CASE STUDY 2
MySpace: The Rocky Evolution of a Social Media
Company
SUMMARY AND AUTHOR’S NOTE
Chris DeWolfe’s friends told him that he had to have a plan to get into a good business school
for his MBA. He had to know in advance whether he wanted to be a consultant, an investment
banker, or a marketing manager. Despite this advice, DeWolfe sidestepped the traditional
route—“My plan is I’m going to figure out a plan when I get there.” In the second year of his
MBA program at the University of Southern California, DeWolfe took a class in the Greif
Entrepreneurship Center and was hooked. He knew what he wanted to be—an Internet
Ready to start another business, DeWolfe and Anderson surveyed the Internet landscape and
recognized a “perfect storm” of activities that seemed to suggest a space to do something that
wasn’t being done. In late 2002, the term social networking was getting some play due to the
emergence of Friendster, Tribe, and Facebook. The two envisioned a portal that would bring all
of the niche functions together and let users do whatever they do offline in a more productive
way. They pitched the idea to eUniverse and took a seed round of financing for 66 percent of
their equity.
85 Case 2: MySpace
WHERE TO USE THIS CASE
• Chapter 2: Use to discuss DeWolfe’s pathway to and preparation for a career as an Internet
entrepreneur.
CASE ANALYSIS
This case addresses a number of issues surrounding the Internet space. An opening discussion
might focus on how the MySpace opportunity was developed and what influence DeWolfe’s
previous experience with XDrive and ResponseBase had on the approach to launching MySpace.
The Importance of Industry/Market Knowledge
Another discussion can center on the importance of understanding the industry and the market.
Internet companies generally go through the business life cycle in a much more compressed
period of time than traditional firms. The windows of opportunity are narrow, and the
competitive landscape shifts often and quickly. What this means for entrepreneurs is that if you
focus too much on the business and don’t stay in touch with what’s going on in the industry and
in your market, you risk missing an opportunity or spotting a competitor who could disrupt your
business.
MySpace encountered just such a competitor in Facebook, whose platform is arguably easier to
Roles of Stakeholders
Chris DeWolfe and Tom Anderson seem to get most of the press about MySpace, but rarely does
The Acquisition
A discussion of the role of the stakeholders segues nicely into a discussion of the merits of the
Case 1: Command Audio 86
DISCUSSION QUESTIONS
1. How did DeWolfe and Anderson recognize the opportunity for MySpace?
DeWolfe and Anderson surveyed the Internet landscape and recognized a “perfect storm”
2. What mistakes were made with Xdrive that ultimately made MySpace go more smoothly?
Xdrive was launched in the middle of the dot com explosion, a time when money was
3. How did MySpace differentiate itself from the competition?
MySpace developed as a portal that enabled users to bring together in one site all of their
4. Should DeWolfe and Anderson have given up so much equity (66 percent) in the beginning
to eUniverse? Was there an alternative strategy available?
This question has no right or wrong answers. When entrepreneurs need seed capital, they
5. Evaluate the acquisition of MySpace as part of the Intermix package. Would you have
made that decision? Why or why not?
Again, this is a question with no right or wrong answers. At the time of the acquisition, it