MySpace: The Business of Spam 2.0 (Exhaustive Edition)

Does Trent Lapinski's exposé about MySpace (digest version here) read like a conspiracy theory? Sure. Does our boss think it's over-outraged? Sure, but you can't trust him, he believes in the lone gunman and a real moon landing. Buy the anger or not, this guest feature story is a great read for those of us who are goddamn sick of Tom, Tom, Tom.

By Trent Lapinski

By now, everyone knows what MySpace is--or at least, they think they do. The generally held assumption is that MySpace is a social networking site: "a place for friends," as their slogan puts it. In reality, MySpace is the next generation of marketing, advertising and promotion, exquisitely disguised as social networking. Simply put, MySpace.com is Spam 2.0.

Spam in Sheep's Clothing

On July 11th, 2006, Hitwise reported that MySpace had "surpassed Yahoo! Mail as the most visited domain on the Internet for US Internet users." Clearly, MySpace has become almost ubiquitous--everyone and their mom have a profile up, from the fourteen-year old girl next door to Madonna. Tom Anderson himself--one of the site's founders and every MySpace user's number one "friend"--has over 109 million pals with profiles, and that's just today; by next week that number could easily have increased by millions. What's interesting is that most users don't know that Tom Anderson is more of a PR scheme than anything else--the mascot designed to give a friendlier feel to a site created by a marketing company known for viral entertainment websites, pop-up advertising, spam, spyware, and adware.

Most users believe that MySpace started as some kind of fluke--a happy accident that began in Anderson's bedroom or garage--and many still don't wonder, know, or care about the site's real business history and model. Heralded as a haven of DIY self-expression, MySpace was actually created by executives whose backgrounds are anchored in spam and mass marketing, and who are tied to investment scandals. With his almost alternateen good looks, Tom Anderson has served as an exceptionally convincing distraction. The PR campaign is one of MySpace's two strokes of genius, brilliant, but not groundbreaking.

The real genius of MySpace lies in it's re-imagining and repackaging of spam. While most internet users expend time and energy attempting to keep it out, MySpace is spam that they actually invite in.

Ancient History

Internet spam originated as classic, straight-up, unwelcome, in-your-face-and-inbox advertising and marketing. At its worst, it comes from "Nigerian Bankers" and swindlers peddling Viagra, and more likely than not, this early incarnation of spam--we'll call it Spam 1.0--is lurking in your inbox right now. eUniverse, the company that essentially created MySpace, was a pioneer in this field. Headed by CEO, founder, and Chairman Brad Greenspan, eUniverse (now Intermix Media), was a multimillion-dollar marketing and entertainment company known for sites like Skilljam.com, pop-up advertising, unsolicited mass emails, spyware, and the adware behind controversial peer-to-peer file sharing network Kazaa.

Also essential to the creation of MySpace is current CEO Chris DeWolfe, who from October 1999 through March 2001 acted as the VP of Sales and Marketing at Xdrive Technologies, Inc., a company that offered millions of users large amounts of free online storage during the dot-com bubble. The business of "free," while not necessarily a lucrative enterprise for an online file storage company, would prove to be an essential building block of Spam 2.0 and MySpace. As a source close to DeWolfe at Xdrive put it, "DeWolfe learned that people will sign up for almost anything that they find useful, and they could care less about the fine print."

Xdrive hit hard times when the dot-com bubble burst, and in March of 2001, DeWolfe was laid off along with his entire marketing department. He quickly set up a new email marketing firm named ResponseBase. DeWolfe recruited and hired most of Xdrive's former marketing team for this endeavor--specifically, the employees who had been responsible for the production of Xdrive's email-based newsletter called "Intelligent X." At its peak at Xdrive, 8 million users subscribed to "Intelligent X."

Tom Anderson, the eventual face of MySpace. was originally hired as a copyeditor in DeWolfe's marketing department at Xdrive, and accompanied DeWolfe to ResponseBase when Xdrive laid them both off.

DeWolfe's new company, ResponseBase, was purchased by eUniverse on September 9, 2002. At the time of the purchase, ResponseBase had upwards of 30 million e-mail addresses at their disposal. This partnering of ResponseBase and eUniverse was the moment of inception for MySpace, although at the time neither DeWolfe nor Greenspan knew what path they were on, and the actual, conscious conjuring of it wouldn't happen until later.

In terms of future visibility and pseudo-celebrity status--Tom Anderson, the friendly face of MySpace and every member's number one "friend" stayed with DeWolfe at eUniverse.

Also of interest, the acquisition of ResponseBase by eUniverse involved a finance partnership, TTMM, LP., consisting of Andrew Wiederhorn and his wife Tiffany. Wiederhorn was a high school classmate and past business associate of DeWolfe's, and in the late 90s DeWolfe was VP of Marketing at First Bank of Beverly Hills, a co. of WFSG purchased by Wiederhorn's former company Wilshire Financial Services Group. In late 2002, DeWolfe joined Fog Cutter Capital Group, Wiederhorn's new investment operation. At this time, Wiederhorn was under legal investigation for his activities with Wilshire Financial Services Group, and as of August 2004, Wiederhorn began an 18-month jail sentence for felony charges. Despite Wiederhorn's predicament, he kept a seat on the board. Donald Berchtold, Tiffany's stepfather, was temporary CEO while Wiederhorn was in jail. The investment group put Wiederhorn on a "leave of absence" and paid him an annual salary of $350,000 while he sat in federal prison. FCCG had a 3-year contract with Wiederhorn starting in 2003 wih an annual salary or $350,000 plus bonus. Ultimately, Wiederhorn served only 13 months in jail and upon his release, after completing mandatory work program, he received a $2 million bonus to cover restitutions from Fog Cutter Capital Group and resumed his duties as chief executive.

DeWolfe left Fog Cutter Capital Group just a few months before Rupert Murdoch's News Corporation purchased MySpace.

Recent History

The MySpace that we know was conceived about a year after the 2002 launch of Friendster. Preceded and influenced by Ryze, a social networking site which focused on business, Friendster offered a new twist: the site connected people through networks of friends for the specific purpose of dating and making new friends.

In August of 2003, Brad Greenspan received and accepted an invitation to join Friendster from Chris DeWolfe, who had been a member since June 2003. Once Chris DeWolfe, Tom Anderson, and other eUniverse employees had all set up Friendster accounts, the ball was rolling. Recognizing the potential of the Friendster concept, a plan was hatched to quickly mimic the appealing features of the site, re-brand it as MySpace, and then out-market them using eUniverse's resources. According to internal emails and documents provided by Brad Greenspan and sent between eUniverse executives and the team at MySpace, DeWolfe's squad worked fast: MySpace 1.0 was ready within ten days. As part of the internal testing and promotion of the site, the company held a contest to see who could sign up the most people. The hope was that if all 250 eUniverse employees brought on 10 friends, they would have a starting user base of 2,500. Even self-proclaimed loner Tom Anderson took part, stating in an email, "I am as anti-social as they come, and I've already got 20 people to sign up."

So it happened that MySpace essentially blossomed into Spam 2.0 out of seeds planted by DeWolfe during his Spam 1.0 days. eUniverse's business was booming when MySpace launched, so in retrospect it's almost endearing to learn how tentatively they tested and promoted the site. Considering the resources of connectivity that the project started with, MySpace was arguably assured a strong launch. At that point, eUniverse had over 50 million email addresses in their database, as well as over 18 million monthly web users. Originally, DeWolfe's business model was intent on selling accounts to MySpace, but it was Greenspan who proposed to keep MySpace free and to make profit through advertising. Greenspan and eUniverse even cannibalized valuable existing websites they owned, such as their paid dating service, CupidJunction--a top dating website with over 3 million users. Members at CupidJunction were encouraged to set up free MySpace accounts. Unfortunately, Greenspan was forced out of the company soon after MySpace's launch.

With the site quickly gaining popularity, and Greenspan no longer providing integral direction, DeWolfe and the MySpace team moved to create a false PR story that would best reflect the ideals and tastes of its growing demographic. They wanted to prevent the revelation that a Spam 1.0 company had launched the site, and created the impression that Tom Anderson created the site, and the lie worked.

The venture, of course, turned out to be a huge success. MySpace has spawned an incredibly successful twist on the age-old art of self-promotion, allowing--even encouraging--the marketing of everything from bands to businesses on their site. Essentially, they've opened up a channel through which to solicit and promote everyone and everything--most importantly the individual. The whole site is, in essence, a marketing tool that everyone who registers has access to. Users constantly receive spam-like messages from said bands, business, and individuals looking to add more "friends" (and therefore more potential fans, consumers, or witnesses) to their online identity. A testament to this strange new social paradigm is the phrase "Thanks for the Add," a nicety offered when one MySpace user "adds" another as a "friend."

Best yet, to use the site, members must log in, causing them to inadvertently view advertisements, and then read their messages on a page with even more advertisements. In the world of MySpace, spam is earth, air, fire, and water.

Super Publics and the Wisdom of Crowds

As for Brad Greenspan, who had offered his resources and full-fledged support, sought capital for the site. He was superseded by two eUniverse executives situated below him--Brett Brewer and Chris Lipp--who enabled an investment group named Vantage Point to assume a majority of preferred stock in eUniverse through defrauding stockholders. Once Vantage Point was in control, Greenspan was forced out of his position, maintaining 30% of shares in the company at the time, and only held 10% of the company by the time MySpace and Intermix Media (eUniverse) were eventually bought by News Corp. Various other corporate dramas have ensued, including the sale of Intermix Media (formerly eUniverse, and the umbrella company to MySpace) to Rupert Murdoch's News Corporation in a deal that has been described as a cash-out merger as a result of an unfair process and at an unfair price. Somewhat justifying suspicions, Viacom (the company that owns MTV) went on the record stating, "It's fair to say that we had an opportunity to participate in the process [of purchasing MySpace]. We looked closely at MySpace, but didn't fit our financial filters." Further justifying suspicions, The New York Times recently reported that Chris DeWolfe, Tom Anderson, and other MySpace employees now employed by News Corp. received multimillion-dollar bonus payments "to smooth the feelings that were ruffled when Intermix was sold, dragging MySpace along with it against the will of its founders, who received only a small portion of the sale price."

Base business details and corporate scandals aside, the crucial story here is how a site built on a foundation of spam has become one of the most culturally, socially, and technologically influential websites in the history of the Internet. To their credit--and an important key to the site's popularity--the MySpace team has intuitively gone with the flow, treating their users as co-developers (whether by luck or by wisdom), and allowing network effects from user contributions to steer their evolution in many ways--a fundamental difference between both Web 1.0/2.0, and Spam 1.0/2.0.

A social paradigm has shifted with the tipping of MySpace. It's incredible to consider, but Spam--as negative a connotation as it has--has morphed to enable and fuel the massive development of an incredible Super Public. Tom Anderson and Chris DeWolfe may not even fully recognize the fantastic longitude and latitude at which they stand.

It's no wonder that a site this popular has been a consistent newsmaker, repeatedly finding itself at the center of various controversies. MySpace has become a sort of Super Public portal--entry to a world defined by an ever-changing digital architecture that creates pathways for connection between individuals who might otherwise (even elsewhere on the internet) never have met. In addition to facing accusations of not sufficiently protecting its underage users and subsequently being sued for thereby enabling sexual assault, MySpace has inspired debate over free speech from high school students to porn stars.

What truly remains to be seen is not the repercussions of misleading PR campaigns or bad business deals, but whether MySpace teens will fall victim like Narcissus to the worship and distortion of their own (and others') online reflections, or if they will lead the way in navigating a new world comprised of Super Publics, where old cultures collide, and new cultures are born.