Contrary to popular belief, the Google–MySpace “partnership” is not a $900 million dollar “done deal.”
Google “announced a multi-year search technology and services agreement” last August:
whereby Google will be the exclusive search and keyword targeted advertising sales provider for Fox Interactive Media's growing network of web properties including MySpace.com. The agreement calls for Google to power web, vertical and site specific search for MySpace.com and the majority of Fox Interactive Media properties…
The integration of Google's services including consistent search navigation across Fox Interactive Media's network of properties is slated to begin in the fourth quarter 2006 and will provide users with access to Google's industry leading search capabilities as well as text and display advertising from its global advertiser base.
Under the terms of the agreement, Google will be obligated to make guaranteed minimum revenue share payments to Fox Interactive Media of $900 million based on Fox achieving certain traffic and other commitments. These guaranteed minimum revenue share payments are expected to be made over the period beginning in the first quarter of 2007 and ending in the second quarter of 2010.
We are currently in the fourth quarter 2006, but as of today, MySpace Web search is still powered by “Overture,” not Google.
I recently asked Ross Levinsohn, President, Fox Interactive Media, parent of MySpace, about the contingent nature of the Google-MySpace announced deal (see “FIM Ross Levinsohn on MySpace in ‘Real Deal’ exclusive interview”):
QUESTION: In describing the digital revolution in your keynote you put forth that there are no barriers to entry, no barriers for distribution and underscored that no one saw Yahoo or MySpace coming, so anyone can be the next Jerry Yang. Given that there may be the next MySpace around the corner, how vulnerable is the Google $900 million revenue share contingent guarantee to FIM not achieving its traffic and other commitments?
LEVINSOHN: It drives you to work very hard. If we do our job right and build out the full portfolio, we will fortify our position and it won’t deteriorate. We have a strong network effect, we shouldn’t be worried.
Today’s Google Q3 earnings conference call revealed that the entire Google-MySpace agreement is contingent; A definitive contract has not been executed by the parties.
Question form Bill Morrison, JMP Securities:
On MySpace, I was curious, you have obviously announced the deal and talked a lot about it. Curious if you have actually signed the deal, and their response to your planned acquisition of YouTube?
Google CEO Eric Schmidt:
With respect to your question on MySpace, we signed a binding letter of agreement which we are operating under. We will come to final contract terms, I think, very quickly on that.
Google speak at its (not so) finest.
UPDATE: To Rupert Murdoch: Is MySpace acquisition really ‘paid for’?
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