MySpace needs Google’s help

by Mathew on August 8, 2006 · 2 comments

When it comes to the $900-million deal between Rupert Murdoch’s News Corp. and Google for advertising and search-related services at Fox Interactive Media — the bulk of which is made up of MySpace — there are a number of ways of looking at it. On the one hand, it is in some sense a vindication of the half-a-billion dollars or so that Rupert (definitely not a stupid man) paid for MySpace, as Fred Wilson of A VC points out, saying it could be the “best Internet purchase ever.”

The deal also helps to crystallize some of the debate over valuation that has been going on about social networks such as MySpace, a debate that will likely get even more heated if Viacom bids for MySpace competitor Bebo, a deal rumoured to be in the works. Does it mean that MySpace is worth $3-billion, as some have been arguing? Not necessarily. But it does help put some financial meat on the bones of a company everyone has been trying to arrive at a value for. Rafat at PaidContent has a nuts-and-bolts breakdown of the deal.

One of the most interesting elements for me, however, and one very capably described by Om Malik, is how much MySpace needs Google. One of the reasons why the social network’s CPM (cost per thousand) is down around $1 is that it has a gigantic backlog — in part because there are billions of MySpace pages, and in part because advertisers have remained relatively cool to putting their brands on MySpace next to questionable content, to be looked at by fickle teenage users. Too much supply and not enough demand.

How is Google going to deal with that? According to Om and others, it will avoid certain parts of MySpace, and will include other Fox properties such as the IGN gaming network. But at the same time, the whole reason for the deal is so that Google can help create a social-network ad platform — the holy grail for sites like MySpace, as Gigaom contributor Robert Young puts it. That will be interesting to watch.

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