Several weeks ago, MySpace announced that it was being acquired by Specific Media, with the purchase price rumored to be a paltry $35 million. Both MySpace and Specific Media were early customers of Aster Data, and if you had told me four years ago that one of them would eventually buy the other…well, let’s just say this wouldn’t have been the outcome I would have bet on! There’s no doubt that the rise and fall of MySpace will soon become a mainstay of MBA programs everywhere, but while we wait for the inevitable onslaught of postmortems (including, in a new twist, a possible crowdsourced history of MySpace), I can’t help but notice one aspect of the story which mainstream media has yet to discuss:
Over the years, I must have visited MySpace’s Beverly Hills headquarters at least 50 times. In the early days, I was extremely impressed by the strength of their technical teams. Across the many groups with whom I interfaced, I met top-notch talent that could go toe-to-toe with any Silicon Valley company. But a funny thing happened as MySpace continued to grow: the overall strength of their team started to decline.
As the years went on, I couldn’t help but notice that MySpace was constantly struggling to attract technical talent that could match the quality of their early team. Managers from various groups would regularly reach out to myself and others at Aster Data, asking for referrals and recommendations for a variety of positions. It wasn’t that they didn’t know what they needed, it’s that they couldn’t find it in Los Angeles. Unable to find homegrown talent and ineffective at tapping into the technical workforces of other cities, they soon fell into the trap of having to sacrifice quality for quantity. It wasn’t long before MySpace began to hire people who, frankly, would not have made it in the door at Google, Apple, or Facebook.
So What Happened?
In 2006, myspace.com was the top US web destination, with more hits than Google, Yahoo! or other big properties of the day. Driven by their explosive growth, they tackled numerous technical challenges at an unprecedented scale (Aster Data’s engagement with MySpace, for example, resulted from the fact that no data platform on the market at that time was able to load the volume of data generated by MySpace’s web servers on a daily basis). In order to succeed, MySpace needed to have the best and brightest technical minds working for them, especially as new competitors like Facebook started to appear.
But while their competitors all drew from the massive talent pool that is the Silicon Valley, MySpace stubbornly stuck to its SoCal roots, even as they struggled to fill a plethora of open positions. It wasn’t until 2007 that they opened their first remote office in Seattle, and 2008 when they finally dropped anchor in the Silicon Valley. By that time, they were already on the defensive against Facebook, and had an extremely hard time attracting talent.
In hindsight, the result seems almost inevitable.
Succeeding Where MySpace Failed
So what could MySpace have done differently? To find the answer, one need only glance at the billboards lining Silicon Valley’s CA-101. Daily deals powerhouse Groupon is a perfect example of a company that’s riding a wave of buzz to strategically grow. The Chicago-based company recently opened a large office in Palo Alto and has plastered the Bay Area with billboards as part of a massive hiring campaign to expand their technical team. Unlike MySpace, who waited until after their status as “media darling” was on the decline to expand into the Bay Area, Groupon is still very much on the up and up.
Moving to where the talent is doesn’t have to mean moving to the Silicon Valley though. Google is a great example of a company that moved away from the Silicon Valley in order to target a different type of talent. In 2006, Google opened a large office in the heart of Manhattan as part of an effort to greatly expand its highly-profitable advertising arm. The purpose here was the same: Google knew that there was a relatively weak talent pool for advertising professionals near its headquarters and went to where the best and brightest were.
MySpace needed to go where the talent was. But more than that, they needed to expand when their buzz was at its height. Already struggling to hire “A+” talent and knowing that Facebook was located in the Silicon Valley (and, thus, had access to a much stronger pool of technical talent), MySpace should have opened an office in the Bay Area in 2006 or 2007. At that point, they were still the “cool kid” and would have had no problem attracting top-notch engineers and other technical talent. Obviously, it would be an oversimplification to suggest that this alone would have been enough to change history (especially with revelations such as this one coming from Tom Anderson), but I can’t help but wonder how many people that ended up at Google or Facebook might instead have gone to MySpace had there been a Silicon Valley office earlier, and what the impact might have been.
Now, this is not to say that there weren’t fantastic technical people at MySpace. There absolutely were. I had the privilege of working with a number of MySpace employees, both past and present, whom I hold in very high regard (including several from both their Seattle and San Francisco offices). But the fact remains that as the company grew, it struggled to find more such people from a rapidly shrinking SoCal talent pool (and, unsurprisingly, their attempts to convince happy Silicon Valley engineers to relocate to L.A. didn’t exactly work).
This also isn’t to say that there aren’t strong technical people in L.A. UCLA, in particular, has a great Computer Science program. But guess where many of the top grads go when they finish? The Silicon Valley. It’s the exact same reason anyone looking for top finance talent goes to New York, rather than Boston (home of Harvard). As humans, we’re inherently loyal to our home towns and want to see them succeed, but while cities everywhere are vying to be the “next Silicon Valley,” the “next Hollywood” or the “next Madison Avenue”, it’s essential that companies step away from the hype and look objectively at the talent pools available to them when considering expansion.
It could mean the difference between a billion-dollar enterprise and a rounding error.