Google's growing

Deal flurry finds Netco on media high

By BEN FRITZ

Google's big push into the media space is helping News Corp. turn its $1.5 billion worth of Internet investments into a lucrative new revenue stream.

Companies signed a deal on Monday for Google to provide search services and advertising across the Fox Interactive network of online properties, including MySpace and IGN, starting in October through the second quarter of 2010. Google is guaranteeing News Corp. at least $900 million, assuming traffic growth stays on track.

Under the deal, News Corp. will get a majority of the revenue generated by keyword-related ads Google serves across Fox Interactive Web sites. If users click on Google ads more than expected, deal could end up being worth even more, possibly north of $1 billion.

"In one fell swoop, we have paid for about two-thirds of our Internet investments," said News Corp. prexy Peter Chernin. "We were already confident about monetizing MySpace. This is 100% margin money."

Deal is predicated mainly on Google's desire to get access to the hugely popular MySpace audience, currently 48 million people per month and growing.

It comes just a day after Netco pacted with Viacom to use MTV Networks content to kick off a new service that will syndicate videos throughout the Web with integrated ads (Daily Variety, Aug. 7).

As major media congloms move aggressively onto the Web, partnering with them is a key factor in Google's growth. While its Video Store has thus far failed to line up nearly as much TV content as competitor iTunes, deals with Viacom and Fox show that it is moving aggressively to link its ad sales network to the huge amount of content media companies are putting on the Web.

In addition, Google beat out Microsoft last December for an exclusive contract to provide search services and advertising to AOL. As part of the $1 billion deal, Google also got a 5% stake in the Time Warner-owned Netco.

Though they have both made more partnerships to feature exclusive content, competitors Yahoo! and Microsoft's MSN thus far haven't lined up any broad-based search and distribution deals like Google's. Both Netcos were in the running for the Fox Interactive contract.

Previously, Yahoo! provided some search services to MySpace.

Fox partnerships call for Google to provide search services and serve keyword ads for all of News Corp's Web sites except for FoxSports, which is already partnered with MSN.

Google will be Fox Interactive's exclusive provider of search-related ads and will also sell excess graphical advertising inventory, though the media conglom will continue to sell the majority of its own graphic ads.

In addition, companies expect to work together on a number of other initiatives. None has been spelled out in detail yet, as the search and advertising partnership only closed early Monday morning.

"Wherever there are a lot of users and growth, there is an awful lot of opportunity," commented Google CEO Eric Schmidt. "There will be many opportunities to collaborate on that we can only guess at now. Ultimately, this is a massively important deal."

Those collaborations could include Google distributing Fox content around the Web and inserting video ads into them, as it is doing with MTV. Neither company would comment on whether they'll make such a pact.

Last year, when it started its Internet acquisition spree, News Corp. considered buying a search company and looked at several video search companies, including Blinkx. Ultimately, rather than buying or developing a search engine and selling keyword ads itself, conglom began in the past few months to solicit bids from Google, Microsoft and Yahoo!.

Chernin noted that one of the advantages of working with Google is it is the top Web site MySpace users depart to when they leave the social networking giant. "They will no longer have to leave once we can more fully integrate Google search and technology onto our site," he said. "That was one of the reasons the deal was the most compelling to us."