Google wins $900m MySpace deal
Published: 08 Aug 2006 17:45 BST
…Google's search tool from the network. That could also calm any fears the search giant might have had about an expanding and unwieldy force on the Internet — social networks — which could have proved a larger threat to the company without such an agreement.
The amount of traffic Google gets from MySpace has more than doubled, from about 4 percent early this year to 10.8 percent last week, said Bill Tancer, general manager of global research at Hitwise. When MySpace suffered a sporadic outage last month overall traffic to Google increased by about 4 percent from the previous weekend, he said.
"What I think that tells us is there are synergies between the two sites," Tancer said. MySpace is the biggest Web site in the US in terms of market share of visits, with more than 7 percent of all visits to any Web site in the US last month, according to Hitwise. The terms "MySpace" and "MySpace.com" are the top two search terms typed into search engines, Tancer said.
"When you have a site like MySpace growing at the rate it is, that tells us there is a paradigm shift happening with Internet users. There is a move away from static pages to interacting with (the Web) and posting your own site," he said. "I think it was a smart idea of Google to latch on to the leader in this space."
Traffic magnets
"So much of Google's volume of traffic was being generated by MySpace," said Greg Sterling, founder of Sterling Market Intelligence. "If they were to lose that search volume, that might be a significant chunk of traffic they would cede to someone else."
Google has taken a similar tack before. For example, it agreed to pay $1bn for a 5 percent stake in AOL. It also agreed to share search ad revenue with Dell in exchange for Dell pre-installing the Google Toolbar for PC and Web search.
The Fox deal is ironic, Sterling said, given that Google could have bought MySpace for about half the price that News Corp paid for it, according to an interview with News Corp Chief Rupert Murdoch in a recent issue of Wired.
Nevertheless, News Corp's Chernin said the deal will pay for the company's investment in MySpace on a 100 percent margin, and that the relationship will have a positive effect on revenue this year.
Under terms of the deal, Google will have additional rights to serve search and advertising to Fox properties in the US and overseas, except for two countries, which Fox executives would not disclose. MySpace executives have said previously that the social network plans to grow internationally, in countries including the UK.
As far as search is concerned, MySpace plans to mesh Google technology and ads with its own features for navigating the Web, member profiles, music, books and so on. Fox executives said that each MySpace member page will contain a Google search box, for example. The company also plans to release a toolbar that will incorporate Google technology.
Google ads will appear in the form of sponsored listings in search results and contextually targeted placements on MySpace pages. Google will also have first right of refusal to sell unsold display advertising on MySpace and other Fox properties.
Danny Sullivan, editor of Search Engine Watch, said the deal will be especially fruitful for Google when it comes to targeting ads within social environments.
"It's going to give them an incredible look into what's going on in MySpace. Given that MySpace is growing so fast, that's a cheap price to pay," Sullivan said.
News Corp's Chernin hinted that targeted advertising to members is the Holy Grail.
"The real potential for a home run is combining Google technology with our demographic information," Chernin said.
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