The beginning of MySpace (II.)

Financial Results Analysis

Intermix was acquired in July 2005 by Fox (Translator: Fox is part of Modoc News Corp), and MySpace was the main reason for the takeover. I estimate that MySpace's value is about the difference between Fox's bid (580 million dollars) and Intermix's market capitalisation (about $100 million trillion) as a listed company. The purchase price of MySpace is up to 500 million dollars. But there is also a complicating factor in the takeover case, which is the legal dispute over the privacy of Internet users that the Intermix company was facing. After Fox's takeover of Intermix, these lawsuits were passed on to Fox's head, making it possible for MySpace to acquire a much higher value than 500 million dollars.

It is reported that MySpace planned to earn 20 million dollars in 2005 years, but the company was on a fast-rising basis. The revenue for the second quarter of 2005 was about 6 million dollars. According to the data, Fox's bid is about 20 times times the annual MySpace revenue, which was considered expensive by many people at the time. However, less than a year after the acquisition, MySpace's monthly advertising revenue has been about 8 million dollars. According to this data, Fox's acquisition paid 5 times times the annual revenue of MySpace, which is a reasonable price. Taking into account the brand effects of MySpace and the impact on American culture, it would be wise to say that Fox spent 500 million of billions of dollars on MySpace (especially in connection with the recent 900 million-dollar deal between Fox and Google). (The important part of Fox and Google's deals is to place Google search on all myspace pages) and one wonders why Yahoo, MSN, AOL, and Google missed the opportunity to acquire MySpace. Why not the giants of the Internet industry predicting the huge growth potential of MySpace on the internet?

Let's take a look at venture capital and founder earnings. Bill Burnham has a very good detailed analysis, I will not repeat his findings. Redpoint in February 2005 with 11.5 million dollars to help MySpace split (spinout) from the intermix, and thus received 25% of the shares. As a result, MySpace was valued at about $35 million trillion before capital was injected. The break-up occurred when MySpace has been quite successful, sitting in Alexa ranked 100 or less. (Original author Note: It is interesting to note that the valuations of Internet companies that have had a certain degree of success in the past 1.5 have changed a lot.) Redpoint the value of 35 million dollars for a company that generates content for 100 users of MySpace. and websites such as Facebook, Bebo, YouTube and tagged are far more overvalued than this in their financing. Intermax has wisely added a clause in the Treaty: if Intermix is acquired in a year, he will have the right to buy back the MySpace stakes in Redpoint's hands at a fixed price. Under this provision, the acquisition of MySpace has brought a return of about 65 million dollars to Redpoint VCs (about 4 times times the five-month return). This is a very good rate of return. And let's see that venture capital doesn't necessarily have to find out what the next good idea is, and the idea of squeezing into the next good idea that's already in operation is good. VantagePoint Venture Partners have the highest returns. They were Intermix's investors long before MySpace was successful. As Intermix's big shareholder, their 15 million dollar investment returns 139 million, 9.1 times times. VantagePoint did not invest because of MySpace, but became the beneficiary of MySpace's success.

So how are the founders Chris, Tom and other Reponsebase team members profiting from the Fox takeover? Intermix has a total stake in MySpace from the start, so MySpace's asset structure is not a typical start-up company. However, I was told that in the early days of MySpace, Intermix gave responsebase team members 50,000 dollars to buy stock options for 1/3 of MySpace shares. The contract was here to be seen. Chris and Tom all took part in the "this round" of asset formation. They should be worth more than millions of, plus the stock options that were later distributed and received in the form of bonuses.


Summary and thinking
If MySpace and Skype count as the biggest Web2.0 success stories in terms of registered users, I think we should have noticed an interesting common denominator: they benefited from a strong outreach channel at the beginning of their initial career. The Skype case analysis I'm going to write later mentions that Skype's initial promotion was through Kazaa (translator: a peer-to-peer download network). Since Skype's founder was the founder of Kazaa, it was easy to get the original users by promoting Skype in the Kazaa client software. While Skype and MySpace are viral-capable products, they may not have been so successful in such a short time without the incentives of the original traditional marketing channel.


Further, Web2.0 entrepreneurs should be aware that they are not just competing with big, unresponsive companies, but with small companies that are also in the start-up stages, but have a strong outreach channel in hand. In addition to Skype and MySpace, there are similar cases in the Advertising networking field. For example livedigital.com, by advertising network company Oversee.net founder, within 9 months to enter Alexa top 5,000. Another online advertising company, blue Lithium, has adopted a similar strategy, using the rest of its website's advertising space to advertise its other community web site. So what happened to the Tagworld and Myyearbook? Your MySpace "eco-circle" (websites that provide images and HTML programming services for MySpace users) are ubiquitous in their ads. The effects of these promotions may vary widely, but there is no denying that they are all being used. Perhaps Web2.0 's new thinking is dismissive of traditional promotional channels, but both MySpace and Skype have proven that in the heat of the Web2.0, the establishment of promotional channel partners cannot be overlooked.

If the entrepreneur chooses the road of pure viral promotion, your product must be very clear to the user to bring great value, and easy to use. Otherwise, other companies with promotion channels will become an insurmountable competitor for you.

(Source: Thunder Rain)