YouTube vs. MySpace?
With millions of dollars in online ad revenue on the line, the two Net superstars could be headed for more conflict — Just a few months ago, News Corp. (NWS) landed a crucial deal with Internet leader Google (GOOG). News Corp. designated Google as the search engine for MySpace …
Context & Ripple Effects
News Corp. had already made Google MySpace’s designated search provider in a deal framed as a major payoff, while September coverage raised the prospect of a News Corp.-backed YouTube rival. Google’s announced $1.65 billion purchase of YouTube puts its new video property alongside a key commercial relationship with MySpace.
MySpace’s move into video therefore turns a partnership into a more complicated overlap: Google supplies search to News Corp.’s social network while preparing to own the video service it will challenge for audience and advertising.
First-order effects
- MySpace’s video offering directly competes with YouTube for user-uploaded video viewing and the associated online advertising revenue.
- Google must manage News Corp. as both MySpace’s search partner under the Google–News Corp. search deal and the owner of a competing video destination.
Second-order effects
- Advertisers seeking online video reach gain two prominent services to compare, shifting the contest toward each company’s ability to sell and package video inventory.
- News Corp. and Google have greater incentive to distinguish MySpace’s social-network audience from YouTube’s video audience, even as their search arrangement remains in place.
Third-order effects
- The clash signals that distribution partnerships need not prevent competition in adjacent services, particularly when platforms expand from search and social networking into video advertising.
- If social networks treat video as a core feature rather than an add-on, online-video competition will be shaped by audience ownership and ad sales relationships as much as by standalone video sites.
The trend: Online video is becoming a strategic advertising layer inside larger internet platforms, creating rivalry between companies that remain partners elsewhere.