Google and MySpace announced a eye-popping $900 million deal yesterday providing definitive proof of Google’s diversification strategy (was there ever really any doubt?) and sending a new tremor down the spines of Microsoft and Yahoo!. But this deal is not just about Google bolstering its lead in the online search marketing race. It means:
- Great news for News Corp. Just one year after shelling out $580 million in cash for Intermix Media, the parent of MySpace.com (a price tag that at the time left many financial analysts scratching their heads and spouting cries of "Beware of Bubble Two!"), News Corp. has recouped its purchase price and scored a premium.
- Google finally has a Web 2.0 presence. The future of search is in personalized search — where search results are customized to my profile, my past searches, and feedback on what results I — and people like me — found relevant. So Google developed ways to access consumer data (Gmail, personalized Google home page). At the same time, Yahoo! — already rife with customer data — began building a network of social media sites like del.icio.us and Flickr to have additional sites against which to serve ads and to have peer created content to leverage into search results. I think Google intends to eventually tap MySpace for customer insight and content to help build its personalized search offerings.
- The institutionalization of social media. This marriage with Google officially catapults MySpace out of the realm of online community and into full-fledged media company status. So what? Well, the whole nature of online community sites is that they provide a pure, unadulterated way for real people to express themselves. And many people are already questioning how long consumer interest in these types of sites will last. If MySpace becomes sponsored or littered with ads and it no longer feels pure, authentic, or uncensored, I expect consumer use of it to decline drastically. Which would certainly undermine the traffic assumptions Google used when planning its $900 million offer.
Wonder if Google and News Corp. signed a prenup…