$99,970,000,000 is The Difference Between These 3 Decisions

If MySpace would have just copied Facebook, it would have been FacebookSean Parker

That was Sean Parker’s answer to the question “what happened to MySpace?”  in a recent interview with Jimmy Fallon.  This got me thinking and was the needle prick I needed to start on a topic I have wanted to write about for some time.

If you can remember at one time MySpace was the social networking behemoth, holding the crown as the largest site on the web.  “Do you have a MySpace?” was the proverbial question between twenty-somethings.   They had over a hundred  million users worldwide, were driving revenue in the hundreds of millions of dollars and it looked as though we had an MTV 2.0 on our hands.  They made headlines with the acceptance of a $580 million acquisition from News Corp, validating Social Networking as a ligament startup business venture.   Little did we know they would turn out to be a joke, an afterthought on the web and a huge lesson to any young founder looking to build the next big company.

At right is a snapshot of the MySpace.com monthly unique users from earlier this year (courtesy of Techcrunch). As you can see (and probably already knew) usage has continued to plummet.  MySpace is literally a ghost town at the same time Facebook has grown to the largest site in the world, officially eclipsing 700 million users on their way to an inevitable 1 billion users and will soon IPO with a valuation of more than $100 billion!  This begs the question: What happened?

My take from Parker’s statement is MySpace had such a massive lead in users, media coverage as well as total mindshare in the social networking space it was their race to loose.  Quickly incorporating the features they saw Facebook releasing could have helped them stay atop the game.  Imagine what MySpace would be worth now if all they did was manage to keep it all together and ride out this new wave of social/mobile web.  Definitely more than the rumored $30 million News Corp is looking for to get them off their books.  What a sad ending to once dominant company.  To take Parker’s statement a bit further, I argue the biggest mistake MySpace made was sell out to the suits for a mere $580 million.  Here are three key differences that add up to a $99,970,000,000 difference between Facebook and MySpace.

Lack of vision and Leadership

The biggest difference between Facebook and MySpace is an intangible I have written about it extensively before.  Just as the difference between Apple and Microsoft was found in Leadership, so too was the difference between the social networking companies Facebook and MySpace.   (Get used to me writing about vision and leadership because I believe it is the number one reason companies succeed or fail.)  MySpace was early out of the gate and sprinted the first mile but did not foresee what could possible be on the horizon.  All they knew was people wanted a page to customize as their own and maybe a place find and connect with others.  But who was leading MySpace?  To put it bluntly, MySpace had no clue what they were doing and no clue who to look towards for leadership.  MySpace was not created by a visionary such as Mark Zuckerberg, who saw something in the web most did not.  They were driving solely on dollars and revenue, and the lack of vision and focus devastated MySpace’s growth in the end.

If Facebook was only a profile page where you can connect to your friends, MySpace would have won the race.  Facebook bet (and won) on a vision of the personalized web, integrating our friends in almost everything we do in the digital world.  Zuckerberg saw not only a web of information, but a web of people and set out to connect all those people into the web.  Execution on this vision required laser focus from a passionate founder.  MySpace ran the first mile faster but lost its way.  Facebook knew the course and won the marathon.

Message to entrepreneurs:  Have the intelligence to place a visionary leader at the heart of your company and let them guide the way.

Technically Inept

Myspace proved they were technically inept, lacking any engineering vision of how the web should work.  According to a recent Bloomberg Businessweek tell-all article, the company was constantly at odds with leadership on how/what/where to innovate.  “They were having to do all technical innovations to address the various panics that are happening. Basically their development cycle turned into one of crisis management, not one of innovation.”  Bottom line, MySpace lacked the vision as well as the technical edge necessary for a web company to maintain their dominant position.

More importantly, MySpace was not created as an innovative new platform built by forward thinking engineers. They were a company who decided to copy Friendster using sub-par technology but grew because they understood how to market their brand to the general public.  Choice quote from the article: “Using .NET is like Fred Flintstone building a database,” says David Siminoff, whose company owns the dating website JDate, which struggled with a similar platform issue. “The flexibility is minimal. It is hated by the developer community.”  Why did they choose to do this?  Driven by revenue pressures they chose to skimp on technical details and focus on more ads.

On the contrary, Facebook was intended from the beginning to be a socially transformational technology built by smart engineers.  Zuck made it a point that their engineers would determine the road ahead.  They aimed to redefine the web and understood this would require major investment.   As a non-technical executive, it was still obvious to me who was stronger in  engineering talent between the two companies.  Remember how refreshingly clean a Facebook profile felt vs the craziness that was a MySpace profile.  MySpace chose to skimp on the engine and polish the chrome.  Bad mistake.

In an interesting note, most close to Zuckerberg would admit the best decision he has ever made was to bring in a much senior and more businesslike Sheryl Sandberg as the Chief Operating Officer of Facebook.  It is said she is in more direct managerial oversight than Zuck, and who would want that?  Sandberg has been credited with building out Google’s ad business, helping create a multi-billion dollar search ad business.  I credit Mark for submitting his ego and filling holes with the right people, Facebook is better off for it.  Looking at MySpace and their recent history I cannot say the same.  Holes were not filled and egos were not subdued.

Message to entrepreneurs:  Know where you are good, understand where you need to be great, and find the right people to fill the gaps.

Poor Culture Fit with News Corp

“I think any time a startup is acquired, there’s always a certain amount of culture clash.” – Chris Dewolfe, MySpace Co-founder and one time CEO.

The worst decision for the future of MySpace was to sell the company to News Corp.  (Okay, the founders and initial investors made out fine, but the future of the company pretty much was set in stone.)  Time and time again I observe or read about another startup being acquired by a larger company and I think to myself  “well, there it goes…

The blazing, crazy, edgy, partying, sometimes innovative culture of MySpace was suffocated by the bureaucracy of corporate New Corp.  Do yourself a favor and think about your startup culture currently, and then think about the culture in a Microsoft, Google, Aol, or any other large corporation.  Ask Dennis Crowley.  Ask Evan Williams.  Ask Caterina Fake.   It usually doesn’t end well when you sell your booming startup to a large corporation.  Facebook fought off takeover bid after take over bid until everyone knew they just weren’t ever going to be for sale.  That’s ballsy, but its also what has to happen if you want to see your vision come together.

Message for entrepreneurs:  If you have a long term vision for your company, don’t sell – ever!  If you want to make some quick money, sell at the top of your hype – and walk away as early as you can.  The post-acquisition company will be nothing like the pre-acquisition company.

I am tired of seeing innovative startups being gobbled up by larger corporations only to disappear off the face of the earth – this is not how innovation changes the world.  It is actually how innovation is hindered.  I understand, as a founder you are double minded building your company.  You want to make a chunk of cheddar, and  there’s nothing wrong with that.  Isn’t that what going into business is all about?  I understand… and I would want to do the same thing in your position.

But before you sign those papers I would step back and determine what you really want and if it’s the best option.  If you really need to sell, truth is you did not build the company correctly.  If you want to cash in, great.  But understand, odds are the world will no longer be changed by your innovation.  If you really feel selling is the best option, think deep and hard about the culture inside your company as well as inside the potential acquirer because the marriage is going to be tough.  And if you feel deep down in your heart your company has a great future, don’t sell out.  Just think about how News Corp and the original MySpace founders feel about this outcome right now.

Image courtesy of Flickr user UltraRob.

This post was originally published on BusinessInsider.com.

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