Chris DeWolfe, left, and Tom Anderson of MySpace.com credit the site's owner, Rupert Murdoch, with understanding today's younger generation.




For MySpace, Making Friends Was Easy. Big Profit Is Tougher
Published: April 23, 2006

Ross Levinsohn, president of Fox Interactive Media, says he wants advertisers to have their own MySpace profiles, just like the teenagers'.

ALMOST on a lark, Chris DeWolfe bought the Internet address MySpace.com in 2002, figuring that it might be useful someday. At first, he used the site to peddle a motorized contraption, made in China and called an E-scooter, for $99.

Selling products online comes naturally to him. Having jumped into the Internet business in the early days, Mr. DeWolfe had become a master of the aggressive forms of online marketing, including e-mail messages and pop-up advertising. After the Internet bubble burst, he even built a site that let people download computer cursors in the form of waving flags; the trick was that they also downloaded software that would monitor their Internet movements and show them pop-up ads.

Very quickly, however, Mr. DeWolfe's tactics for MySpace changed. He had noticed the popularity of Friendster, a rapidly growing Web site that let people communicate with their friends and meet the friends of their friends. What would happen, he wondered, if he combined this type of social networking with the sort of personal expression enabled by other sites for creating Web pages or online journals?

He convinced the executives of eUniverse, the company that had bought his own marketing firm, ResponseBase, to back his plan. As soon as the site was reintroduced, in the summer of 2003, Mr. DeWolfe saw it grow quickly with little marketing. And although his scrappy backer was hungry for cash, he resisted pressure to flood MySpace with advertising and to turn all of its members into money.

"Chris came from ResponseBase, and they knew all the direct marketing tactics to get money out of almost anything," said Brett C. Brewer, the former president of eUniverse, which was later renamed Intermix Media. "But I give him credit: from literally the first or second month, he realized MySpace could be something we really need to protect because user confidence in the site was paramount."

Now MySpace has a new owner — Rupert Murdoch's News Corporation, which bought MySpace and Intermix last year for $649 million — and the pressure on Mr. DeWolfe to find a way to make much more money from MySpace is far greater.

But the opportunity is greater, too. More than 70 million members have signed up — more than twice as many as MySpace had when Mr. Murdoch agreed to buy it — drawn by a simple format that lets users build their own profile pages and link to the pages of their friends. It has tapped into three passions of young people: expressing themselves, interacting with friends and consuming popular culture.

MySpace now displays more pages each month than any other Web site except Yahoo. More pages, of course, means more room for ads. And, in theory, those ads can be narrowly focused on each member's personal passions, which they conveniently display on their profiles. As an added bonus for advertisers, the music, photos and video clips that members place on their profiles constitutes a real-time barometer of what is hot.

FOR now, MySpace is charging bargain-basement rates to attract enough advertisers for the nearly one billion pages it displays each day. The company will have revenue of about $200 million this year, estimated Richard Greenfield of Pali Capital, a brokerage firm in New York. That is less than one-twentieth of Yahoo's revenue.

In buying MySpace, Mr. Murdoch also bought a tantalizing problem: how to tame a vast sea of fickle and unruly teenagers and college students just enough to notice advertising or to buy things, yet not make the site so commercial that he scares off his audience. At the same time, he must address the real and growing concerns of parents and teachers who see MySpace as a den of youthful excess and, potentially, as a lure for sexual predators.

Mr. Murdoch's initial strategy seems to be to do nothing to interfere with whatever alchemy attracted so many young people to MySpace in the first place. So he has embraced Mr. DeWolfe, 40, and Tom Anderson, 30, the company's president and co-founder, and their close-knit management team. And he is providing them with the cash to reinforce MySpace's shaky computer system and to hire armies of sales representatives to bring in more money from the banner ads and sponsored pages that MySpace sells.