Paying up for MySpace

You have to wonder what Microsoft's (msn), Yahoo (yhoo) and InterActiveCorp's (iaci) Ask.com were thinking by letting MySpace go to Google. MSN has enough money and it's trying to validate its own search advertising platform. Yet it wouldn't pay up for MySpace traffic, which tend to go to Google to search.

MySpace had 45 million unique visitors in June, according to Nielsen//NetRatings.  And, about 10% of MySpace traffic leaves MySpace to go to Google, according to HitWise. Clearly, there was an opportunity for the other search engines to capture that search traffic. They let it slip away. Too bad for MSN, Yahoo and Ask.com. Also, Bill Tancer noted a while back that when MySpace had an outage, a lot of its users went to Google. Read Tancer's take.

Btw, if you were reading my MarketWatch blog today, you would have known the MySpace/Google deal was coming. It was posted before the close of the trading day.

Blogs.MarketWatch.com/bambi

Also, watch for my Net Sense column, in which I'll comment about the Google/MySpace and Google/MTV deal. Also, go to MarketWatch Tuesday for my video interview with FIM's Ross Levinsohn.
Watch out for my commentary tomorrow.
   

Comments

[Mr. Search]

Bambi you are better reporter than this. Pondering why three bidders didn't bid enough is the wrong question...winning a deal full of poorly converting inventory doesn't help a challenger, it devalues the entire network.

Fox wins in this in the short term as they pay for the MySpace acquisition with Google guarantees, but you should ask Mr. Levinsohn what he plans to do in three years...does he not think Google will ratchet payments back if there are no challengers left to bid his business up (if they weren't willing to go there this time) and if he integrates Google into the toolbar for search because his users at MySpace crave Google how does he pull that away from them in three years?

With regards to Google...right now, if 10% of their audience is leaving MySpace to search at Google where Google earns 100% of the revenue with no TAC, with this deal, they are giving 85% of the revenue away - that they aleady are earning - just to switch behaviors and ride the deal. You should ask Google shareholders why this seems like a good idea.

[BF]

Mr. Search:

You're right, signing up for nearly 4 years is a risk! But I think that means there'll be a lot more than just search ad listings between the two companies. Sure, Google doesn't get 100% of the search revenue if the searches are done on MySpace, but goog would have risked those search dollars altogether if myspace made a concerted effort to get its members to search on its site. It's unclear what they'll do to do that though. Good observations though! Thanks for commenting.

[John Rodkin]

I think it's a good deal for Google because they lock out Yahoo and MSN for long enough that the search war might be over when the contract renews. They have a lot of cash now, so spending it to protect their dominance while competitors are still fighting makes sense.

I agree with Mr. Search that it may not make sense in the long term for MySpace. Renewal terms are likely to be much worse, especially if this deal prevents Yahoo and MSN from cutting into Google's lead.

[WJPH]

It isf a good sitl 9