News Corp scores $900M from Google, a coup
will pay the parent of social networking company MySpace.com
at least $900 million in shared advertising revenue over the next three and a half years, and become the exclusive search engine for the site.
This is significant because News Corp paid $580 million for Intermix Media, which owned MySpace, last year. This deal means that News Corp will have already gotten that much in revenue, and more, from the income its gets from Google. Then you add the $350 million in revenue MySpace is reportedly making per year, you realize NewsCorp may soon be getting close to the black on this deal already ($350M revenue does not mean profit, so we'll have to know more, as reader points out in comment). And to top it off, News Corp going forward will still own one the most promising sites on the Web and everything that comes with it.
It is good for Google because it will apparently kill off any aspirations by MySpace to develop a search technology of its own (though we don't know if the terms actually rule that out).
More importantly, it prevents MySpace from allying with Yahoo or Microsoft. The jury is out on whether Google will actually make money off this. It depends on whether MySpace users decide to use the search bar to buy things. Our hunch is they probably are only searching for friends, because that's all we've used the MySpace search for. (After all, everyone knows you can switch over to Google if you want to buy things. This just makes it easier to search Google from within the MySpace page, but according to the deal, "a majority" of the resulting search revenue is going to News Corp!).
News Corp.'s Fox Interactive Media unit will add Google search boxes to MySpace and other sites, likely by the end of the year. Google will provide search results and keyword ads targeted to people's search terms. Google will also get first rights to sell any display ads not sold by Fox directly.
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August 12, 2006 4:36 AM
Uh, I think you mean "billion," not "million." C'mon Matt, let's not get into the habit of readers actually thinking that bloggers NEED editors...
No, that wouldn't be good. Unedited bloggers unite! I've updated. Thanks.
Every report I've read said News Corp paid $580 million for MySpace, not $1.2 billion. Can you confirm either way?
It was $580m and it was not for myspace - but for a Intermix media that owns myspace, among other properties.
Updated to make clearer. Thx.
Let's not confuse profits with revenues and let's not forget about Finance 101: a dollar today is worth more than a dollar tomorrow. Fox's IRR will be the discounted value of $900MM + the present value of the future cash flows from MySpace, which will be based on MySpace's profitability...Not $900MM + $350MM as you point out.
I thought all of Intermix, including MySpace was $580M.
Ok, the confusion stems from my link to the AP story, which used the $1.2 billion number (which includes the IGn deal), and so that is what I was referring to. I've updated it now, and hope it is finally clear. Sorry about that.
'It depends on whether MySpace users decide to use the search bar to buy things. Our hunch is they probably are only searching for friends, because that's all we've used the MySpace search for.'
I'm sure the Google execs took a look at the current search volume and ad clicks... Currently it's powered by Overture. This is a minimum revenue guarantee too, so it's likely the real amount will be more (especially if MySpace keeps up some growth). Murdoch is looking really smart right now. Making all his money back in a few years.
So, what does this mean for other VC-backed upstarts like YouTube and Facebook?