While we were busy settling on a new name for the first proper version of the site – not to mention trying to raise money to fund it, 2007 was fast becoming the year of the ’social networking’ site.

‘ Social networking’ was an Internet industry buzzword that described any site that brought people together and allowed them to bond over their shared interests. Fridaycities – sorry, Kudocities – was a social network for people who wanted to bond over the cities they lived in, but there were also social networks for people who were looking to buy houses, social networks for dog lovers,((Dogster – the fourth porniest name on the Internet. )) social networks for book lovers; there were almost certainly social networks for people who loved joining social networks.

But while these niche social network sites were hot, and getting hotter, the real giants of the social networking world – the only ones worth any actual money – were the ones that ignored niches and threw open their doors to the world. And the biggest of these social network giants was MySpace.

Launched in 2003, MySpace was created as a social networking site for young people who wanted to discover new music. Members were able to set up personal profile pages to share their favourite bands, along with all manner of other likes and dislikes. Very quickly, having a cool-looking MySpace page became as important to young people as having the right pair of trainers, or using the correct slang. Yagetmi?

Unfortunately, somewhere down the line, the definition of ‘cool’ among MySpace users apparently got confused with the definition of ‘hideously tacky’ and the site’s millions of profile pages became a cacophony of flashing images, gaudy background colours and photos of underage teens posing in very little clothing indeed. The phenomenon inspired a popular online competition by cult video blogger Ze Frank called ‘I knows me some ugly MySpace’ with viewers encouraged to send in links to the ugliest profile pages they could find. Meanwhile, the trend for posting misleadingly posed profile photos became the subject of a song: ‘You look a lot fitter on your MySpace picture (than you do in real life)’- which became a hit on… where else… ? MySpace.

MySpace enjoyed phenomenal growth, thanks in part to favourable press coverage which typically gushed about how the site was a true Internet rags-to-riches story, founded by twenty-somethings Chris DeWolfe and Tom Anderson. But behind the media myth, things were not quite what they seemed.

According to the official company line, MySpace was founded in 2003 by Chris DeWolfe and Tom Anderson who worked for a company called eUniverse (later renamed Intermix). eUniverse was founded by an entrepreneur named Brad Greenspan, but Greenspan later left the company, handing over full control of MySpace to DeWolfe and Anderson. As MySpace grew, Tom Anderson, who was twenty-seven when the site launched, became an Internet celebrity thanks to his role as the default first ‘friend’ that was added to every new MySpace user’s profile page. This instant fame led to Anderson being nicknamed ‘America’s first friend’ by various news magazines and inspired one T-shirt entrepreneur to produce a shirt bearing the slogan ‘Tom is not my friend’. Hundreds of thousands were sold.

In 2005, with MySpace boasting over 100 million users, the company (and parent company, Intermix) was acquired by Rupert Murdoch’s News Corporation for $580 million, making the end of an amazing ride for two plucky young entrepreneurs.

The only slight problem with this history is the fact that it ’s not true. For a start Tom Anderson had been fibbing to his hundred million friends. He wasn’t twenty-seven at all when he started the company. In fact he was thirty-two. Using a younger age was a shrewd marketing move by the founders to help them appeal to the site’s target teen demographic. And that’s wasn’t the worst of the allegations surrounding MySpace. In 2006, the technology site Valley Wag (one of Nick Denton’s Gawker portfolio of sites) published a damning investigation by journalist Trent Lapinski((Who wrote his article at the age of nineteen. Or fourteen in Anderson years.)), using information provided by Greenspan who, it had become apparent, hadn’t left MySpace voluntarily at all but had been forced out for reasons unknown. Whatever the truth about Greenspan’s departure, he was certainly extremely pissed off and launched a site – www.freemyspace.com – to tell his side of the story, giving Lapinski all kinds of juicy details about the real story of MySpace.

For a start, Lapinski ’s article claimed, MySpace was far from the cute garage start-up that everyone loved. Instead it had begun life as a sinister ploy by hardened marketing execs at eUniverse to persuade young people to opt in to receive targeted advertising from youth brands. The use of Tom – originally hired by the site as a copy editor – as everyone’s first friend (with his revised age) was a clever ruse to give some youth appeal, sorely lacking in the other founders.

For his part, Greenspan had a history of being involved in somewhat dodgy advertising schemes, including creating the ad software behind the Kazaa file-sharing network which had become popular with music and movie pirates. DeWolfe, too, had previously been the founder of an email marketing firm named ResponseBase – which was acquired in 2002 by none other than eUniverse, but not before building up a database of thirty million email addresses.

The team, with their roots firmly in the world of online advertising, set up MySpace and quickly began to build up the membership base by instructing employees to invite everyone in their email address books to join. Those first contacts invited their friends and so on and so on – and the rest was (somewhat revised) Internet history.

So is Tom really your friend? Or just a marketer ’s shill? As the man himself put it in an email to all MySpace’s staff during the first days of the site: ‘I am as anti-social as they come, and I’ve already got twenty people to sign up.’ At the time of writing, anti-social Tom has 217, 701, 025 friends and analysts predict that MySpace could be worth as much as $15 billion. The man has clearly got over his shyness.

But while in 2007 MySpace was still the largest of the social networks, its position was by no means secure. In fact, there were two rivals yapping at the giant’s heels, including one that had specifically set out to steal the lucrative youth demographic. The fact that this rival had already succeeded in achieving that in several European markets was impressive. The fact that the rival wasn’t American but British was astonishing.

11.1

I’ve got a feeling we’re not at Open Coffee any more, Toto.

As I approached the velvet rope that separated the nightclub from the outside world – and vice versa – I was greeted by the imposing form of a Maori warrior in full traditional dress, clutching a guest list. Say what you like about the Maoris, they run a tight ship. A quick scan of the list, a grunt of approval and the rope was lowered, allowing me inside.

I had come to Mahiki – the favourite late-night haunt of Princes William and Harry – for an event called ‘Lessons Learnt’. The evening was organised by Robert and it was already encapsulating everything that an Internet People event should be.

I had actually been slightly disappointed that my name was on the Maori’s list – it’s hard to think of a better anecdote than the one that begins ‘What? These bruises? Oh, yeah, a Maori threw me out of Prince William’s local…’ but maybe next time. Walking downstairs to the basement – which, if I hadn’t been told by every tabloid that it was one of London’s hottest party venues, I could have easily mistaken for a tacky Hawaiian-themed dive in a chav holiday resort – I edged my way to the bar, wading through crowds of well-dressed entrepreneurs and paid £10 for a bottle of beer. Looks like it’s not Marbella either, Toto.

The plan for the evening was to gather together the brightest and the best of the British dot com scene and give each of them a minute with a microphone to share the one piece of advice they wish they’d been given before they’d started in business.

The main attraction of the night – and the reason the event was unmissable for anyone who had even a passing interest in social networking – was Michael Birch, the founder of teenage networking site Bebo: the site that had MySpace running scared, especially in Europe.

Birch may not have the pro file of Tom Anderson or Chris DeWolfe but he is a fascinating character, and humble, too, having failed at various businesses before hitting upon the one that was fast becoming Europe’s big hope against a Murdoch-owned MySpace.

Birch’s first – and least successful – enterprise was a site called Babysitting Circle that allowed local teenagers to arrange babysitting appointments among themselves (nobody signed up). Then there was the online will-writing service (nope) and the birthday reminder service, Birthday Alarm. This last one actually did manage to get some ‘traction’ (a stupid industry term meaning people actually used it in decent, and growing, numbers) before being used as a springboard to launch Bebo.

Bebo was a real winner – co-founded by Birch and his wife, Xochi, with help from his brother, Paul – a social network along similar lines to MySpace, but with a more European flavour and sticking firmly to a youth demographic while MySpace had started to morph into a showcase for musicians and celebrities. The site quickly became the third most popular site of its type in the world, with tens of millions of members creating profile pages. For anyone over the age of twenty a visit to the site is a baffling experience; a world apparently populated by aliens with their own language. The Birches raised $15 million to develop Bebo, a good chunk of which must surely have been spent on special software to remove grammar and punctuation.

For sure, Bebo is a site for total fucking idiots – the Jeremy Kyle juniors, if you like – but give a few dozen million of those idiots pocket money and you can see why the company has been valued in the hundreds of millions and had MySpace worried. Hell, give a few dozen million of those idiots typewriters and they could write Shakespeare. Although they’d spell it ‘ShAkz9er3′.

Taking the microphone, and ignoring the one minute rule imposed on everyone else to keep the event moving allegro, Michael Birch had two pieces of advice to share with the assembled crowd, who fell totally silent for the first time all night as he cleared his throat to speak. Yeah – screw you, Prince William; to this crowd, Michael Birch is true royalty. I took out my notepad, pen poised, while next to me Jemima Kiss, a blogger from the Guardian ’s website, cracked open her laptop to report the momentous event live.

‘The one piece of advice I wish I’d been given before moving to the US to start Bebo is…’

The room held its breath.

‘…is to look the other way when crossing the road. Turns out they drive on the other side over there.’

Big laugh.

Rich and funny.

Wanker.

But seriously folks.

‘No, really, the best bit of advice I can give to any entrepreneur is to be a cheap bastard… that’s a really good tip… and if you do manage to fool a VC into giving you lots of money then make it last. We worked from our bedroom for four years before we had enough money to pay for the money we were spending.’

As one, all the entrepreneurs in the room looked down guiltily at their bottles of £10 beer.

With that Birch handed over the microphone and headed back to the bar, as a hundred would-be social network entrepreneurs slowly began to edge in his direction, in search of the illusive business card swap.

11.2

Next to the stage came another celebrity – albeit of a more traditional tabloid type – Jamie Murray Wells, the founder of Glasses Direct. In contrast to most people in the room, Jamie was no stranger to Mahiki. The headline in the Sun a few weeks earlier had said it all: ‘ Anyone fancy a Goodtime Girl? (That’s cocktail Kate drank on date with Wills’ mate) ‘. Kate being, in this case, Kate Middleton. Wills’ mate, in this case, being twenty-five-year-old Jamie Murray Wells.

Young, quietly spoken and modest in appearance, Murray Wells nonetheless has a remarkable public profile. By night, when he’s not dancing with future princesses, he’s making tabloid headlines for his other extra-curricular antics. Another story in the Sun a few weeks earlier had revealed that Murray Wells had been injured when, along with a friend, he had been caught breaking into a girls’ boarding school searching for ‘totty’ (unfortunately it was the Christmas holidays so no one was there – and Murray Wells later fell off a water tower, breaking his leg).

But by day Jamie makes headlines for something far stranger: driving the optometric industry stark staring mad.

It all began while Murray Wells was studying English at the University of the West of England in Bristol and discovered that he needed reading glasses. Perhaps it was the hours hunched over books. Perhaps it was the fact that he lived with five girls that started to turn him blind. Either way, what follows was one of those classic entrepreneur moments: he was quoted £150 by an optician for what was basically two pieces of plastic and ‘less metal than you’d find in a teaspoon’. A bell went off in his head. Surely the mark-up on these things must be astronomical. So Jamie did what born entrepreneurs do when bells go off in their heads: he did some research, speaking to opticians and people who work in optical labs and – basically – anyone who might be able to explain where the £150 goes. And this is what he found out: the real cost of a pair of glasses is about £7. The rest goes on cost of sales – those stark white shops and teams of sales staff don’t come cheap – and huge, huge profits.

The second thing he found out was that the way most high street opticians work is, basically, a scam: you turn up, have an eye test for about £20 (barely enough to cover the cost to the optician for carrying it out), you get your prescription and then you get sold a pair of glasses (or two) at a £143 mark-up. But what the high street optician doesn’t tell you is that there is absolutely no legal reason why you can’t go to the optician, have the cheap eye test, get your prescription and – well – leave. Just walk out. Take the piece of paper with your measurements and get someone else to provide the glasses.

Someone like Jamie Murray Wells.

With those discoveries made and a business plan written, Glasses Direct was born. With just £1, 000 from his student loan, Jamie commissioned a web designer to build a prototype of his website and then set about establishing relationships with exactly the same suppliers that provide frames and lenses to the big high street names. At first the suppliers were terrified of pissing off their best customers, but Jamie promised them he’d keep their relationship with Glasses Direct a secret. Money is money is money – and soon Jamie had a website and a supplier who would provide him with pairs of glasses to fit his customers’ prescriptions. Prices? From £15 a pair. First year turnover? £1 million. In 2007, the company received £2.9 million in funding from Saul Klein’s Index Ventures and Highland Capital, who also invested money in the successful betting site, Betfair.

And it was with that success, and Murray Wells’ growing profile, that the trouble started.

It turns out the major high street opticians don’t like it when twenty-five-year-olds start stealing millions of pounds of their business, especially when £1 million turnover for Jamie represents a loss of sales of many times that for his traditional rivals.

Alarmed by Jamie’s success, the General Optical Council((There’s a General Optical Council – it’s the quango that regulates the optometry industry; aren’t you glad you now know that?)), under pressure from Boots, Specsavers, Dolland & Aitchison and Vision Express, decided to consider whether selling prescription glasses online could be ‘harmful’ to customers. The chairman of the committee holding the debate? Brian Carroll, a consultant for Boots Opticians.

Reading from the top then…

C

ON

FLI

CTOF

INTEREST

Murray Wells is understandably a little concerned by his rivals’ tactics. Until the GOC makes a ruling, the company can’t raise any more venture capital money or consider a flotation to raise any more cash. The very survival of his business rests on it. And – surprise – the GOC is taking its sweet time. Jamie even tried to get himself elected on to the committee himself, hoping it might push things through. But the managing director of Specsavers stepped in and nominated his own candidate, encouraging his staff to support his choice, against Murray Wells. Checkmate.

The Specsavers connection is particularly ironic given the brilliant story that Sam Lewis had told when he came back from attending (don’t ask) a lunch hosted by the Worshipful Company of Spectacle Makers. Imagine the masons in verifocals.

Sam had been invited to go along to the lunch by a friend whose father had been a high-up figure in the organisation, on the strict instructions that he behave himself and not upset any of the old men in attendance. Which, of course, was like asking a bull not to do anything to upset a red rag. Sam and I had been out at a party the night before so, of course, with the lunch starting at noon, he rolled up still drunk and immediately laid into a bottle of red wine. Soon the other members began to file into the dining room and the sight was one that would disturb even a sober mind: a line of elderly men, all wearing what appeared to be brass gongs around their necks filed in and took their seats. Then one stood and announced the arrival of the most senior member of the company. A slow hand clap began to build, louder and louder, as the entire room rose to its feet. Sam stood up, managing to join in the clapping while still clutching his wine. Clap, clap, clap, louder and louder, until finally the grand master appeared, also wearing a large brass gong, his arrival signalling that the dinner could begin. Jamie Murray Wells had the distinction of being unofficially banned from attending these lunches and Sam’s friend had pleaded with him not to mention Jamie or Glasses Direct.

‘So what do you make of Glasses Direct?’ Sam asked, turning to one of the old men sitting at his table, a senior manager at one of the big optical chains. Sam’s face was a mask of innocence.

The manager ’s face darkened. ‘Jamie Murray Wells? A terrible business. Terrible. Just terrible.’

He continued.

‘After all, we’ve only just recovered from the trauma of Specsavers .’

So Jamie could be forgiven if he had stood up that night at Mahiki and offered the advice: ‘Choose an industry that isn’t populated by protectionist old wankers who fear and loathe the Internet – and change in general.’ But instead he gave something more practical, learned from his company’s recent ill-fated celebrity ad campaign.

‘When choosing a spokesmodel to promote your glasses brand, try to choose a celebrity who actually wears glasses, rather than paying an absolute bloody fortune for Nancy Sorrell… who doesn’t.’

Apparently, on comparing the fee paid to Sorrell – who is famous for little more than being Vic Reeves’ wife and once appearing on I’m A Celebrity Get Me Out Of Here – with the number of extra glasses sold as a result of her advertising campaign, Glasses Direct found that each extra pair had cost them more than £400 in promotional costs.((Murray Wells’ advice evidently fell on deaf ears. Nancy Sorrell was recently revealed to be the new face of Pampers despite, as far as I can tell, not wearing nappies.))

Some you win.

11.3

Bringing to an end the formal part of the evening, Robert took back the microphone and announced that he wanted to make a prediction. More of a bet, really, concerning not MySpace or Bebo but the third major social network…

Facebook.

Facebook was founded in 2004, a year after MySpace, by Mark Zuckerberg, a student at Harvard. After arriving at Harvard, and keen to make new friends, Zuckerberg had become frustrated that the Ivy League university offered no searchable album – or face book – of fellow students. It seemed to Zuckerberg that such an album would be a great way to get to know his fellow students and also to put a name to the many new faces he met wandering around campus. So, at first on his own and then with help from friends, he decided to build one, calling it The Face Book.

The site was an immediate success and by the end of The Face Book’s first month of existence more than half of the Harvard undergrad population had signed up. Word soon spread to other Ivy League schools and, by popular demand, the service quickly expanded to cover Stanford and Yale. By April 2004 there were face books for the entire Ivy League.

Buoyed by this rapid growth, and seeing huge potential in The Face Book as a business, Zuckerberg and his friend Dustin Moskovitz quit university at the end of the academic year and moved to Palo Alto, California, to develop the service properly. They quickly closed a round of angel funding with $500k from Peter Thiel, who had previously co-founded the online payment site Paypal. By December, less than a year after The Face Book’s launch, the service had over a million users. As the number of users grew, so did the features offered by The Face Book – or just plain Facebook as it was renamed in 2005. Students could send each other messages, organise their social lives and generally keep tabs on what each other was getting up to during their college days.

At the end of 2005, Facebook boasted sites for students in over two thousand colleges and more than 25, 000 high schools throughout the US, Canada, Australia, New Zealand, and the UK and Ireland. With investment money pouring in, including a further $12.8 million in venture capital from VC giants Accel Partners, analysts were suggesting a valuation of up to $2 billion for the company, which at that point was still restricted to registered students – those with recognised academic email addresses. Then, on 11 September 2006, Facebook went global. From that date on anyone with an email address – not just students – could register on Facebook. A new open-to-all social network giant was born.

But the question remained: how much was Facebook really worth? And that was the subject of Robert’s bet at Mahiki.

He had been prompted by a comment made earlier in the evening by George Berkowski, then BT’s head of Internet strategy but soon to launch his own start-up – a dating site called Woo Me. Berkowski had seen details of a (rejected) offer by Yahoo! to buy Facebook for $1 billion and argued that Zuckerberg had made a huge mistake by turning it down. Robert disagreed. He was convinced that in a few years Facebook would be worth much, much more than ‘just’ a billion dollars, so much so that he was prepared to risk some money of his own. Standing at the microphone, Robert laid down his challenge: would Berkowski take his bet – that in four years time Facebook would be worth over $4 billion?

The stake: £1, 000.

Berkowski, a tall, brash Australian – every bit a match for Robert’s confident swaggering – immediately accepted the bet and the two men shook hands, to cheers from around the room.

The evening ended, as so many Internet People parties do, with ‘networking and drinks’. Which is, of course, a euphemism for ‘getting very drunk indeed’. My last memory of the night is standing at the bar, sucking on an enormous straw – one of half a dozen such straws – jutting out of a giant wooden treasure chest filled with luminous coloured booze. ‘This is great, ‘ I half-slurred to the beautiful Brazilian model whose mouth was clamped around the straw next to mine, and who was holding on to the bar with both hands. ‘What’s in it?’

‘Everything.’

‘Okey dokey.’

11.4

Facebook ’s rapid growth was both a blessing and a curse to Kudocities. Our main selling point, the ability to ask and answer questions about your city, had very little to do with social networking, and so wasn’t at all threatened by Zuckerberg’s continuing success. However, we were planning to make most of our revenue through things like private messaging, quick ticks, stealth dating and the like – all of them social networking-type features. With Facebook getting huge traction in London and offering far superior social features, not to mention millions more users, it was idiotic for us to try to compete on that front. We decided that when we launched the first proper version of the site we’d focus on our strong points – the questions and answers – and tone down the social features, instead making it a doddle for Kudocities’ members to invite each other to become friends on Facebook.

Our decision could hardly have turned out to be more prescient. A couple of weeks later, Facebook announced that it was going to launch a feature that would make it easy for sites like ours to build services (known as ‘applications’, or ‘apps’) which could integrate with Facebook. For example, we could build an app that would let users actually submit questions to Kudocities from the comfort of their Facebook profiles. Answers would then appear both on Kudocities and on Facebook and we would each take a share of the advertising revenue. Even better, it was a two-way street, making it easy for us to allow Kudocities users to become Facebook friends with each other and for Facebook users to sign up to Kudocities. This was perfect – and we had the advantage of having already decided to go down that route while other social networks had to scramble to figure out their Facebook strategy from scratch to avoid being left behind.

As a final added bonus, Facebook’s announcement had got investors all in a lather. Any company that was looking to raise angel or VC money for the next few months better make sure they have a Facebook app somewhere in their business plan. The next day, back in the office, we took out our working blueprint for Kudocities and added a new section…

Kudocities: The Facebook App.

The investors would surely be putty in our hands; if only we could find some who would actually talk to us. With money fast running out, and only Duncan and Max left to pitch to, it was time to create a bit more hype…

Chapter Twelve: ‘Relationship Status: Complicated’…