August 7, 2006 1:58 PM PDT
Google pledges $900 million for MySpace honors
On Monday, MySpace parent company Fox Interactive Media said it had entered into a pact with Google that spans three years and nine months and gives the search giant exclusive rights to provide Web search results and sponsored links across MySpace. Google also will power search and ads for other Fox Interactive properties including RottenTomatoes.com and Scout.com. FoxSports, which is aligned with Microsoft's MSN, is not part of the deal.
Under the terms of the agreement, which will begin in the fourth quarter, Google must guarantee Fox Interactive minimum payments of $900 million over three years, as long as Fox meets certain traffic and other commitments.
The deal is a blow to Yahoo given that MySpace's advertising results have long been served up by Yahoo's search division. The agreement also ends a months-long hunt by MySpace for a new partner, a quest driven by growing demand among its members for Web search.
On an investor conference call Monday, News Corp. President Peter Chernin characterized the deal as the first of many with Google and said that when MySpace members leave the site they typically jump to the search powerhouse. By integrating Google's technology, search will be seamless for MySpace members, he said.
"Ultimately, in the totality of the deal, Google was the preferred supplier," Chernin said, referring to a highly competitive bid for the business that included Yahoo and all the top-tier search providers.
Google CEO Eric Schmidt said his company was eager for the chance to team up with MySpace because of the social network's trajectory over the last year. In July, MySpace became the No. 1 ranked Web site in the United States based on number of visits, above the numbers of Yahoo Mail, according to research firm Hitwise.
"When we looked at what was growing on the Web, all our internal metrics pointed to Fox Interactive," Schmidt said on the conference call announcing what the executives called a quick but complicated deal.
"It's important to move Google to where users are, and that is where user-generated content is," Schmidt added.
Quick start for Fox Interactive
The pact could be lucrative for both companies, but it's especially key for Fox. News Corp. formed Fox Interactive 10 months ago following the $580 million acquisition of MySpace; and since that time, many investors and executives have questioned whether the social network could turn a profit from its thriving free community. Search-related advertising, a business worth as much as $8 billion annually, is a step in that direction.
For Google, the deal secures an important source of traffic and ad revenue, giving it added exposure to a thriving young audience of millions on MySpace. Roughly 100 million MySpace members will be accessing Google's search tool from the network. That could also calm any fears the search giant might have had about an expanding and unwieldy force on the Internet--social networks--which could have proved a larger threat to the company without such an agreement.
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