[Editor’s Note: Original version has been modified on or about February 5, 2007.]

Mark was my indirect boss for 6 months.  I knew him for about 2 years.

Am I surprised to see Mark leave?  To some extent.  Am I surprised Mark stuck around so long?  To some extent.

Mark is a smart guy.  Problem is, he will tell you just how smart he is.  Don’t get me wrong, Mark holds a Masters of Business Administration from Stanford University and a Bachelor of Science degree in Electrical Engineering from Princeton University.  As well, he was a McKinsey consultant at one time. 

Fox Interactive runs into problems: COO LEAVES; MYSPACE TRAFFIC FALLS; YOUTUBE GOT AWAY.

Despite supercharged growth in the 18 months since News Corp. created Fox Interactive — a now 1,400-employee unit that oversees Fox’s Web sites, including MySpace — the division isn’t having the best of fall seasons.

In the latest sign of problems, chief operating officer Mark Jung quietly stepped down earlier this week, just nine months after his appointment. Jung had cofounded and was CEO of video gaming company IGN Entertainment, which was sold to Fox in September 2005 for $650 million in cash.
First on Mercury News last night, then tonight again on PaidContent.org.

It was one of those “double-take moments” that edged on the brink of “not exactly shocking” and “really?”

Mark Jung was one of those “dot com” executives who had seen the rise of the Web, lived through the maddening fall and endured to reap the rewards of the Web’s subsequent resurgence.  He had co-founded IGN with Ted’s Chris Anderson - then known as Snowball.com - built up the company to 300-400 employees only to have to let go of most and lived long enough to learn and profit from the experience.

When Mark Jung’s IGN acquired my former employer, talk was swirling about an IGN IPO in late 2005.  The company was on pace to generate some $75-100M in revenue in 2005 and had recruited Dale Strang from Ziff Davis’ gaming unit to oversee the media properties that had fueled IGN’s revenue growth.  Mr. Strang remains one of the most knowledgeable people in the media space I have ever met and I enjoyed every single in-person, phone and email exchange we had (yes, there’s an inside reference there).

Of course, not due to any management shortcomings, IGN was never fully profitable, and the drain had to do with a) IGN’s content being anything but user-generated (and thus somewhat expensive to produce vis-a-vis content found on social networking sites such as MySpace) and b) IGN had invested heavily in platforms for in-game video advertising and digital downloads.  The latter having being acquired in IGN’s merger with its one-time competitor GameSpy.  Somewhat merger, somewhat acquisition: IGN acquired Irvine, California, rival GameSpy in March 2004 for $53.3 million in cash.  IGN had a 2004 loss of $18.9 million and judging by News Corp.’s financial statements also lost money in 2005.

What the GameSpy merger did (it was an acquisition but was somewhat billed as a merger of equals, with new igngamespy.com company url and all) was consolidate the #1 and #2 in the video game publishing space.  The company had agalmated the so-called hard to reach and elusive 18-24 and 18-34 male demographic. 

When the dust settled from the GameSpy deal (not to be confused with CNET’s Gamespot, currently the #2 after IGN in the space), Gamespy’s founder Mark “The Freshmaker” Surfas (no idea what The Freshmaker refers to…) left after cashing out, because, well, that’s what successful and visionary founders do when they get bought out.

I never met Mr. Surfas, but I can imagine that there was probably not enough room in the joint for the two Mark’s even though the combined company was sprawled between LA and SF.

This is an important consideration, because I respectfully think that the Mercury News sensationalized the story and probably got the details wrong: in two bold moves, FIM became the best positioned media company, and the credit for that goes to Rupert Murdoch and Ross Levinsohn first, but by association it also goes to IGN and MySpace. 

Of course, I am a not-so-inside insider because I departed IGN’s fiefdom back in December of 2005 after I became redundant and unnecessary given IGN’s deep bench.

IGN had one of the deepest benches in digital media.  That is for sure.  That’s also why I was surprised when IGN sold to News Corp. for a massive $650M in September 2005.  On the day the news broke, rumors were swirling that both Sumner Redstone’s Viacom and Rupert Murdoch’s News Corp. were interested in IGN.  Not only did IGN provide a gateway to men 18-34 and offered News Corp. with a considerable platform to promote its assets on the Web, but News Corp. secured some of the most seasoned managers available online.  Maybe that’s why News Corp. paid 40 times EBITDA for IGN.

IGN had paid only 12 times EBITDA for my employer, so Mark Jung effectively help make his shareholders a net 28 times EBITDA in just a few months by buying us.  He also acquired a potential competitor and totally consolidated the lucrative men’s space.  If that’s not vision and execution I do not know what is.

What made the IGN deal somewhat surprising was that IGN was the second major $500-plus million deal pulled off by Rupert Murdoch’s digital dean Ross Levinsohn.  As CEO of News Corp.’s online unit, Fox Interactive Media, Mr. Levinsohn had previously pulled off the “deal of the century” in buying the assets of Intermix Media for $580 million.  Intermix, it should be noted, owned the popular Myspace social networking site.  While eyebrows were raised by many, MySpace turned out to be the deal of the century.  At one extreme, RBC analyst Jordan Rohan came out and put a bullish potential value of $15 billion for Myspace by the end of the decade in 2010.  Maybe this is why Intermix co-founder Brad Greenspan has fought diligently to undo that deal.

The reason why all of this context is important is that no matter how great the IGN deal was for News Corp., at least externally but also internally within News Corp.’s upper management ranks, MySpace’s 300% growth since the deal made it the media and financial darling while IGN got less attention.  IGN’s digital download and in-game advertising platforms are great assets, but the markets are still somewhat novel and nascent.  Its digital media properties will fuel FIM’s revenues for years to come.  All in all, the portfolio that Jung assembled is second to none.  I was surprised IGN did not go public, especially since it had filed to do so anyway.  There are not that many attractive new media IPOs these days, so despite being unprofitable, my gut says that the market would have greeted them well. 

When the deal was announced, conventional wisdom states that the upper ranks of Fox Interactive Media would become crowded.  Dale Strang was running the media properties within IGN, Ross Levinsohn was running FIM as CEO and doing an amazing job with Mr. Murdoch’s mandate while the wonderboys at MySpace were getting all of the press’ attention.  Before even pulling the Myspace and IGN deals, Levinsohn grew FoxSports.com (which he was in charge of) from less than 800,000 unique users a month to averaging more than 10 million users per month.  Once he accepted the digital czar role, then he did even more by beating Viacom not once but twice. 

Of course, when such deals are made, CEO/founders are rarely free to walk, so the initial spin was that Mr. Jung would remain in his position. 

In March of this year, Jung was transitioned to COO of FIM (and Scout’s founder Jim Heckman was made Chief of Strategy).  

But it was pretty clear that integrating personnel at the top would be as hard as integrating assets and digital platforms.  The MySpace guys were told that they could run the company as they saw fit, yet Jung was made COO of all of FIM.  Want to see what we mean:

From NYT:

The bigger opportunity, however, is not so much selling banner ads, but finding ways to integrate advertisers into the site’s web of relationships. Wendy’s Old Fashioned Hamburgers, for example, created a profile for the animated square hamburger character from its television campaign. About 100,000 people signed up to be “friends” with the square.

Fox officials wonder whether this sort of commerce, built on relationships, can be extended to small businesses. A Ford dealership in, say, Indiana could create a profile, said Mark A. Jung, the chief operating officer of Fox Interactive. The profiles themselves, he said, would probably be free, but MySpace would sell enhancements to help businesses attract customers and complete transactions, Mr. Jung said.

Yet here is another place that executives at Fox and MySpace don’t see eye to eye. Mr. DeWolfe discounted the idea of people creating profile pages for small businesses. “If it was a really commercial profile — the gas station down the street — no one is going to sign up to be one of their friends,” he said. “There is nothing interesting about it.”

For now, Mr. DeWolfe said, he has more down-to-earth plans. With the News Corporation’s help, he is opening an office in London to coordinate MySpace’s expansion in Europe. He is cutting deals to let members connect to MySpace over cellphones.

At the time, I was surprised that he would remain in a limited role given Jung’s track record, education (he holds a Masters of Business Administration from Stanford University and a Bachelor of Science degree in Electrical Engineering from Princeton University) and experience (Mark was the chief executive officer and co-founder of Worldtalk Corporation, an Internet security company that he took public in 1996 and that has since merged with Tumbleweed, his second IPO was Snowball.com’s, who was taken private in 2003 by Great Hill Partners in Boston).

Great Hill owned some 40% of the company when News Corp. bought it, effectively making a mammoth return off its investment.  And while it’s no one’s business but his, Mr. Jung owned a cool 14%, so suffice to say that he did not exactly need to remain in any position were he not happy.  Of course, happiness is somewhat relative: Mark had a lot of ideas for MySpace (such as using it more for merchants and commercial transactions) that probably were not received so favorably by Myspace’s founders.  At some point, if you are the COO of something, you need freedom in operating it.  I doubt that this was the case since MySpace was not to take orders from anyone and Mr. Levinsohn had proven his Midas touch to the boss of all bosses, Rupert Murdoch.  It was simply a crowded backfield, too many cooks, all the cliches apply here.

Where will Mr. Jung find himself?  Well, if he wanted to start a company, he’d have VCs lining up to offer him as much cash as he wanted to start any project.  VCs don’t have a rule against backing arrogant types.  Mark’s idea of motivation was telling an editor who made $20K per year that he replaced his Mercedes S55 AMG with a red Ferrari.  Yeah, I guess that is motivation and all.

Anyway, at this age (he’s certainly not old by any stretch of the imagination but he’s also not in his 20s) I doubt he really wants to start a new company from scratch.  If he’s allowed to do so (which I doubt), one position he might fit in well would be CNET, whose CEO Shelby Bonnie resigned amidst a backdating option scandal.  Though I certainly assume there’s a non-compete agreement that would prevent it from doing so (though I am not sure non-compete hold much water in California).  But, what do I know about non-competes?

But since he’s never run a publicly-held corporation (and News Corp. would never allow him to walk over to CNET), so there’s Yahoo! who might want a savvy #2 who is more online oriented than Chairman/CEO Terry Semel.  Read more on that here.

If none of this pans out, my gut says that he might either pursue his PhD (yes, that’s more of an inside reference if he’s reading) but he will probably start or join a VC fund.  If not that, he might also joing an investment bank, since in his tenure he orchestrated a stunning array of acquisitions (previous to the dot com experience, he was a McKinsey consultant). 

Acquisitions include: 

- Gamespy for $53.3 million in cash.
- Rotten Tomatoes for $7.8 million.
- TeamXbox, an XBox-only gaming site, for $610,000 in cash.
- 3D Gamers, a rival video game news site, for $2 million.
- AskMen.com for $13.5 million.

Is there anything to suggest that Jung’s departure was less than cordial?  Maybe.  There were integration issues going back to earlier this year.

Is there anything less rosy about Mark that might have explained his departure?  Maybe.  But there’s always something about someone.

The simple truth is that at FIM, he was not the boss.  He probably did not get this way all the time, and that meant that when he was no longer happy with the structure, he took his ball and left the playground.

[Editor’s Note: Original version has been modified on or about February 5, 2007.]

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