blogging.vc

While it was of course covered at Techcrunch and many other sites already, I find NewsCorp’s announcement to power MySpace search with Google a very interesting one. The deal looks as follows:

• According to comScore, MySpace was the 6th most visited site in June and currently has a bout 50M monthly searches on it, growing at a rapid clip. That’s a lot of room for ads…
• Google powers the search on MySpace and shares search advertising revenue with Fox, MySpace’s parent. Google agreed to minimum revenue share payments of $900m between the beginning of 2007 until end of 2010. The parties wouldn’t disclose the exact revenue share for Google, but I read an analyst note estimating Google gets maybe somewhere between 5%-15% of revenue, which sounds about right (so somewhere in the neighborhood of $100M for Google over contract lifetime). Can’t be too favorable a revenue share for Google, because I am sure Yahoo, which is currently running MySpace search, was bidding for the deal as well…

So finally everyone agrees that there is real money in MySpace…and what is interesting is that you’d think the site is actually a lot more interesting for brand advertisers that want to target certain demographics than for Google. The search engine’s text ads are generally only tailored to page context, but not to a specific target audience, say teenagers. So it is clearly to be expected that search revenue is only a fraction on MySpace advertising revenue.Techcrunch says MySpace revenue this year is estimated to be $350M, and I believe they were at $72M last year…that’s a nice ramp by any means.

The only drawback for sites like MySpace however is that their audience is spread across the world, which makes it tougher for advertisers to get their message to the right target group. I wonder when they will start to monetize their users directly, for example by selling virtual items like LiveJournal’s electronic flower bouquet’s…

technorati tags: Google,
MySpace,
Advertising