news, sports and entertainment offerings."

 

An unusual success.

 

DeWolfe and Anderson's success is intriguing because they did it by defying just about every cliché about starting a business. MySpace wasn't the first business the two created. The idea for the site dawned on them in late 2003 when they were working at an Internet marketing firm they had created and sold to Intermix.

 

Anderson, who tinkered with the online "bulletin boards" in the '80s that were precursors to today's chat rooms, was convinced the world was ready for a site that would let users talk about things they loved, ranging from their favorite bands to movies and games.

Defying the odds

 

The site counted on various forms of advertising, including banner ads, to survive. That was a scary proposition in January 2004, just a few years after an Internet advertising recession, when companies were still cautious about online ads, especially banner ads. The two dabbled with other forms of ads, such as "featured profiles." Those allowed companies such as Procter & Gamble to pay for prominent links on the front page of MySpace.com that would make it easier for users to find pages promoting their products.

 

Also, they had experience because this was the second company they founded. They created an Internet advertising firm called RB Marketing in 2001, so they knew firsthand that online ads were booming and could sustain a business model. And while baby boomers are petrified of identity theft, MySpace relies on its users volunteering personal information and photos of themselves and posting them on the Web for all to see.

 

MySpace wasn't even the first website of its kind. Sites like Friendster were doing similar things at the time. But DeWolfe and Anderson weren't concerned. They met during the dot-com boom when they were both working for an online-storage company called Xdrive. Anderson was attending film school and, looking for some extra cash, answered a flier calling for people willing to try the company's products. DeWolfe was vice president of sales and marketing at Xdrive and says Anderson's comments were so valuable he hired him as a copy editor.

 

At Xdrive, the two learned from mistakes the company made. For instance, they marveled when executives persisted with ideas that didn't catch on right away. The beauty of online businesses is knowing immediately if they'll work, Anderson says. That's why the two knew straight away they had something: Traffic at MySpace surged from the get-go. "I tend to see people trying to do stuff that is an uphill struggle," Anderson says. "Pay attention to what works, and do that."

 

Meanwhile, unlike other "social networking" sites that turned away musicians and artists using the sites to promote themselves, MySpace embraced them. It added tools enabling bands to upload their music, so consumers could easily download and listen to it. That turned out to be the home run MySpace needed. All of a sudden, it was cool to be on MySpace. Users jumped onto the site and not only checked out their favorite bands but listed the bands they liked. It created a word-of-mouth buzz that got the music industry's attention. More than a million bands and artists now have MySpace pages.

 

"It wasn't that long ago when nobody knew what this site was," says Matt Shiv, music director at online music station woxy.com, which features and discovers independent musicians. "Now it is becoming a mandatory thing bands must do to get promoted." Major bands ranging from Depeche Mode to Nine Inch Nails and Weezer have launched albums on MySpace.

 

MySpace "went against all the odds," says Geoffrey Yang, partner with Redpoint, the only venture-capital firm that invested in MySpace. "It surprised us," says Yang, whose firm also invested in Tivo and Netflix. DeWolfe and Anderson's success, Yang says, was largely due to monitoring what users were doing and molding the Web to fit them. "They do a really good job of figuring out what's important and just doing it," he says. "They are some of the best entrepreneurs I've ever worked with. ... I'd work with them again in a second."

 

Obstacles and opportunities

 

That's not to say there aren't problems. MySpace employs a staff of about 12 who do nothing but look at all 1.5 million images uploaded each day for inappropriate photos, including pornography. Advertisers are sensitive about the content their brands appear with, DeWolfe says. Despite their efforts, some illicit images still get through.

 

Meanwhile, the two are hoping to boost MySpace's popularity in the taste-selling agenda. Late last year, the site teamed with Interscope Records to create a record label. One of the bands featured on their first compilations is Hollywood Undead, which they discovered on MySpace, naturally.

 

Next, there are plans to work more closely with filmmakers to create the same word-of-mouth buzz for films.

 

"Bands get discovered off MySpace all the time," DeWolfe says. "This could be a tool for (movie) studios too." And that's one of the final ironies about the company. For a site that rejoices in individuals' interests beyond work and school, Anderson says he works most of the time. His online profile lists interests ranging from the history of communism to weight lifting, travel, hiking and writing music. But when asked what he does in his spare time, he says, "I really do nothing else but work."