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Wed, Aug 09, 2006 - Page 10 News List

Google and MySpace sign US$900 million ad deal

AP , NEW YORK

Google Inc reached a deal with the owner of MySpace.com to pay at least US$900 million in shared advertising revenue and become the exclusive search provider for the popular online hangout.

Monday's deal, which marries the Internet's leading search engine with the top social-networking site, means News Corp will have essentially paid off the bulk of the US$1.2 billion it spent last year to acquire both MySpace and the online video-game company IGN Entertainment Inc.

Under the multiyear deal, News Corp's Fox Interactive Media unit will add Google search boxes to MySpace and other sites, likely by the end of the year, and Google will provide search results and keyword ads targeted to people's search terms. Google will also get first rights to sell any display ads not sold by Fox directly.

Queries

Because the primary reason people leave MySpace now is to conduct searches on Google, according to Fox executives, letting MySpace users enter such queries directly on the site allows it to retain visitors longer and thus boost its advertising potential.

But just as importantly for Google, the deal lets the search company benefit from queries at MySpace instead of seeing those ad dollars go to rivals Yahoo Inc or Microsoft Corp's MSN.

Google's payments, which are contingent upon Fox achieving certain traffic and other milestones that Google expects Fox to exceed, are expected to start early next year and run through the second quarter of 2010.

Driven largely by word of mouth, MySpace has rapidly risen to become the second-busiest site in the US, behind Yahoo, according to comScore Media Metrix. It has about 100 million registered users, about 90 percent in the US.

"We think it's important that we move Google to where the users are, and the users are moving to user-generated content and particularly the sites of Fox Interactive," Google Chief Executive Eric Schmidt told analysts and reporters.

MySpace offers a mix of features -- message boards, games, Web journals -- designed to keep its youth-oriented visitors clicking on its advertising-supported pages. Users stay connected by adding others as "friends" and expand their networks by meeting friends of their friends.

Google will power MySpace's in-house search, making friends and groups easier to find, said Ross Levinsohn, president of Fox Interactive Media.

Besides MySpace, the deal covers most of Fox's other sites, including IGN, AmericanIdol.com, Fox.com and Rotten Tomatoes. Fox Sports is not included because News Corp already has a deal with MSN.

Discussions

News Corp executives said they had discussions with some of Google's rivals, which they refused to name, and considered building their own search engine, but quickly concluded that Google was the best partner because the two companies shared similar consumer-centric goals. Negotiators worked nearly round the clock over the past five days.

Both sides said they expected additional deals beyond search, "many of which we can only guess on right now," Schmidt said.

Google and MySpace have been developing similar services, including Web journals, video and instant messaging. MySpace is planning to develop a browser toolbar that will integrate Google searches.

MySpace currently uses search results from Yahoo Inc under a smaller deal reached before News Corp bought MySpace and Yahoo acquired search-ad company Overture Services.

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