The landmark search advertising deal between Google and News Corp. is set to expire on June 30, 2010, just a little more than a year from now. The $900 million deal, announced in August 2006, has little chance of being renegotiated on similar terms, say sources close to the company. That means MySpace, which accounts for most of the revenue generated from the deal has just a year left figure out its go forward revenue strategy.
Until now the details of the contract have been kept confidential. But we’ve recently reviewed a copy of both the original agreement (a binding term sheet) as well as the amendment signed in 2007 – in fact I’m reading it right now. The guaranteed payment clauses, which lay out the dates and sizes of the payments due to News Corp., call for $300 million to be paid by Google over the final year of the agreement. Here are the revenue guarantees:
January 1, 2007 through June 30, 2007: $50 million, paid quarterly pro rata
July 1, 2007 through June 30, 2008: $250 million, paid quarterly pro rata
July 1, 2008 through June 30, 2009: $300 million, paid quarterly pro rata
July 1, 2009 through June 30, 2010: $300 million, paid quarterly pro rata
All MySpace has to do to get the guaranteed payments is make certain search page view requirements. They’ve made those page view requirements easily, says our source, mostly by destroying the user experience. Any search on MySpace by default returns Google web results, which is rarely what the user wants to see. But MySpace has a history of monetizing their site to death, damn the user experience. That may explain part of the rise of Facebook at their expense.
For their part, Google is said to be unhappy with the results. Perhaps it’s because MySpace is tricking users into doing Web queries, but click through on ads is rumored to be abysmal, and conversion on those click throughs is even worse. In other words, Google, Google advertisers and users are unhappy, but MySpace is just fine, thank you.
One part of the deal which is reportedly doing well is display advertising, which is separate from the guaranteed revenue payments. Google is able to offer display advertisers deep reach into MySpace’s tens of millions of users, our source says. But it’s not clear MySpace, which has its own sales team and self service ad product, is all that interested in Google display ads going forward.
At this point Google probably feels like it’s paying off a mortgage on a house worth half of what it paid for originally. They may be glad to just be able to walk away from it all as soon as possible.
I’m believin for their comeback!
long live myspace. they should mend their ways before even twitter overtakes them.
MySpace, it is high time, you grow! The core team has changed but still there is no change happening in the site. Definitely Google should be happy with the deal ending in 2010.
@long live: Twitter is yet to overtake MySpace? It is already way ahead of it…if you doubt what I say, ask MG of TechCrunch. He will tell you better.
lets give some tips. Myspace should have some good homepage, showing “streams”! That should be control and command room, with all ajax things.
what is up with the out of date ads on Techcrunch?
screenshot:
http://hollywoo...l.com/nhl07.png
Federated never would have let that happen!!
Good catch Mike, I think Google got trapped trying to buy “the next big thing,” just like the Youtube and Skype deals, without doing a longer term analysis.
A lot of people/business’s are getting caught up in the next big thing all the time. The problem is society needs to realize we are just doing the same things we have always been doing, socializing, sharing content, stories, and music. That has been the same since the beginning of human interaction.
To truly harness any new product or service, you have to be sincere, address a real human need, and be open to community based discussions.
It’s simple. Yet somehow society always forgets this!
Skype belongs to eBay, not to Google.
Get your facts.
I believe that was in reference to the reported Skype deal that never happened
The “next big thing” is an elusive myth. We look at a shining startup and think it is the next big thing, but down the lane, it turns out to be the next worst thing on the web. The life of the next big thing lies in “becoming” or having the potential to become the next big thing as there is no startup which can both “be” and “become” the next big thing.
MySpace was glittering long back, but now, it is not. There will also come a time Twitter would become a thing of the past or may deteriorate.
‘be’ can only be ‘were’, else ‘be’ is incomplete! Complete would be a word missing before ‘be’: ‘possibly’ : D
next big thing is a reality for some. created by the early internet pioneers that put there head to the grindstone and never surrendered.
most people dont have the capacity to fathom innovation. you would have had to boldly have gone to a place no one has gone before to find true innovation.
there will be a next big thing. its already here slapping you in the face. a “diamond mine” in the rough. the motherlode.
BigLocator.com – size matters
ohmygodyouareanidiotlocator.com — reread your post and realize that you said nothing of any value — again. You can’t spell (”there” instead of “their”), misuse quaint sayings (”head to the grindstone”, how about “nose to the grindstone”, idiot), and call people out for not having the “capacity to fathom innovation”! What is so innovative about your useless site? What does it do? How does it help anyone? What do you do other than post your inane blather on TC to offend our collective brains? Is is just so you can put your meaningless “XXXlocator.com” BS at the end of every post? No one cares. Go away.
funny……people like Germ have never said that they have something better or look at what ive been working on, or this other startup has more potential. Germ when you mature and can stand up for who you really are, and have a business startup to share with the world load it into crunchbase. if you dont have a crunchbase link, your not in the game. till then Germ your just another fanboy heckler in the bleachers with a mask on wearing a skirt. dont be a sissy.
PlayLocator.com – get in the game
You’re spot on about MySpace not being interested in Google’s display ad product. MySpace has spent considerable energy collecting information about its users desires by parsing through their messages. It’s using this analysis to aggressively target those users not based on the content they are reading but based on what is recently happening in the user’s life.
How’s this any different then the technology google uses for gmail?
Unless they are late on any payments up until June 20, at which point the interest rate doubles, a late fee is assessed, and charging privileges may be suspended.
R.I.P. the good times?
Why did Google do this again? They could tell by looking at myspace resource sites running adsense just how horrible the cpm was going to be. And why in the world did they agree to pay them through 2010? Myspace will be a dead man walking by then. Even their supposed bright spot, MySpace Video, is losing ground to Hulu etc. and other video sites.
Google should have realized how fickle social networking users are. By 2010, Myspace will be an empty carcass, and Twitter will be owned by a giant conglomerate and boring. Time moves at light speed in the social networking realm.
Given your analysis why would anyone buy twitter?
It makes for good publicity today. Oh, and they are not going to make any money off twitter anytime soon, either.
Google never stops surprising me. Its weird how they claim to be so very data oriented, and yet fell into this. The best thing for them would be to walk out of this as soon as it ends.
They are data oriented, but having a lot of data doesn’t imply that the data is useful to solve the problem you are interested in.
Google saw traffic with myspace and youtube (and skype although ebay outbid them), and went after the traffic.
Google assumed that they could monetize the traffic regardless of the source / type.
- if you hire only egg-heads with PhD whether they design your search engine, or clean your floor, you should expect those PhDs to be smarter than 12-years old and ask simple question: how are we going to make money on it.
Google MADE mistake doing what they did (deal with MySpace), you can see it now, you could see it then!!
Anyone else noticed that MySpace is actually usable now? I give them credit for the improvements over the last year or so. You can thank Facebook for giving them fierce competition.
With that said, I think Google can spend their money elsewhere for better returns.
This is the type of stories I want. Not who Twitter is sleeping with.
hehe
You guys should read in Stealing MySpace how google got in this mess.
Apparently google did not even submit a bid for this. Then some dude on their board found out while in a social get together with murdoch/fox interactive teams. He called up Sergey, screamed at him to get a deal done, got Sergey over and signed the deal within days.
Otherwise yahoo would’ve been stuck with it, even though their bid was 700M I believe.
LOL. Does that guy still have a job?
“Then some dude on their board found out while in a social get together with murdoch/fox interactive teams. He called up Sergey, screamed at him to get a deal done, got Sergey over and signed the deal within days.”
Ok…and where does Schmidt fit in to this story? Sounds a little suspect, that’s all.
Prolly because Sergey + Board Member > Schmidt
Yeah, it is kinda interesting. I don’t recall reading Schmidt’s name once in the story.
According to “The Google Story” by Vise, Google’s VCs forced them to hire Schmidt (or some other “real CEO”), and if they didn’t, the VCs were going to pull all their funding. So, I would be surprised if Sergey + board member > Schmidt. But it’s all complete speculation. Maybe in the story you read, this “mysterious board member” actually was Schmidt.
It wasn’t Schmidt. And the board member wasn’t mysterious. I just don’t remember the dude’s name. I want to say Doerr?
Another tragedy of this btw was that Scout.com’s founder–which fox interative had recently acquired–was made in charge of negotiations.
The “fun” get together of Fox interactive execs turned into lotsa work…and eventually led to their separation.
OK now go buy the book:) I havent read a complete book in ages. Finished this one in a day. Mind the last couple lame chapters.
What, you’re not going to post the agreement? What kind of journalist are you? Such a tease!
god danmm google spend so much money everywhere and the result are very slow to come… anyway google can’t make it in the social world… from youtube to myspace to their own social network ( orkut I think lool ) .. they simply can’t .. they need a new angle… a new ad model… like adsense/adword was for search.. they need something new for social.. cause right now they floppin every project….
Not a bad deal for MySpace. I wouldn’t complain
Good investment on New Corps milked the Social Media craze for what it’s worth.
They can just live off the interest on that 900M and remain profitable forever. Unless they spent it all on those hideous stylesheets found on a typical myspace page.
Money goes to News Corp, not a Myspace trust fund
Indeed… I visited myspace 3-4 times (ok, 2 uniques) and after about 100 pageviews, vowed never to return.
RIP.
I don’t see how Myspace can be effectively monetized, their average audience consists of pre-pubescent girls.
Did you even read what you just wrote? That is the main market for tobacco companies.
(I know it is wrong, but it is true.)
Wasted money just like the government bailout money.
dd
lol they are paying more then fox bought myspace for.
wow
Myspace is done. In five years there will be another social networking website that will take its place. The novelty has worn off.
That might have been true five years ago…
Google is not worried about its revenue streams.
MySpace is the next Yahoo..
i knew this from day one, 900M was just ridiculous, i bet google arent even getting half of 900M out of it.
Google has been spending way to much money …
Myspace $900m
Youtube $1.65b
total $2.55b
If you put $2.5b somewhere, you expect to gain some profit. How much would someone expect?
20%, 30% ? 150% !?!?!
utter unreal investment
Mike,
Is Myspace using facial recognition and other image detection when targeting display ads? I would think that’s a major invasion of privacy.
Single Pill, are you forcing me through mind control to transfer all of my bank funds to your account? I’m also beginning to think that’s a major invasion of privacy.
The biggest winner of this MySpace/Google deal is of course Rupert Murdoch.
He used Google’s greenbacks to pay for his MySpace purchase and receive a steady revenue stream.
He may even now be pondering about doing the same type of deal with two new Pedigree chums.
Twitter and Microsoft.
This is just another clear cut sign why Google, Apple, Yahoo and the rest should stay away from purchasing Twitter $700M +.
The impact of MySpace local did not really do anything either. You would figure it would have traction.
who’s the next partner?
Same Question of g00se !
“Any search on MySpace by default returns Google web results”
False.
The default search option is “Web” which returns Google results. However the other options, like “MySpace” does not return Google web results.
Google deal with MySpace was probably a rush to deal with competition at the time. If they had more control over the quality of traffic, it would have been more useful and good for the advertisers. Any smart advertisers know to target sites instead of blasting to low-quality, high-traffic site like MySpace (unless the rate is dirt cheap and the point is to simply drive traffic, not purchases)
for 900 mill, they could’ve bought twitter back then.
Myspace is ndone & over with…
Google has cut down payments to everyone, I am sure they will offer Myspace something like 10-30% of the original deal.
When I first joined myspace 2 years ago, it was energetic and fun. Growth and more growth are the only thing in the air.. Just look at how much can be changed in 2 years ..
This is after some 80+ work hour weeks … and people need to take break:
http://vids.mys...videoid=1891996
So does this mean we’re going to see a Google Facebook deal now?
Hmm wrote “Another tragedy of this btw was that Scout.com’s founder–which fox interative had recently acquired–was made in charge of negotiations.”
Some tragedy – looks to me like he did his job spectacularly for FIM. Biggest single ad deal in the history of the Internet is not a bad accomplishment to hang one’s hat on.
As for why Google did this, don’t discount the defensive aspect, they did not want Yahoo or MSFT (who both bid) to get the massive traffic bump to their ad networks. And Google over-estimated their ability to monetize on the deep user data MySpace handed over as part of the agreement.