MySpace CEO Chris DeWolfe got a hero’s welcome when he showed up at his alma mater, the University of Southern California’s Marshall School of Business. His former professors surrounded him and shook his hand. Then DeWolfe walked onstage to applause from the 300 MBA students who packed the auditorium.

MySpace owes its beginnings in part to a paper DeWolfe wrote at USC. Five years ago, he and business partner Tom Anderson launched the social-networking site, which subsequently reigned as the hottest gathering place on the Web. In July 2005, Rupert Murdoch’s News Corp. bought My­Space for $580 million. The following year, MySpace entered into an exclusive ad-placement deal with Google for $900 million, giving MySpace the kind of revenue that has so far eluded competitors such as Facebook.

But the site has suffered indignities of late. Last year, it launched MySpace Music, boldly trying to tilt the recording industry away from charging for downloads and toward MySpace’s model of letting users listen to any song for free. But the music service has not caught fire. In the past few months, numbers have shown Facebook usage surpassing that of MySpace for the first time, giving weight to the sentiment that My­Space has lost its cool factor to Face­book. (DeWolfe says that 60 percent of Face­book users are also on MySpace, so they’re both cool.) In February, My­Space announced that it had ousted 90,000 sex offenders from the site, which was both good publicity (MySpace took action!) and bad (wait—there were 90,000 sex offenders prowling MySpace?).

DeWolfe was interviewed in the USC auditorium by Condé Nast Portfolio contributing editor Kevin Maney. While looking like a rock star in a slim-cut pinstripe suit, boots, and an open-collared shirt, DeWolfe often seemed to stick to savvy corporate answers. This is an edited transcript.

How has the economy affected MySpace? For the first quarter, year-over-year, our revenue was up 17 percent. We think we’re pretty well-positioned for the rest of the year.

Seventeen percent? Do you consider that good or bad? Good. I think in a normal economy, it would’ve been up 30, 40, 50 percent.

What’s the next big thing coming from MySpace? We’re allowing our users to export their profiles onto other websites. The internet is becoming totally mashed up. Imagine you’re on Flixster, which is a movie-review site. You’re probably not going to want to set up a profile on that site. You’re probably not going to be able to find any of your friends on that site. But if you can log in through your My­Space user name and password, you can see if any of your MySpace friends are on there too. You can write reviews and see which movies your friends recommend.

How about being compatible with your competitors, so a MySpace profile can be transported to
Facebook, or a LinkedIn profile to MySpace? We’d be fine with that.

So you’d like that? I think LinkedIn would be fine with that. I’m not sure if Facebook would. They’re not using any of the open standards. LinkedIn and MySpace usually use open standards.

Is that a conversation you’ve had with LinkedIn founder Reid Hoffman? No, but it’s a conversation we would be open to having. We think that you can’t really control the users. If users want to take their data and use it on any other site in the world, they should be able to.

How about Twitter? If Twitter wants to integrate into My­Space, that’s fine. Definitely more people are using Twitter. But it’s still very small. They haven’t proven in any way that there’s a business model around it, and I think it’s going to be difficult.

Are you looking at a location-based service so you can tell where your MySpace friends are in the real world—like whether they’re at a certain bar or at home? Yeah, we’re kicking it around. But then it gets a little bit creepy. [Laughs.] I don’t think I would use that myself.

What is MySpace going to be like five years from now? You’ll see MySpace on virtually every site. And then, MySpace.com will be your home on the internet, where you’ll be able to get whatever it is that you’re really into—from your Gmail to your newsfeeds. The other primary trend that we’re seeing right now is a big switch to mobile. And we’re working really hard on continuing to improve our music product.

About MySpace Music—what are you learning? The revenue model is really in tune with the one that Ticketmaster and Live ­Nation are trying to adopt, meaning the money is no longer in CD sales. It’s in advertising, live events, and merchandise. So we have the advertising piece down, and we have the download piece down, and we’re going to be adding a ticketing and merchandise piece. Together, it makes for what we think is going to be a profitable business in the next couple of years.

What about Facebook? Is that your biggest concern? From a pure social-networking standpoint, the sites are very different. Face­book has definitely done a great job. They’ve created more of what they would describe as a social utility that makes it really easy to send messages and manage your address book, which makes them successful. But they haven’t focused on monetizing much.