Does Google really love MySpace ?

MySpace.com was founded in 2003 and bought in July 2005 by Rupert Murdoch’s News Corp. NWS.
For those of you who do not know about MySpace, here is a quick introduction from Wikipedia.org

MySpace.com is a social networking website offering an interactive, user-submitted network of friends, personal profiles, blogs, groups, photos, music and videos. MySpace also features an internal search engine and an internal email system. It is currently the third most popular website in the U.S. They crossed 100 million accounts in August 2006, with a news story claiming the site attracts new registrations at 230,000/day.

Google-MySpace Deal 2006
This kind of website is definitely going to attract attention from the big boys like Google GOOG, Yahoo YHOO Microsoft MSFT and eBay EBAY. Google struck a $900 million advertising deal with MySpace 6 months back. Google wants to provide Google search tools on MySpace and run Google ads. This will benefit Google by allowing them to promote themselves and their advertisers to a huge community. In return Google will pay News Corp, $900 million in ad revenue over the next 3 years. Win-win for both !! But there is more…

Roadblock
Before the Google deal goes through, MySpace wants to strike some more deals, especially with eBay. Now this would be a cool feature for MySpace users. This deal would allow MySpace users to buy and sell products. Additionally eBay’s payment system PayPal would become the means for payments. This will benefit eBay generate more revenue from the merchandize sale and payment processing fee. In return MySpace can expect a big chunk of revenue.

Google-MySpace Deal 2007
Obviously Google is not happy with the eBay-MySpace deal. Google’s listing service Google Base and their recently introduced payment service GCheckout will take a hit. Add to that Google has realized that people looking up different profiles dont really care about clicking the ads and therefore is not turning out to be a good source of revenue. So what does Google do now ? They will be renegotiating terms of their deal with News Corp. Meanwhile, MySpace has grown in audience and will be looking for more cash. This one is going to be tricky from both ends. That said, I am sure Google will not completely blow off the deal since it will keep competitors like Yahoo and Microsoft at bay.

Recommendation: Keep close eye on how the deal folds. This would affect the way these big boys do busines in the next year or two.

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  • Great article!

    It will be interesting to see how newscorp monitizes the immense traffic on MySpace. With YouTube now offering shared advertising with its content providers, it would be fantastic if Myspace did something similar as well.

    -AppleOracle