Anyone who thought Rupert Murdoch had lost his marbles when his fledgling Fox Interactive Media division paid what seemed like a huge $US580 million for the social networking website MySpace in July last year, take your seats for a serving of humble pie.
In a deal that promises to more than cover the cost of Rupert’s internet gamble, Google has won the right to provide search technology and sell search-related advertising on MySpace, guaranteeing at least $900 million to News Corp over the three years of the revenue-sharing deal – a cut of the spoils they expect to get from advertising, provided Fox meets traffic and search thresholds.
“The size of this deal is staggering,” Pali Capital analyst Richard Greenfield told The Wall Street Journal. “Twelve months ago, MySpace was generating $2.5 million to $3 million a month in advertising revenue. Now you’re talking about search alone being worth about $25 million a month.”
Which must be a huge relief for News Corp investors, many of whom were worried the traditionally “old media” company wouldn’t be able to make any money from the burgeoning MySpace. Despite being one of the most heavily trafficked Web sites on the Internet – monthly traffic has ballooned to 52 million users, from 22 million at the time of purchase – it has had to work hard to endear advertisers to the website’s raucous homemade content, says The WSJ.
News of the deal yesterday boosted News Corp shares in after-hours trading on Wall Street, while News Corp chief operating officer Peter Chernin basked in the new media glow: “Our partnership with Google underscores News Corp’s continued evolution to become a powerful force in the digital media marketplace,” Chernin told reporters. “This is just the first of many steps we plan to take with Google.”