MySpace's Google Gravy Train Set to Stop Next Year
Midway through next year, Google's $900 million, 3.5-year search advertising deal with News Corp. and MySpace expires. What are the odds that Rupert Murdoch's social network gets anything close to that with a new contract? — Very, very low.
Context & Ripple Effects
The $900 million Google search deal struck in 2006 was the financial backbone of MySpace's business model — guaranteed revenue that let News Corp. treat the social network as a real business rather than a fad. But the ground has been shifting for years: teens had already begun drifting away as early as 2006, and by mid-2008 MySpace's growth curve had flattened even as it remained profitable. Meanwhile, questions about whether Google overpaid have circulated since at least early 2008. With the contract expiring midway through 2010, MySpace faces the prospect of losing its single largest revenue guarantee just as its audience momentum stalls.
First-order effects
- MySpace loses a guaranteed ~$250M+/year revenue stream when the deal lapses in mid-2010, forcing it to compete for search-ad dollars on performance rather than on a locked-in contract.
- News Corp.'s valuation of MySpace takes an immediate hit, since any renewal or replacement deal will almost certainly be priced far below $900 million.
Second-order effects
- MySpace must accelerate diversification beyond search ads — display, self-serve ad platforms, and content partnerships like its earlier push to chase YouTube's video growth — to fill the gap.
- Facebook and other rivals gain a relative fundraising/monetization advantage, as advertisers and partners reprice social-network inventory against MySpace's diminished guaranteed floor.
Third-order effects
- The episode cements a structural lesson of the social era: platform-audience businesses dependent on a single large distribution/revenue partner are fragile, and guaranteed-traffic deals of this size become rare as search engines internalize the risk.
- If the pattern holds, legacy social networks face a consolidation-or-decline endpoint — a trajectory later coverage suggests played out with MySpace's eventual shutdown and Murdoch's own admission it was mismanaged throughout.
The trend: This is one data point in the broader shift from the 2000s era of mega-guaranteed portal/search deals toward performance-based social advertising, where revenue follows engagement rather than contracts.