Google Deal Will Give News Corp. Huge Payoff
Google has won a bidding war to provide search services and advertising to MySpace.com, the social networking phenomenon, and other Web sites owned by the News Corporation. — The deal promises to pay the News Corporation a minimum of $900 million …
Context & Ripple Effects
News Corp.'s March embrace of MySpace made the social network a central part of its web strategy. Google’s guaranteed payment turns that audience into contracted search and advertising revenue rather than relying solely on News Corp.’s own sales efforts.
The agreement also follows Google’s separate arrangement with Viacom to distribute ad-supported video clips, indicating a push to place its advertising systems alongside large media audiences rather than merely directing users to them.
First-order effects
- News Corp. receives a minimum $900 million commitment while Google becomes the search and advertising provider for MySpace and other News Corp. sites.
- MySpace’s audience and ad inventory move into Google’s sales and search infrastructure, giving Google a major distribution outlet for its advertising products.
Second-order effects
- News Corp. can treat a portion of its web advertising revenue as contracted income, shifting more of the monetization and sales execution to Google.
- Other search and advertising providers lose the opportunity to serve MySpace and the affiliated News Corp. network during the agreement.
Third-order effects
- If large media owners continue to seek guaranteed payments, search firms will compete for audience distribution through revenue commitments rather than technology integration alone.
- The deal points toward publisher-platform relationships in which the company controlling search and ad systems captures a deeper role in monetizing media audiences.
The trend: Large online audiences are becoming strategic ad-distribution assets that platforms secure through guaranteed-revenue partnerships with media owners.