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MySpace peddles its eyeballs

May 23, 2006

MySpace may be in the right space at the right time. The massive social-networking site hasn't had much luck converting its zillions of page views into cash through old-style banner ads, so now it's reportedly seeking a search-engine partner to supply targeted pay-per-click ads throughout the site. It's going the AOL route, in other words, hoping to instigate a bidding war between moneybags Google and moneybags Microsoft (and maybe Yahoo to boot). Odds are it will succeed, as Google's and Microsoft's CEOs have both recently talked about the importance of social networking sites to the future of the web. It's hard to imagine either of these two bitter competitors ceding the sexy MySpace real estate to the other without a fight. So look for MySpace to get a deal that gives it the lion's share of any ad revenues as well as, if it's smart, either a cash payment upfront or some kind of guaranteed minimum payment.

The good news for the search engines is that MySpace is virgin territory. Even if the victor only gets a small percentage of the pay-per-click ad revenues, they're incremental revenues - and the cost of serving up an additional ad through Google's or Microsoft's network is basically zilch, so incremental revenues are, essentially, incremental profits. But it will all come down to the fine print, particularly if upfront payments or guaranteed payments are involved. It may turn out that whoever buys the MySpace partnership is buying at the top of the market. That will be great for News Corp., MySpace's owner, but not so great for the partner.

At the very least, a bidding war should provide us with a sense of the current price of an eyeball, at least the kind of distracted eyeball that scans MySpace pages.

Comments

Hi Nick

Where would the adverts appear inside each profile like adsense? Adverts on the aggregated pages with a search box. If MySpace pollute the peoples personal space then people will migrate elsewhere. IF MySpace share the adrevenue with the people who allow adverts to be displayed on their personal pages then I can see people allowing it - in which case both Microsoft and Goolge will compete aggressively for this new business. Its a big IF because if either wins in their bid they may find there are no customers if people object to the adverts

Posted by: Sam Sethi at May 23, 2006 11:40 AM

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