MySpace and Google Make $900 Million Deal

On Monday, Google garnered the favor of social networking behemoth MySpace.com by agreeing to make minimum payments of $900 million over the course of the deal that will last three years and nine months. This figure is contingent on traffic and other commitments.

This huge deal is a slap in the face to Yahoo, who had been providing MySpace with advertisements. MySpace was seeking out a new deal for the past few months in response to its users’ request for an effective Internet search tool.

In addition to providing search results to MySpace users, Google will provide text-based ads and ads targeted at keywords through AdSense.

Yahoo responded to its dismissal by explaining why it was not such a huge loss for them. “We think it’s a great deal for Fox. However, we only participate in partnerships that also meet Yahoo’s standards. We did not see this opportunity as financially prudent or in the best interest of our advertisers,” said Joanna Stevens, a Yahoo spokesperson.

The deal will also make Google the search and ad provider for RottenTomatoes.com and Scout.com, both of which are Fox Interactive properties.

Having a Google search bar on MySpace pages will help to retain users who currently leave the site in order to carry out their search queries. A HitWise study reported that 10% of MySpace’s traffic left the site to hop to Google in order to fulfill their search needs.

The terms of the deal also stipulated that Google would have the opportunity to provide search results and ads to Fox Interactive sites on an international stage, except for two countries which were not revealed.

MySpace has also indicated that they are planning to create a toolbar for its users that would integrate Google’s technology.

The deal is a home run for MySpace, who can now boast some confidence behind their expected $200 million in sales by the end of 2006, and $300 million by the middle of 2007.

And though the dollar figure may seem a bit excessive for Google, it does guarantee them added reach, and retains search traffic that could have otherwise been handed to Yahoo. The potential of teaming with MySpace is also an understandable reason why Google would consider this deal well worth the money it is laying down. Google has been relatively unsuccessful in its social networking ventures, so being able to combine forces with a site that has found huge success in the social networking realm could be a boon for the search giant.

The deal will also give Google a unique and key glimpse into the behavior of MySpace’s 100 million users. This should go a long way in helping them find the best ways to reach social network users with relevant ads and search results.

“It’s going to give them an incredible look into what’s going on in MySpace. Given that MySpace is growing so fast, that’s a cheap price to pay,” said Danny Sullivan, editor of Search Engine Watch.

The partnership will commence in the fourth quarter of this year.

Sources:

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