Even while parent company News Corp. continues to try to disrupt the Microsoft/Yahoo merger, Fox Interactive Media (FIM) is rumored to be in negotiations with Microsoft take Google’s place as the MySpace advertising partner.
The Google-FIM deal, first announced in August 2006, obligated Google to make guaranteed minimum revenue share payments to FIM of at least $900 million based on Fox achieving certain traffic and other commitments. But the original deal was negotiated in extreme haste, say people with knowledge of the deal. In February 2007 the parties were rumored to be working on the final agreement, months after ads were already being served by Google. That long form agreement was never actually signed.
In Google’s haste to keep the deal from Microsoft they may have paid more than they can stomach.
According to our source, Sergey Brin’s thinly veiled buyer’s remorse verbalized during Google’s most recent earnings call on January 31 angered News Corp./FIM execs:
We don’t talk about individual partners’ performance or anything like that. Now I do want to highlight though, we have had a challenge in Q4 with social networking inventory as a whole and some of the monetization work we were doing there didn’t pan out as well as we had hoped. But we are continuing the efforts and we are still optimistic about future quarters.
…we have a huge amount of social networking inventory, including the MySpace relationship, including of course Orkut, our own network, which is very, very successful and probably like 20 others, or something like that. I don’t know the exact number. But we have an incredible amount of this inventory and in fact, it varies quite a bit in how it all monetizes, based on a number of factors, some of which we understand, some of which we don’t.
…I don’t think we have the killer best way to advertise and monetize the social networks yet. We’re running lots of experiments. We had some significant improvements but as I said, some of the things we were working on in Q4 didn’t really pan out and there were some disappointments there. I hope to be able to report more progress in the future but it’s a big opportunity because it’s so much inventory.
The vast majority of social network traffic that Google serves ads into is controlled by MySpace – this was a direct complaint about that deal. Shortly thereafter, our source says, FIM started discussions with Microsoft about taking over the advertising inventory. Microsoft announced a guaranteed payments deal with Facebook just two weeks after the initial FIM/Google deal. I’m sure they’d be very happy to get their hands on MySpace traffic, too. And if anyone has more money to burn than Google, it’s Microsoft.
What we don’t know is what kind of termination clauses are included in the existing agreement. But Google seems to be saying publicly that they wish they had never entered the deal. Perhaps now, with Microsoft waiting on the sidelines waiting to play sugar daddy, MySpace will suddenly be sexy again.
Update: A FIM representative says on a phone call that FIM is not looking to get out of the Google deal at this time, but would not comment on whether discussions were occurring with Microsoft around advertising.
Hopefully now more advertiser money will be available for smaller publishers.
I doubt it.
I think Microsoft was smart to invest on social networking.
e.g. they bought 2.5% of facebook for hundreds of millions.
Now it is cash time.
With $900M , Google could have purchased other social networking websites like badoo or take a stake in these websites. It would have been more rewarding in the long term.
Nowadays, keeping competitors away seems to be really costly and burning money is a temptation they can’t resist.
http://www.myaboo.com
Who are the SOURCES that keep being referred to.
Are they leaking these stories with the permission of SERGEY as negotiating strategies …
or
Are they just high level employees with big mouths who blab via social engineering
Hopefully, it is the former.
It now appears that the Top Google leaks are first Leaked to Wall St Journal – and the B-Level leaks are given to TechCrunch if they dont quality as WSJ material.
But it is interesting how leaks to popular media resources are being used for strategic negotiations. One wonders whether they are done via email or over the phone
The two leading online social networks in Russia have millions of users every day and some offline advertisers already experiment with selling banner ads there. However, a cpm rate is very low http://blog.qui...orks-in-russia/
Not really good to go and anger the google gods.
http://www.tech-exposed.com
I’ve always thought this was a joke and unsustainable. FIM should’ve purchased their own ad server(s) like Quigo and Tacoda, to learn to monetize their own inventory, which has to be a core competency.
I advertise with Adwords extensively and use their Content Network (Adsense) to show my ads and for my particular business MySpace traffic is some of the most useless, low quality traffic around.
Tons and tons of volume but craptastic ROI so I have long since blocked showing my ads on MySapce.
From what I have read around the web I am definitely not alone on this.
So what if Microsoft ends up with their ads on MYSpace or every other social network around. If their advertisers don’t profit from the traffic neither will Microsoft.
I’m betting Google will be more than glad to lose MySpace to Microsoft.
The end result will be Google can report better profit numbers once MySapce expenses are no more and Microsoft will take a financial hit in their numbers.
I’ve been very disappointed with google ad earnings recently. Some days it dips down into a cpm in the 2s. It used to be 3-6
Jenkins-
That said, MySpace has their own adservers, they just can’t fill all the inventory themselves. And without some extra level of targeting, social network inventory is next to useless (and even with a better level of targeting it’s not fantastic).
When I attended OMMA Behavioral earlier this month, a senior speaker from FIM said roughly that their “hyper targeting” has drastically improved revenue for them (I believe he actually said average CPMs were up around 50%).
@Jenkins: FIM did exactly that with the Feb 2007 acquisition of Strategic Data Corp:
http://mashable...ads-on-myspace/
having a MySpace in the back pocket – i dont think Murdoch and co would spend fortune on “moving to next phase” Google and Facebook.
Quite exxxxxxxxxxpected.
http://yooflix....earchVideo.aspx
I don’t believe Google can’t make hay on MySpace. No one contextualizes better. Take a look at Adsense for video on their new partner sites. It’s amazing how well matched the ads to content is. Take a look at some of the vids on RooTv to see what I mean.
I suggest Brin, sensing the impending loss of the FIM deal to MSFT came up with a ready made excuse that they were losing money on the deal.
Softens the blow of losing them.
With both the amount of content and eyeballs in the social network space – led still by MySpace – you can be sure, I really think, that this will be seen by the heavyweights for the valuable real estate that it is.
That having been said, no one likes to overpay (a relative term perhaps in an evolving market), and there can be frustrations with finding suitable technologies that enable monetization to a degree that justifies such sizable investment in the short term.
1. if the deal went sour, google retreats, other retreats.
2. myspace rev go south
3. other SN valuation go south
4. all SN go down
Jeremy,
I totally agree with you. The traffic from myspace is useless and I can not think of any advertiser who would think differently. For example, if you are advertising for tattoos, your add would show up on a page with a picture of someones tattoo. It ridiculous to think that people will actually purchase something when looking at their friends photos.
This deal would be a godsend for Google. They get rid off Myspace which has declining stats and is awash in spam, on top of that their bitter rival Microsoft makes another dumb move and will be forking cash for nothing. Seems for every right step Google makes, Microsoft makes two wrong ones. No wonder they’re way in back. If it wasn’t for the Windows and the Server divisions MS would be the new Novell.
Like it would matter. Sucks for FOX.
In the context of Microsoft’s Engagement Tracking announcement today, MySpace might have a lot more value to brand advertisers than just the clicks and immediate conversions. Enter this inventory into a combined drivePM / Right Media / Blue Lithium network arrangement (if Msft / Yhoo combine) and let it compete against the CPC bids from adCenter and it could get extremely interesting…
Mike –
Contextualization is only of limited value in a setting like myspace (or other social networks). Content isn’t the driver on these sites. The better monetization strategy is with targeting data about users themselves as they go around myspace. And even then, there are so many pageviews as people go about different things that each individual ad is worth so little. Where ads might work well on content sites where people are actively (to some degree) looking for information, on social sites they tend to be focused on user oriented activity (messages, friending, etc) and not particularly open to ads.
James,
I agree with you that most social networking sites are more focused to user oriented activities such as message, group, friending, etc. Not much as to advertising activities. But would be interested to see like what M. McMahon mentioned if MSFT/YHOO adpower combined moving forward in the Social Media space.
Google doesn’t have the same thing that Facebook social ads has — Google can only do their own thing and do everything based upon contextual advertising, not social network analysis. If Google wants to enhance their ad engine with the social networks, they’ll need to come up with behavioral and psychographic targeting capabilities as well as social network analysis will need to be done. Imagine having the ability to send your ad message out to the largest influencers on Facebook and MySpace, that would be the perfect sale to ad agencies and advertisers alike.
It’s just not cutting out too well for Google in that space, they need to focus
Google really has to cut it immediately – their advertisers are likely unhappy with the results of their ads up on MySpace. MySpace needs an ad engine like Facebook’s — Close-knit based upon interests as well as other sections of psychological influence
iCluck SEO-
They have it. They rolled out “Hyper Targeting” which works in a very similar manner (target based on interests and such). From what I heard from a FIM senior manager speak, it’s doing quite well for them.
Affliate Expert-
I definitely agree, the key to this inventory is to combine other methods of targeting, rather than contextual which has questionable value there (of course, some studies point behavioral providing better lift than contextual in general, so it’s no wonder it does better for this type of inventory).
Didn’t google say they have yet to find a good way to monetize myspace anyway?
this is a lovely comment
It would be nice if you guys (TechCrunch) would post with a bit more caution:
http://www.news...9878366-36.html
You have a large crowd and such carelessness is disheartening.
FIM has always been an interesting company to watch. A bit of solid plans along with a bit of building the airplane while you fly it.
I like the Lotame approach and also Behavioral Remarketing. Blue Lithium and Right Media have been doing this with success on MySpace and other Social Media for some time now.