Posted by: Burth Helm on August 8, 2006
So Google is partnering with MySpace, guaranteeing the social network $900 million over three years for the privilege of putting little text advertisements next to search results on its pages.
My quick take: This is a great example of how Google leverages its vastly superior advertising technology to make itself even more powerful. It’s better at targeting the advertising to users (try this: type “dog park nyc” into Google, Yahoo, and Microsoft search engines, and see what ads come up), and its margins are the fattest in the industry, and only getting better. That means Google can make a lot more money out of the ad real estate that sits next to search results than any other competitor. Then it can offer companies like News Corp a lot more cash up front to secure the blockbuster deals.
Tough luck for Microsoft and Yahoo. They sorely wanted the huge slice of the market that MySpace represents, especially after losing the chance to sell ads next to AOL’s search results to Google last year. But no matter how generous a revenue split Microsoft or Yahoo offer up, Google’s technology gives it the edge. And no one - certainly not News Corp. — is going to turn away that fat $900 million check.