Archive for October, 2007

Tom Anderson and Chris DeWolfe must be pretty upset today. The two founders of monster social networking site MySpace had sold it lock stock and barrel to NewsCorp for $580million in 2005. Just a few months later all of that investment and more ($900million to be precise) was recouped through a deal with Google in which it would became search engine partner for MySpace. And now Rupert Murdoch is considering swapping it for a 25% stake in Yahoo!

At the time, the deal seemed sweet: so sweet, in fact, that many observers thought Murdoch must have lost his wrinkled mind to pay that sum of money for MySpace. But then, in early 2006, Google (yes, THEM again) snapped up upstart online video site, YouTube, for $1.6billion, and its two founders, Chad Hurley and Steve Chen, found themselves a few hundred million dollars richer.

The MySpace duo fumed.

No wonder they took umbrage and started to think they’d been ripped off by wily old Aussie, Murdoch. MySpace had far higher numbers of subscribers than that Johnny-come-lately YouTube and a business model that was bringing in real cash, not just column inches. So, in June this year, Anderson and DeWolfe decided to ask Rupert for more cash in compensation - to the (name that) tune of $12.5million a year each - to stay on after their contracts expired! Murdoch has counter-offered with $7.5million each for two years and, as far as I know, the discussions are still going on.

But, hot off the press (and long awaited) news about a deal between Microsoft Corp and Facebook must be making the two MySpace founders more bitter still. Today Microsoft said it was paying $240million for a 1.6% stake in Facebook - a site a mere four years old that again has way fewer users than MySpace - valuing it at around $15billion (or 25 times the amount MySpace was sold for). Grrr! And Mark Zuckerberg, the 23-year old founder of Facebook, frees up some cash for a bit of money for pocket money (to buy a Lear Jet, for instance) while staying firmly in control. GRRRRRRR!!!!

The moral of the tale? There is none. Murdoch is a shrewd dude who saw the potential of MySpace and snapped it up as the, what now looks to be, bargain of the century. Mark Zuckerberg is half a century (53 years!) younger and is every bit as savvy. And DeWolfe and Anderson made it big, but perhaps sold out too early (easy to say in hindsight). So, sorry Tom and Chris. Buy me some Cristal and I’ll help you commiserate.

Yes, that Sgt. Pepper taught the band to play. But also the stock markets around the world went into free fall in the worst crash since 1929. I was there, working as a financial futures broker in the City of London. Starting on Black Monday - October 19, 1987 - indexes like the Dow Jones Industrial lost a third of their value over the following weeks.

But the reasons for the dramatic sell off were not particularly rational - in fact within 2 years the markets were back to where they had been before the crash - there was a ‘group think’ going on by the institutional investors that turned a market correction into a blind panic. They were all using computer programs based upon a set of almost identical assumptions to help them decide how to buy and sell stocks, so when certain prices were breached massive numbers of sell orders were triggered at the same time. As the market started to drop, more and more sell orders were automatically triggered and it became a self-fulfilling prophecy: sell the market because the market is going down.

The group think I saw 20 years ago is happening now in marketing. The mentality is to do something because that’s what others are doing, without thinking through the assumptions and to stop and ask ‘why?’ And, you know what, we’re starting to see the effects. The ‘business as usual’ crowd are losing out to the marketers and agencies who are questioning the assumptions about the role marketing plays in consumers’ lives and can find ways to do things in a fresher way.

As we say in the Punk Marketing Manifesto, “why not ask ‘why not?’” Assumptions are there to be questioned, not followed without thinking. As the money moves from the old ways of marketing to the new the need for change has never been clearer.