The bidding war to provide search and advertising to MySpace is over with Google emerging as the winner. The deal for MySpace search and advertising, also includes other sites owned by News Corporation, which purchased MySpace last year. Google will pay a minimum of $900 million over three and become the sole provider of search and advertising on MySpace as well as other News Corporation websites.
There have been many forums of late with threads asking about MySpace and how to monetize the MySpace traffic. Most responses seem to be along the lines of it depending on what you sell and if MySpace users are in your target market you can succeed, which has been my usual thought. Another popuar opinion has been that the traffic is simply useless. Well Google’s not seeing it as useless. They just paid a lot of money to advertise to the MySpace crowd.
One of the concerns of advertisers in regards to MySpace has been the sheer number of pages. Google won’t be showing ads on every page of the site, but rather analyzing what types of ads generate the highest click throughs. The idea being to show fewer yet better ads, better being decided on what the MySpace crowd indicates they want. Seems like a good approach.
More though, are the intangibles the deal gives to Google. In May Hitwise reported that MySpace was the #1 upstream provider of traffic to Google, accounting for over 8% of all Google traffic. Just keeping MSN and Yahoo away from even just a peice of that traffic was most likely part of the rationale for the deal.
It will also allow Google a deeper look at what makes the MySpace crowd tick. While the MySpacers are generally younger and often seen as a little too young to buy, the current group of MySpace users certainly won’t be getting any younger. I feel safe in saying they’re going to grow old and age like the rest of us. Even if they may be a little too young to account for large spending now they will in a few years. Google can now gain some valuable information not so much about where MySpacers will be spending money now, but where they’ll spend their money a few years down the line as their purchasing power grows.
Google may also simply want to get more involved with social networking, and either offer a new network or improve upon current social network Okrut. Whatever you think of them social networks aren’t going anywhere and are very much embedded in the web 2.0 world. There have also been those who have suggested that social bookmarking sites provide a better base for general search than current algorithms based around the voting power of links. I disagree that social sites would improve general search as much as some think, but they can certainly find a niche within search and they already account for great sources of traffic.
In any event I think the deal makes sense and is a good one for Google. $900 million is a lot of money yes, but Google can surely afford it and there are a variety of ways beyond the direct advertising they can profit from the deal even if it’s just maintaining its brand for a large and growing population of MySpace users. Interestingly Google may have actually passed up a better deal on MySpace. According to Rupert Murdoch in an article in July’s Wired Magazine
“They could have bought MySpace three months before we did for half the price. They thought, “It’s nothing special. We can do that.”
I guess some deals are better than others.