Murdoch sale led to ruin of MySpace, says its co-founder

Chris DeWolfe, the former chief executive of MySpace, has accused Rupert Murdoch of ruining the social network – and discussed false allegations that he had an affair with Mr Murdoch’s wife.

The technology entrepreneur, who co-founded MySpace, said that Mr Murdoch had squandered $15bn (£9.3bn) of shareholder money while the social network was owned by News Corporation, as it sacrificed its long-term health in favour of short-term profits.

“[Mr Murdoch] made a big blunder in announcing our potential revenues. He went to [Wall] Street and said, 'MySpace will do $1bn of revenue and $250m in profit’. The same year [2007], Facebook lost $250m on zero in revenue. They were building user experience while we were forced to muck up ours,” he told The Telegraph.

News Corporation bought MySpace for $580m in 2005, when it was bigger than Facebook. However, in 2011 it offloaded the company to a consortium led by singer Justin Timberlake after it plummeted in popularity.

Mr Murdoch later admitted that News Corp had “screwed up MySpace in every way possible” and learned lots of “valuable, expensive lessons” in the process. Mr DeWolfe said that the $580m News Corp spent on MySpace was just the start of the money it wasted. “When we left, MySpace traffic was bigger in the US than Facebook’s. This is as recently as 2009,” he said.

“[Mr Murdoch] writes on Twitter, 'Crappy MySpace’. Well, if Facebook was worth $20bn or $30bn then, MySpace was worth at least $15bn, so shame on you for letting $15bn go to waste and selling it for $30m a year and a half later.” Facebook’s value has subsequently rocketed to more than $120bn.

Mr DeWolfe painted a picture of a business mired in red tape, and says he looks in envy at YouTube, allowed to run at a loss for years while it built market share.

“They didn’t have any ads at all back then because they wanted to let it run, let it grow. We had the second largest video site in the world after YouTube, but we had ads in front of every single video

“Whenever I asked to reduce them, six months of analysis needed to be done on how much revenue we would lose.”

He also expressed confidence in the future of Facebook and Twitter, which many analysts fear could one day follow MySpace.

“There is this meme that now that mum and dad are on Facebook, the kids are going and it’s not cool any more, but I still see people checking in. It doesn’t feel like they have a huge runway for [user] growth, but they will keep finding new ways to monetise,” he said.

Mr DeWolfe – who now runs mobile gaming company SGN – gained unwanted attention after claims of an affair with Wendi Deng, Mr Murdoch’s estranged wife, whom he is now divorcing. Mr DeWolfe said that the rumours were false, but that they had been circulating for years and that he had discussed them with Mr Murdoch while at News Corp.

“I didn’t think much of it [the allegations]. I was actually more taken aback that they were getting divorced,” he said. “My mum asked me about it – for some reason she didn’t see that before, or maybe she forgot. But I’d already talked about it with Rupert.

“He knows it’s not true… I worked for him and he came to me and said, 'Ignore this stuff, it happens all the time’.”

News Corp declined to comment.