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Google & MySpace In $900 Million Deal On Search & Contextual Ads

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Just in, an announcement that Google and MySpace have reached a deal for Google to provide search and contextual ads to MySpace, in return for giving MySpace (well, the entire Fox  Interactive Media network) $900 million in guaranteed payments through 2010. From the press release:

MOUNTAIN VIEW and LOS ANGELES, Calif., August 7, 2006 - News Corporation's Fox Interactive Media and Google Inc. (NASDAQ: GOOG) today announced a multi-year search technology and services agreement whereby Google will be the exclusive search and keyword targeted advertising sales provider for Fox Interactive Media's growing network of web properties including MySpace.com (http://www.myspace.com).

The agreement calls for Google to power web, vertical and site specific search for MySpace.com and the majority of Fox Interactive Media properties. Google will be the exclusive provider of text-based advertising and keyword targeted ads through its AdSense program, for inventory on Fox Interactive Media's network. Google will also have a right of first refusal on display advertising sold through third parties on Fox Interactive Media's network.

The integration of Google's services including consistent search navigation across Fox Interactive Media's network of properties is slated to begin in the fourth quarter 2006 and will provide users with access to Google's industry leading search capabilities as well as text and display advertising from its global advertiser base.

Under the terms of the agreement, Google will be obligated to make guaranteed minimum revenue share payments to Fox Interactive Media of $900 million based on Fox achieving certain traffic and other commitments. These guaranteed minimum revenue share payments are expected to be made over the period beginning in the first quarter of 2007 and ending in the second quarter of 2010.

I'm at our Search Engine Strategies show in San Jose at the moment, so I don't have time to do a long post on the news, which I'm still digesting. I've taken a number of phone calls on it already, so I'll provided what I've given to some other reporters who have asked.

  • Big win for Google? Sure. Lots of traditional players are worried about MySpace, even if the site itself isn't earning that much now, from what I understand. This gets Google in, keeps Yahoo and Microsoft out, and might be a cheap payment to protect Google's front in the social networking wars. In other words, even if Google doesn't make a net profit off of MySpace, the intangibles could be worth the cost. The closer ties also give Google deeper insight into the MySpace traffic, since it will soon see everyone going to these pages. That will be very helpful for Google if it wants to do a renewed social networking effort of its own.
     
  • Big loss for Microsoft and Yahoo? Maybe, maybe not. If social networking is hot, both of them -- unlike Google -- have very healthy communities in several international markets. In fact, that potentially could have been an issue in trying to win MySpace. Revenue-wise, Yahoo indirectly provides ads to MySpace, but current revenue doesn't appear to be substantial, plus Yahoo already would have been giving a big chunk of this to whomever is the unknown middleman.

John Battelle notes there's a conference call going on, plus he's working on some follow-ups, so keep an eye on his post. I or Barry will also postscript stories from elsewhere to our post here or do a fresh round-up tomorrow.


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