Google and MySpace have just reached an agreement that will pay Fox Interactive Media, parent company of MySpace, a MINIMUM of $900 million in revenue share payments from the first quarter of 2007 through the second quarter of 2010. Here’s the press release that just hit today.
If you do the math, you’re looking at a minimum of $250 million per year over the 3 1/2 year period. As a result, this will no doubt strengthen the great deal that Rupert Murdoch made by purchasing MySpace for $580 million. The deal includes other FIM properties, but MySpace is the real driving force here – recent reports put MySpace traffic above that of even Google itself.
Thus ends the speculation of which search engine company out of Yahoo, MSN, Google or others would receive the MySpace advertising business. My gut reaction would be that MySpace wanted to align itself with the hands down hottest search property out there – thus restrengthening its position in the elite top web sites given all of the negative press regarding downtime issues and questions about MySpace’s web site architecture. While MySpace gets its house in order regarding technology (and as a wild aside, what if Google’s datacenter plans start to involve MySpace hosting), this certainly puts MySpace in the Google camp – still the poster child of technological superiority on the Internet right now.
Google, itself being a smart, smart competitor, knows that aligning itself with MySpace continues to keep it ahead in this race towards Net dominance.
A related side effect is in the land of feeding the MySpace beast. This reasserts that the free ride on MySpace by way of widgets, photo slideshows and especially those selling goods or aiming to make a profit will likely be at odds with MySpace interests. Essentially, they’ll want the revenue for themselves – not being siphoned off through various widget makers and into the hands of its users. Unfortunately, this is completely within the realm of reason for MySpace to do this – after all, someone has to pay for all this bandwidth. However, it will come at the expense of some of the neat start-ups that might have been.
Throw in Google checkout and it becomes more apparent how this will take aim at e-commerce, cost-per-sale programs, and payment processing as well.
This has got to be one of the biggest big Internet company deals of all time – not all of the far reaching implications have revealed themselves yet that I’ve only briefly touched on here. I’m sure we’ll be seeing the aftermath of this for years to come.