Technology

Google Gets Back into MySpace


How much are friends worth? To Google (GOOG), almost a billion dollars. The search engine giant said on Aug. 7 it will pay News Corp. (NWS) more than $900 million to serve as the search engine for MySpace.com and other sites under the media giant’s Fox Interactive umbrella.

Under the terms of the multiyear deal, Google will provide search capability for Fox Interactive Media by the end of 2006. It will continue to serve as the search engine until at least the second quarter of 2010, when the deal expires.

MySpace is attractive to Google because it has a massive audience to view Google’s search ads. In July, nearly 45.8 million people visited the site, according to Nielsen NetRatings. Many of those users generated search traffic for Google, which had previously been MySpace’s search engine. Other Fox Interactive sites such as AskMen.com and Rotten Tomatoes video review site have considerably smaller, but still significant, audiences.

SEPARATE DEAL WITH MTV. "We believe that our innovative technologies will be of real benefit to Fox Interactive media’s growing number of users," said Google CEO Eric Schmidt in a statement. "MySpace.com is a widely acknowledged leader in user-generated content and incorporating search and advertising furthers our mission of making the world’s information universally accessible and useful."

Google’s real goal, however, seems to have a stake in every major source of Internet advertising. The Myspace deal came on the heels of a separate agreement with Viacom’s MTV Networks (VIA) (see BusinessWeek.com, 8/8/06, "Google's Duet with MTV") to distribute video content and ads via its extensive AdSense network. "If it is close to as successful as Adwords has been it will be a pretty major new trend," says Piper Jaffray analyst Safa Rashtchy of the deal.

Late last year, Google acquired a 5% stake in Time Warner’s AOL (TWX)—shortly before the company announced plans to aggressively move into the online advertising space and abandon much of its subscriber revenue. It also agreed to share search advertising revenues with Dell (DELL) in order to have a Google search toolbar preinstalled on Dell’s units.

MASSIVE AUDIENCE. The News Corp. deal is clearly a boon for the company. It bought MySpace for $580 million about a year ago and has now almost doubled its money.

It also makes sense for Google to use MySpace to solidify its hold on the online ad market. Online advertising spending is set to reach $16.7 billion this year, according to research firm eMarketer. The company is projecting that revenue stream to balloon to $29.4 billion by 2010.

Google’s stock rose more than 1% on the news in after-hours trading.


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