Greed 2.0?
Posted on June 27, 2007
Filed Under Web 2.0 Kool Aid |
by Deadline Hollywood Daily that Chris DeWolfe and Tom Anderson of MySpace fame are asking for $50 million in compensation over the next two years in order to stay involved with the social networking giant which News Corp. acquired for $580 million. As Duncan Riley on TechCrunch points out, the request seems absurd on the surface but does raise a valid issue when it comes to Web 2.0 services: are the people who were wholly or partially responsible for the growth of a community, and who are associated with its culture, a crucial component to continued success once the service has achieved critical mass?
It’s a difficult question to answer. I think two logical considerations seem to indicate that the compensation demands are unjustified:
- By all metrics, MySpace continues to hold a dominant position in the social networking space, although services like Facebook are clearly gunning for it and the extent to which social networking will remain hot over the long-term is debatable. It’s unlikely that MySpace’s popularity, mindshare in modern culture and ability to generate revenues would disappear if Chris and Tom left.
- The strength of MySpace’s network effects is considerable. It seems implausible that if Chris and Tom were to leave, MySpace users would run for the hills en masse.
On the other hand, several considerations provide a different perspective:
- Although the involvement of Chris and Tom may not be necessary for the continued operation and success of the business, it may be desirable. In Chris’ case, he played an integral role in the leading and growing the business from its formation, and therefore has a unique experience and perspective that any new chief executive would lack. In Tom’s case, he is a prominent part of the MySpace culture. He’s on your friends list (unless you remove him) and one might question the subconscious effect his leaving MySpace might have on the MySpace userbase. These intangibles provide an unknown in News Corp.’s analysis of the situation.
- News Corp. has made a large investment in MySpace. The service is now reportedly generating more than $25 million in revenue a month. It’s clear that this is not an investment that News Corp. should take unnecessary risks with. Although the possibility that the intangibles above could lead to MySpace’s downfall seems highly unlikely, one cannot discount the possibility that they may have some impact. Is News Corp. prepared to take the risk?
Given that Deadline Hollywood Daily’s sources are stating that the chances News Corp. will give in to Chris and Tom’s demands are “slim to none” and “highly unlikely,” it appears that both parties have different opinions on who holds the position of leverage and that often makes for drama. It will be interesting to see the outcome. If both parties stand firm and Chris and Tom end up leaving, we may have the first truly prominent experiment that will give some indication as to how important the individuals who build a community are to its continued growth and success. It’s an experiment I’d love to watch.
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Drama 2.0 spikes the Web 2.0 kool aid by providing a critical analysis of Web 2.0 startups and the impact of Web 2.0 on the media industry. Other topics are explored when Drama 2.0 has a slight buzz. Read more about the Internet's version of Keyser Söze here.
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