Google snatches MySpace ad prize

Google has won a highly prized deal with MySpace.com to serve web search and advertising listings to the nearly 100 million members of the News Corp-owned social network, besting rival Yahoo! in the bid.

On Monday, MySpace parent company Fox Interactive Media said it had entered into a pact with Google that spans three years and nine months and gives the search giant exclusive rights to provide web search results and sponsored links across MySpace. Google will also power search and ads for other Fox Interactive properties including RottenTomatoes.com and Scout.com. FoxSports, which is aligned with Microsoft's MSN, is not part of the deal.

Under the terms of the agreement, which will begin in the fourth quarter, Google must guarantee Fox Interactive minimum payments of $900m over three years, as long as Fox meets certain traffic and other commitments.

The deal is a blow to Yahoo! given that MySpace's advertising results have long been served up by Yahoo!'s search division. The agreement also ends a months-long hunt by MySpace for a new partner, a quest driven by growing demand among its members for web search.

On an investor conference call on Monday, News Corp president Peter Chernin characterised the deal as the first of many with Google and said that when MySpace members leave the site they typically jump to the search powerhouse. By integrating Google's technology, search will be seamless for MySpace members, he said.

Referring to a highly competitive bid for the business that included Yahoo! and all the top-tier search providers, Chernin added: "Ultimately, in the totality of the deal, Google was the preferred supplier."

Google CEO Eric Schmidt said his company was eager for the chance to team up with MySpace because of the social network's trajectory over the last year. In July, MySpace became the number one ranked website in the US based on number of visits, above the numbers of Yahoo! Mail, according to research firm Hitwise.

Speaking on the conference call announcing what the executives called a quick but complicated deal, Schmidt said: "When we looked at what was growing on the web, all our internal metrics pointed to Fox Interactive."

Schmidt added: "It's important to move Google to where users are, and that is where user-generated content is."

The pact could be lucrative for both companies but it's especially key for Fox. News Corp formed Fox Interactive 10 months ago following the $580m acquisition of MySpace; and since that time, many investors and executives have questioned whether the social network could turn a profit from its thriving free community. Search-related advertising, a business worth as much as $8bn annually, is a step in that direction.

For Google, the deal secures an important source of traffic and ad revenue, giving it added exposure to a thriving young audience of millions on MySpace. Roughly 100 million MySpace members will be accessing Google's search tool from the network. That could also calm any fears the search giant might have had about an expanding and unwieldy force on the internet - social networks - which could have proved a larger threat to the company without such an agreement.

Under terms of the deal, Google will have additional rights to serve search and advertising to Fox properties in the US and overseas, except for two countries, which Fox executives would not disclose. MySpace executives have said previously that the social network plans to grow internationally, in countries including the UK.

MySpace plans to mesh Google technology and ads with its own features for navigating the web, member profiles, music, books and so on. Fox executives said each MySpace member page will contain a Google search box, for example. The company also plans to release a toolbar that will incorporate Google technology.

Google ads will appear in the form of sponsored listings in search results and contextually targeted placements on MySpace pages. Google will also have first right of refusal to sell unsold display advertising on MySpace and other Fox properties.

Danny Sullivan, editor of Search Engine Watch, said the deal will be especially fruitful for Google when it comes to targeting ads within social environments.

He said: "It's going to give them an incredible look into what's going on in MySpace. Given that MySpace is growing so fast, that's a cheap price to pay."

News Corp's Chernin hinted that targeted advertising to members is the Holy Grail. "The real potential for a home run is combining Google technology with our demographic information," Chernin said.

Stefanie Olsen writes for CNET News.com