MySpace's CEO took big merger in stride

Five years ago there was no such thing as MySpace. Today it's the top Internet site in the USA based on monthly page views and time spent on the site, according to Compete, which says 12% of all Internet minutes are spent on MySpace. Nearly as impressive is that MySpace has thrived since it was acquired by Rupert Murdoch's global media conglomerate News Corp. nws two years ago. MySpace CEO Chris DeWolfe, 41, spoke to USA TODAY corporate management reporter Del Jones about how the two cultures — one old school, the other new school — came together where so many failed.

Q: Wasn't News Corp's acquisition of MySpace the adult version of making the jocks and geeks sit together in the school cafeteria?

A: No. There have been a few rocky spots, but those got smoothed out pretty quickly.

Q: Tell me about a rocky spot?

A: Just small bumps in the road. We wanted to hire 400 to 500 people. Divisions in large companies aren't used to hiring 400 or 500 people. They consider adding 10 or 20 people to be fast. Rather than just hire them, we put together a business plan that said exactly what each would be doing and the benefits we'd get from them. It ended up being a helpful exercise. News Corp. had a thousand ideas for us. It's important to always be focused on the top four or five that we absolutely have to execute. If you try to do too many things you're just not going to get anything done. We had to push off certain ideas, to say, "No, that's a great idea and we will get to it next quarter."

Q: How does the culture at News Corp. differ?

A: They probably don't spend 70% of their day online. People in the media business, whether it's talent agencies or film companies, make phone calls or have their assistants make phone calls. At MySpace, most communication is IM (instant messaging), e-mail or text messaging. I'm not sure every 45-year-old would feel comfortable developing a profile for a social network and putting their lives out there. Everyone at MySpace feels very comfortable doing that. The average age at MySpace is mid-20s, certainly a younger demographic than at News Corp. But Fox has some pretty edgy content: The Simpsons, The Family Guy, Napoleon Dynamite. They have the perception of being an older, conservative company, but they foster incredibly edgy content for a youth culture. Our site, on the other hand, has gone more mainstream.

Q: After the AOL merger, Time Warner employees considered their AOL counterparts to be too pushy and aggressive, while AOLers considered Time Warner staffers to be coddled, passive and lazy. What was done to avoid such antagonism at MySpace?

A: I hate to sound so Pollyanna, but there is a common vision. I'm not an expert on the Time Warner twx merger, but with MySpace there was a strong consensus that it was the right thing to do, should be done quickly, and that we would be the cornerstone of the future media growth of the company. We've always had the audacious goal of MySpace being the largest Internet company in the world. I'm not saying we're ever going to get there, but that's been our goal. We believed we would get there more quickly if we were part of a larger media company.

Q: Yes, you do sound Pollyanna when the track record of mergers has been bleak. Your two-year contract with News Corp. expires in a few days. Are you at liberty to speak honestly about any culture clash there?

A: I can talk honestly. For the most part it's been a pretty positive experience. The majority of acquisitions don't go well. Big Internet companies make a lot of acquisitions. They buy the company, eradicate the brand. The entrepreneurs leave, and they end up with a few engineers and some functionality for their website. The odds were really against us. But as we talked to Rupert Murdoch and (Chief Operating Officer) Peter Chernin, we realized that they had different attitudes. There was more of an entrepreneurial spirit. Decision making was streamlined. They value risk taking, but in a measured fashion. News Corp. has reinvented itself several times, starting a fourth network when everyone said it couldn't be done, starting a news network that's now bigger than CNN and MSNBC gecombined, being nowhere in the Internet two years ago to being a real player today. That doesn't happen by accident.

Q: Sounds like there is a case to be made for mergers, even though so many fail?

A: Yes. Without them, here's the rub: It's very difficult to create a disruptive technology within a large, established organization. You're so focused on your own products and your competition that you don't have time to think about what's next, what to experiment with. You have to constantly improve on the product you have. Either you go out and buy, or create a separate skunks-works organization that's not tethered to the larger company and that can develop the next big thing. There are really smart, creative entrepreneurs who don't want to be part of a large organization for long, but they can create great companies, and that's why there is such a hot M&A market for Internet companies.

Q: I've read that one of Murdoch's traits is that he's cheap when it comes to compensating his executives. News reports say that you and co-founder Tom Anderson want $50 million to stay two more years, but News Corp. has offered $15 million. How do you overcome that?

A: Those are rumors, nothing more. We can't comment on any potential compensation or a new deal other than to say that Tom and I are excited to work with News Corp. in the years to come.

Q: News Corp. is acquiring Dow Jones. What kind of culture clash are the folks at The Wall Street Journalin for?

A: Acquisitions create fear. That's natural. But from what I've heard there are a lot of people over there who are excited because they will take, if not the most, one of the most powerful newspaper brands in the world and grow it. They will invest editorially and in certain bureaus. I don't think there will be a culture clash, not with the opportunity to make it bigger and more culturally relevant. When we got acquired by News Corp. we had 23 million unique users. Now we have more than 110 million. We were localized in the United States. Now we're localized in 23 countries. We're going to add another 10 countries this year.

Q: Murdoch is kind of an old dude. Does he even understand MySpace?

A: He wasn't a heavy user, but he knew what it was about. He knew how many users were on it. He knew how fast it was growing. He knew that it was becoming part of popular culture. I think it was the same gut feeling that he and Chernin had about American Idol being a pop sensation, or that there was a need for another news channel.

Q: How do you and Rupert get along?

A: Really well. When he comes out from New York we're excited and lucky he takes such an interest. When you look at the percentage of revenue for MySpace vs. the revenue for all of News Corp., the time and energy he puts into MySpace is disproportionate, and it's great from our standpoint.

Q: Why doesn't News Corp. write checks, get out of the way, and leave the original founders in complete control?

A: I don't think you can ever totally do that on a successful basis. You largely leave the strategy, product and the creative control to those who you feel comfortable with. But there are other areas where it absolutely makes sense to combine efforts. It's ridiculous to have 10 different sets of accounting practice. There are seven different Internet companies on the Fox portfolio, and they can jointly buy bandwidth. We're expanding into London, and it would be ridiculous to have multiple offices.

Q: So, what last advice would you give to companies about to merge?

A: Before you get acquired, make sure there is a meeting of the minds, in terms of future strategy and how to get from point A to point B. Also, there has to be quick decision making, or any Internet division in any organization is going to die a quick death. You are competing against hundreds, if not thousands, of companies who make a decision with three people in the room.