Intermix Media, Inc
Intermix Media, Inc.
Wholly Owned Subsidiary of Fox Interactive Media, Inc.
Incorporated: 1999 as Entertainment Universe, Inc.
Sales: $78.9 million (2005)
NAIC: 514191 On-Line Information Services
Intermix Media, Inc., is an Internet marketing company divided into two business groups, a product marketing segment known as Alena and a network segment comprised of more than 30 web sites that generate advertising revenue. Best known as the operator of the social networking web site MySpace.com, Intermix attracts more than 51 million visitors per month to its network of web sites. Through its Alena subsidiary, the company sells various consumer products, such as skin care, cosmetics, inkjet printer cartridges, and pet nutritional supplements. Purchased by News Corp. in 2005, Intermix operates as part of the media giant's Fox Interactive Media, Inc., which oversees the corporation's Internet-related business.
Intermix founder Brad Greenspan wasted little time after leaving the University of California, Los Angeles (UCLA), before making his mark in the business world. He earned a bachelor's degree in political science and business in 1997, the same year he founded Palisades Capital, Inc., a private, Beverly Hills-based merchant bank. Greenspan served as president of Palisades, acting as a consultant to public companies looking to raise capital, a role he would play until March 1999, one month after founding Intermix's predecessor, Entertainment Universe, Inc. He formed the company to enter the rapidly growing Internet fray, intending to sell compact discs (CDs), video games, and related items online. To execute his business plan, Greenspan orchestrated a reverse merger as a means of becoming public itself without filing a prospectus and undertaking an initial public offering (IPO) of stock. The process was much quicker than the traditional process of becoming a publicly traded company, and it would give Greenspan the capital to facilitate the acquisition that would make Entertainment Universe a going enterprise.
Starting out in February 1999, Entertainment Universe was a company in name only, a venture without any assets. To give the company life, Greenspan entered into an agreement in March 1999 with Motorcycle Centers of America, Inc., a company without any assets except for its most valuable attribute: its designation as a publicly traded company. In April 1999, the reverse merger was set in motion. Entertainment Universe acquired 92 percent of Motorcycle Centers' stock as part of a reorganization plan that would make Entertainment Universe a subsidiary of Motorcycle Centers. Immediately prior to the deal's closing, Entertainment Universe sold 1.8 million shares in a private offering, raising $6.5 million. Entertainment Universe used $1.9 million from the offering and $7.2 million in stock to acquire CD Universe, a Connecticut corporation formed in 1997 that sold CDs and videocassettes online. Next, Entertainment Universe distributed CD Universe to Motorcycle Centers, which, once the reverse merger was completed, changed its name to eUniverse, Inc., a company headed by 25-year-old Chairman Brad Greenspan.
Once all documents had been signed, Greenspan headed a company entirely reliant on CD Universe for revenue. To lead the day-to-day operation of the company, Greenspan recruited Leland Silvas, a principal member of a Connecticut-based advertising and direct-marketing company. Silvas assumed the responsibilities of president and chief executive officer of eUniverse, overseeing the performance of Brett Brewer, a UCLA alum who was in direct charge of CD Universe from his post as vice-president of e-commerce. Within a year, Silvas would be gone, with Greenspan taking on the responsibilities of chief executive officer and Brewer acting as president, but the trio was intact when eUniverse's strategy began to be deployed. Greenspan intended to follow the acquisition of CD Universe with a slew of acquisitions, intending to form a network of web sites under the eUniverse banner and draw revenue from merchandise sales. As was his custom, he wasted little time before striking out on the acquisition front.
The acquisition of web properties shaped eUniverse into an online retailer, a relatively new type of business that promised to change forever the vast retail industry. Greenspan focused on web sites catering to video game enthusiasts, purchasing his first property in May 1999, Case's Ladder, Inc. Case's Ladder served mainly as an online game portal, providing competitive rankings for online gamers and enabling gamers to compete against one another in a variety of tournaments and leagues. The following month, he purchased Gamer's Alliance Inc., an operator of more than 50 web sites related to gaming that received 750,000 unique visitors each month. In August 1999, Greenspan acquired Big Network, Inc., gaining a web site that offered a full selection of board and card games, such as spades, chess, backgammon, and checkers, which registered users could play online.
A CHANGE IN STRATEGY IN 2000
Greenspan's efforts to make eUniverse a new force in the online retail sector quickly led to a change in strategy. He discovered that the profit margins in video games and related items were depressingly slim. Further, his target demographic, teenage males, lacked the purchasing power to fuel his hopes for eUniverse's development into an "e-tail" powerhouse. In late 1999 and into 2000, Greenspan changed direction, identifying a new target audience and pursuing a new source of revenue. "We became a whole new business," he recalled in a July 14, 2002 interview with the Los Angeles Business Journal, "while being public and without a whole lot of money." eUniverse's future success, as Greenspan envisioned it, would be reliant on females over 25 years of age, "the same users that shop at Wal-Mart and Home Shopping Network," Greenspan noted in his Los Angeles Business Journal interview, and also on revenue generated from third-party advertising rather than from merchandise sales.
As our company has developed and expanded, we have pioneered and refined strategies to successfully segment our audience, create and virally disseminate content, and effectively market products and services online. We leverage this knowledge to deliver brand messages, foster long-term relationships between users and partners, and enable online transactions for our partners, affiliates and advertisers.
For a brief period, eUniverse moved in two directions, acquiring web properties to bolster its retail business and to create a network that would attract advertisers. In February 2000, the company acquired an online retailer, Falcon Ventures Corp., which sold DVDs, videocassettes, and CDs, but eUniverse began to change gears. The October 1999 purchase of Funone.com represented the future of the company, giving it a web site that provided online greeting, cartoons, joke lists, and similar content to subscribers. eUniverse would concentrate on providing entertaining content to attract online visitors, who, in turn, would be leveraged to attract advertisers. The acquisition in March 2000 of JustSayWow.com represented another bid to attract the company's core audience, giving eUniverse a web site offering humorous electronic greetings with animated graphics. The following month, the company acquired DustCloud Media, which operated a web site that allowed users to search the Internet for images of celebrities, movie clips, and movie trailers. eUniverse's change in strategy also prompted a relocation of the company's headquarters. In 2000, as the company abandoned its CD Universe and Falcon Ventures businesses, it abandoned its Wallingford, Connecticut, base and moved to Los Angeles.
Greenspan explained the reasoning behind the change in an August 7, 2000 interview with the Los Angeles Business Journal: "As a leading online entertainment network," he said, "it made a lot of sense to be in the entertainment capital of the world. Los Angeles has the leading entertainment companies, and we can access a lot of the talent out there as we grow the company and build our team." By the time the company was preparing to settle into its new offices, it ranked as the eighth most visited online property, sandwiched between Walt Disney's Go Network and Time Warner's network of web sites, heady company for the fledgling venture to keep.
Greenspan pressed forward with the expansion of eUniverse's network from the company's new offices in Los Angeles. The company, almost entirely reliant by 2001 on revenue from advertising on its network, added new properties to its portfolio, acquiring sites such as Send4Fun.com, DebsFunPages.com, and FunnyGreetings.com. The company also created its own web sites, registering particular success with Flowgo.com, an entertainment web site. Sony Corp., impressed by a network attracting more than 18 million visitors per month, provided financial backing to the Greenspan-led organization, taking a 20 percent interest in eUniverse for $17 million in July 2001. The company used the money to diversify its revenue streams, launching an e-mail newsletter service to registered users and creating CupidJunction.com, an online dating service. In total, the company added seven new properties in 2002 and continued to expand the following year, forming a "performance marketing group," which later became known as Alena, to market various consumer products. The year also marked the debut of what would become eUniverse's best known property, the social networking web site MySpace.com, but less celebratory events pocked 2003, creating considerable tension within the company's executive ranks that overshadowed the year's accomplishments.
On all fronts, eUniverse enjoyed enviable success during its first years in business, starting with one strategy and seamlessly switching to another while, as Greenspan noted, operating as a public company with scant financial resources at its disposal. The company's smooth rise to prominence came to an end, however, interrupted by the May 2003 announcement that it would have to restate three quarters of financial results. In the wake of the announcement, the company was delisted from the NASDAQ in September 2003, incurring substantial losses from the accounting problems.
The company began trading its shares again in October 2004, when the American Stock Exchange approved its application, but before the financial debacle was resolved, eUniverse faced another struggle, one that pitted the company's founder against the board of directors. On October 31, 2003, the company announced Greenspan had resigned as chief executive officer and chairman, offering no explanation for his sudden departure. On November 3, 2003, the company announced VantagePoint Venture Partners had invested $8 million in the company, which, it was later revealed, was the reason Greenspan vacated his posts. The deal had gone through without his consent, part of a plan by eUniverse's board members to embark "upon a scheme to entrench themselves in office," according to Greenspan's comments quoted in the December 12, 2003 issue of PrimeZone Media Network. Greenspan stayed on as a board member until December 2003, when he resigned and ignited a proxy battle to replace the company's board of directors.
- Intermix is founded as Entertainment Universe, Inc.
- After initially focusing on merchandise sales, the company concentrates on attracting third-party advertising as its primary source of revenue.
- MySpace.com is launched.
- The company changes its name to Intermix Media, Inc. and launches Grab.com.
- News Corp. acquires Intermix for $580 million.
As eUniverse celebrated its fifth anniversary, the rancor between Greenspan and the company's board members festered, with each party filing lawsuits against the other. In Greenspan's absence, Brett Brewer temporarily took over control of the company until Richard Rosenblatt, a seasoned executive in Internet-related business, was appointed chief executive officer in February 2004. Under the guidance of Rosenblatt and Brewer, who continued to serve as president, eUniverse pressed ahead, enjoying a remarkable year. MySpace.com developed into an Internet phenomenon, recording explosive gains in popularity. The number of unique visitors to the social networking site increased 1,400 percent between June 2004 and June 2005, becoming the fifth-ranked web domain in terms of page views and, according to eUniverse, accounting for 10 percent of all advertising on the Internet. eUniverse, which changed its name to Intermix Media, Inc. in July 2004, followed up the success of MySpace.com by launching a self-publishing and social networking site, Grab.com, in March 2005. Designated the company's flagship Internet property, Grab.com allowed users to play and purchase games online, write reviews for movies, and view a wide variety of entertaining content. By the time Grab.com made its debut, the more than 30 web sites composing the Intermix network were attracting 51 million visitors per month, making it the 25th most popular destination on the Internet worldwide and the object of media mogul Rupert Murdoch's desire.
ACQUISITION BY NEWS CORP. IN
News Corp., Rupert Murdoch's media conglomerate, was seeking to increase its presence on the Internet as Intermix was enjoying its spectacular success. In July 2005, the massive, $25 billion-in-sales company made its move, reaching an agreement to acquire Intermix for $580 million. The proposed deal promised to triple News Corp.'s reach among U.S. Internet users and make the company a force in the burgeoning social networking market. Greenspan, still trying to gain control of the company he founded, made a counteroffer of $13.50 per share, which was higher than the $12-per-share deal proposed by News Corp., but Intermix's board of directors approved Murdoch's offer. In October 2005, the acquisition was completed. Intermix became part of News Corp.'s newly created Fox Interactive Media group, figuring as a prominent part of the media company's effort to extend its influence into the online world.
Jeffrey L. Covell
Sunningdale Holdings, LLC; Social Labs, LLC; Opt-In Group, LLC; North Plains, LLC; Next Speed Hosting, LLC; Infobeat, LLC; GameUniverse, Inc.; Gamer's Alliance, Inc.; Entertainment Universe, Inc.; eCommerce Transactions, LLC; Download Solutions, Limited (Bermuda); Cases Ladder, Inc.
AOL LLC; IGN Entertainment, Inc.; Yahoo! Inc.
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