Google and MySpace: Woulda, Coulda, Shoulda!!

68 Comments

By Robert Young

In the latest (July) issue of Wired magazine, Rupert Murdoch claims that Google…

“…could have bought MySpace three months before we did for half the price. They thought, ‘It’s nothing special. We can do that.'”


So that means Google could have acquired MySpace a year ago for about $290 million. Talk about a strategic blunder… the thought of Google and MySpace, combined, boggles the mind. Instead, Google is left thinking of what could have been. And to add insult to injury, it may turn out that *not* acquiring MySpace may end up being more expensive for Google!

As widely reported, MySpace is now the largest source of search traffic for Google, accounting for over 8% of their inbound traffic as of early May. That essentially means that MySpace is responsible for about $400 million of Google’s annual revenues. Knowing this, MySpace is trying to capitalize by holding an auction for its search business. If Google wins, it will end up sharing a significant percentage of that $400 million with MySpace… John Battelle thinks the split to MySpace will be close to 90%. And Google would need to pay it every year. Needless to say, had Google acquired MySpace, no such payments would have to be made.

In addition to the real costs that Google is likely to incur, there’s also the opportunity cost. Had Google acquired MySpace, they would likely be ranked the #1 Internet property on all user & usage metrics… nudging out Yahoo! from that top spot. It certainly would have been quite a sight to see… being #1 overall, based on its dominance in search fortified with an even greater dominance in the social networking category. It certainly would have cemented Google’s leadership into a near-ineffable state of invincibility.

Having said all that, I personally believe it would be foolish for Google to pay MySpace anything. Even if MySpace strikes a deal with a competitive search engine, it’s highly likely that the users will simply bypass the default and go to Google anyway.

Robert Young is a serial entrepreneur who played a major role in the invention & commercialization of the world’s first consumer ISP, Internet advertising (pay-per-click ads), free email, and digital media superdistribution.

68 Comments

Bruce

Myspace will fade away, yes, that is a given.

I predict that the new users will abandon it quite soon actually, because it has lost it’s appeal as the millions have clouded the site with the pictures of thirteen year olds smoking blunts, the endless stupid surveys, the rediculous bulletins. The reason that it has lasted this long, and the reason the people that have had it for a few years stick with it throughout all of its problems is that it is a way to communicate that is MUCH easier than email, and less one-on-one than the telephone and instant messenger.

It isn’t just a site for people to take the classic “myspace pic” but for people to keep in touch with the people they already know on a day to day basis. Comments offer a way to share messages. Teens and preteens just do not like email.

So until a new site comes along that offers the ease of use that myspace has, it will stay relavant.

Was it a good idea for google to keep their hands off? Of course. Google is a bit too classy for fads such as this, no matter how relavant to the times. And those stupid fourteen year old kids everyone talks about? No way would they even think to type into the search box through myspace. New tab, google.com. Always. And with all the bad press that myspace has gotten because of adolescent stupidity, Google is wise not to have their name attatched to that. Not every one knows what goes on behind the public eye with corporate deals, but Soccer Moms know the name Google, and soccer moms are afraid of myspace.

But it is an interesting comparison to MTV. What has MTV with the best intentions become but a cesspool for Laguna Beach and Date My Mom.

Shanks Pandiath

Nice article… and thanks for the info…

As you say, according to most management perspectives… it does seem, and in fact may be a strategic blunder..

But for all big corporations, just like in politics, it is imperative to have a strong “so-called opposition” for their survival so as to retain their position..

Now, this is something most corporates or even politicians can afford, because if they slip.. they are history

When you can pay someone to retain their current position, don’t you think that this is a small investment..

As they say, once you know your enemy, it is better to treat him as your friend… [not that they are enemies, but in this case it is the competiiotion]

Well.. who knows… it is too big for us to comprehend !!

I have clipped a piece of this article for my blog and back-linked you with a courtesy… [with your permission]

Cheers

Mil

I don’t believe myspace is going anywhere anytime soon- Why? Because myspace is a place for Exhibitionism- People will do anything to be seen and given attention and Myspace is the accepted medium for such behavior. Would these people pose half naked for a passerby on the street? Probably not. But yet they post pictures of themselves doing just that and let complete strangers in on even the most minute detail of their lives.We live in a world where 99% of the public is retarded and a corporate world that NEEDS it to stay that way in order to keep making money. I’m glad that Google has chosen to keep its reputation in good standing and I agree it was the best choice that in the long run would be more profitable as well.

me myself and i

myspace users want an environment to talk to friends and meet new people. we do not want it sucked up and turned into a profitable website… free sites are always ruined when people try to make a buck out of it… turn it into advertising and marketing crap… just give me the site as it was originally created… im glad google passed up on the deal. they were smart. no one goes on myspace to look at teh ads… how stupid

Anonymous

also – google does not go around buying everyone’s websites, no matter special the website thinks they are. they know everyone will come running to google, saying please pay me.

Anonymous

email is for communicating online. the rest of the internet is business related. also – why should anyone link all their friends together.

dave mcclure

can’t believe how many people on this comment thread have their collective head up their arses. MySpace was a F’ING FANTASTIC deal for News/FIM. Anyone who passed on that deal feels like an IDIOT right now, i guarantee you.

metrics don’t lie. MySpace isn’t in the top 10 Internet properties for both visitors & traffic for no reason. if it’s a fad, it’s a pretty goddamn successful fad folks… and check out eBay for a portal with lots of unwashed masses with incredibly fanatic user base. Facebook might be the only property with a more frequent user visit profile, but MySpace ain’t too shabby either, and it’s 10x as popular.

doesn’t matter how crappy the demographic is with those kind of numbers. and if you think they won’t figure out how to monetize it, you’re completely misunderstanding the negotiating power behind these kind of numbers:
http://weblogs.hitwise.com/bill-tancer/2006/05/myspaceis1googletraffic_so.html

MySpace is worth tons of money in the same way that AOL was worth enough money for Google to outbid Microsoft on the deal and throw down $5B (investment) on the spot.

get over yourselves on this one. MySpace is not GeoCities or Tripod or Broadcast.com. MySpace is a reality, and even if they jump the shark and growth starts falling off, it’s STILL going to be worth a crapload and while there’s some risk the audience shifts to other services, i seriously doubt that much traffic gets completely displaced over night — at this point too many people have embedded their photos, comments, friends, personality, and other life essence for it to just go away. it might still fade away, but in any case it’s already been a GREAT deal for News that has put them on the playing field.

all you armchair analysts need to get a clue. betting on the future downfall of MySpace & the lack of monetization as good reasons for Google passing on the deal strikes me as the Internet version of sour grapes.

Jessica

Google certainly doesn’t need the myspace headache, sure of they were together they would have an unstoppable 1st place on the page views of th net, but google is doing just fine where it is at. I also think that google taking over myspace may hvae made it more conservative than murdock has, and therefor would have ruined the space making people make a mass exodus to competitor portals like yahoo’s 360.

sc

It will be interesting to see how Myspace monetizes its popularity (apart from ads). Another monetization opportunity for them is to broker p-2-p e-commerce. Someone who has 20mm profile views could sell a video, album, book or even tickets to a show and Myspace would facilitate this for a commission.

If this is a way to monetize, that means Newcorp will also be in the market for a payments engine. Or will EBay and Newscorp have only one thing (experiments with expensive acquisitions) in common?

LC

I’m sure FIM have a plan or, two that will prove most successful.

It’s now a wait & see.

derek

Why exactly hasn’t a competitor built a working version of myspace. My god talk about a buggy site. I have tried to view myspace pages but it is too frustrating.

jenny

whats the thingy i have to type to get myspace?

sorry i am new, just got internet

Jenny

Ian Clifton

Sometimes you have to consider image, and (to many) myspace has a very negative image, while Google has a very positive one. Myspace is bloated with ads and server issues from dealing with the countless users. Google has a million projects (though most in beta) for nearly every possible topic, and I’m constantly discovering new ones. They run the business intelligently enough that the “average joe” doesn’t really consider where they get their money from, whereas it’s all too obvious on myspace. Ads should never be intrusive. I think if Google made a personal networking site, they would actually do it correctly, and millions would switch to it in the first month.

KrisLeslie

I personally use Myspace. Honestly when I heard ealier this year about the buzz of myspace I declined to even bother caring. However with a webdesign job I have with a record label that was one of the first things I was asked to do was get a page up on myspace. I being a decent webdesigner declined initially because thats stupid to jump on a fad bus. I offered him a full site revamp, new logo, new design style, and decent XHTML and CSS code to use and he said thats nice but I really want myspace up. Now when he pumped up his myspace page how many people do you think have access to him now… thousands roughly since its an local label but now that you have that place when people want more real info about the “band” they are gonna goto your own website which has failed to even hold up design standards. You just lost customers cause your page sucks because of poor understanding of brand, design, and research.

I think google made a smart choice by staying clear even though I use myspace to network and find old class mates I by no means even care for the crap besides that. If the right company with the right tools and marketing came out with a new app or widget it would blow myspace out the park. However they have better things on their mind. I can’t blame em…

This feels so much like the late 90’s again…

reader

This is the dumbest, Bubble 2.0 post I have seen on this blog in a while. I count on people who do this for a living to think more concretely.

Gabe

tomas is right in a way that people don’t ‘get’ MySpace. But just because you ‘get’ it doesn’t mean you can capitalize on it. I would submit that precious few adults are capable of producing fad-worthy products. And fewer still are capable of doing it consistently. You can have some successes with viral marketing and other cutting-edge techniques, but the fact is that the fickle teen demographic are in the process of defining themselves as people. As soon as a corporation learns how to market to teenagers, the demographic changes. Anything a 50-year old suit knows about teenagers is already outdated and hopelessly uncool by the very fact that he knows it! That’s why the top marketing agencies that really have their pulse on this demographic can bill out at $500 an hour.

If MySpace can hang on to aging users then they might have a long-term future. But teens are going to move to something new, and MySpace is going to stop growing eventually.

On the surface there would be some value for Google acquiring the userbase, but the technology is horrendous, and Google is a company built on great technology. It just wouldn’t be a good corporate fit. This is the trouble with so many large corporations. All potential deals are evaluated by the numbers. Google has X users, MySpace has Y users, revenues are Z, etc etc. Deals have to be huge to get any attention. But it ignores what made Google successful in the first place: great people and great technology. The number one thing Google needs to do is to continue to attract top talent (which they’re doing). Acquiring MySpace might look good to wall street pundits, but I don’t think anyone at Google is regretting passing on it.

jsw

myspace? humm…I think they made a great choice by missing the…errr…uhh…’opportunity’ to buy it.

Let’s take a look in 12-18 months and see if the mgmt can pull it out of it’s dive into the abyss.

Foley

Alex: You’re an IT guy at university. Facebook is targetted towards university students and that’s why you see such a large increase. If MySpace can be cleaned up it would be more attractive to non teeny-bops.

Facebook is a better system for college students to find friends. I’ve found old friends from high school, gotten contact info from friends which I lost, or never had. For all my years in college, I’ll use facebook. But just like my high school friends, I’ll lose contact/interest in a majority of my college friends and will probably abandon facebook.

If facebook can attract post-grads to continue using it, then that would be golden for them. They already allow alumnis that graduated before facebook came out to use facebook.

Also, Facebook has less pedophiles…

Anders

MySpace would have been a bad idea for Google. As they say, they can do it better and there is still room for much improvement. MySpace is a PR nightmare waiting to happen (if it hasn’t already) and Google can’t afford to sully it’s image. No question MySpace has the eyeballs now, but they took them from GeoCities which took them from AngelFire. What does MySpace have on GeoCities? Ring-tones? They all still look like crap. There is huge room in that market for innovation. MySpace is a PHP prototype for the next competitor to learn from. Could easily be Google.

aaron

To assume that MySpace traffic and click value is proportional to their percentage of searches misses the mark on the average income level and value and implied intent at search time of the average MySpace user as compared to the average Google user.

Also, as noted above many times, there are HUGE public relations costs to MySpace.

Keep in mind Google has Orkut, allows people to post threads on their Finance site, partnered with Nike for a soccer social networking site, has Google Music Search (which may eventually allow them to sell music directly if they wanted to).

Google can assemble all the better pieces of MySpace while trying to avoid many of the bad ones.

IMHO MySpace is a fad, and is a smart site to stay away from purchasing.

Mick Liubinskas

Anyone writing on this blog is not even close to being a target of Myspace. And the fact that we don’t understand the bright colours and loud music points out clearly that we can chase teenagers all we want but we can’t reach them with logic.

Myspace may be a fad, although I doubt it. There may be other players, but like AIM, Yahoo messenger and mSN messenger, they all still hold strong networks of users because it fits into the day to day. Ask a teenager about how they interact with Myspace and you’ll get a better idea why it’s not a fad. It’s not like blogging. They’re not doing it to tell the world that they are smart or clever. They are doing it to make friends (and girl/boy friends), chat, gossip, show their style (or lack of it) and to play.

MySpace is about play.

So next time you’re up at the white board wondering how you can reach the teenage market, don’t try and hire Tony Hawk to hold up your product on an afternoon slot, jump onto Myspace and read 50 kids comments. It won’t make sense but it will at least tell you why your old plan won’t work.

So as for Google and Myspace, well if they want to organise all the info in the world, Myspace presents a challenge (financially) worthy of cracking. Just don’t bring the same tools you brought to web search or you’ll miss the point (and the boat).

Bleh

I love when people just throw out random statistics that they know nothing about. Example, above someone said:

“Everybody knows Myspace is the most huge place of trash/garbage pages on the net. Dozens of pages are generated by bots, linked/invited to other bots. 98% Bulletins are also automatically generated, so Myspace is a traffic-eater spam-nest of the promoter bots.”

While I agree there are a lot of junk pages and bulletins on there, where do you get 98% of them being auto-generated? Do you have a source on that or are you just talking out of your ass?

Eric

I’d have stayed away from MySpace too.

Number one reason is that it’s a fad; you have perhaps a year or two to monetize it and get a ROI before it becomes an also ran as teens move on to the next thing. The internet is not cable tv and MySpace is not MTV – the barriers to setting up a competing social networking site are next to nothing compared to setting up a competing cable channel.

MySpace has fundamental design flaws that will ultimately kill it. It’s too easy to set up spam pages. The pages themselves are too public (as I think many kids are realizing, as parents/teachers become MySpace-aware). The design is fairly atrocious (though that doesn’t seem to bother teens much). Then there’s the inevitable morality police that will raise a ruckus about porn, predators, and listening to devil music.

My guess, MySpace has already peaked and in another year or two it’s replacement will have emerged.

Dave

I’m sorry, but don’t you think that the MTV of this generation is a far step from what you are attempting to argue.
It (MySpace) is still growing. This only means more kids are getting into it with their friends. Although there are adults on there, if you go look most of them are trying to promote something like bands or modeling pictures. Kids grow out of it as soon as they get cars and get jobs. MySpace will be grown out of most of the sane kids of this day and will be replaced with lives and money along with relationships.
The only reason it may succeed longer than anyone may expect is because more and more kids are getting connected to the internet earlier and earlier, there are kids on there that can’t be over 9. In registering you have to simply say you are 13 or older and you get an account. It’s simple and I’m not suggesting making the age 18 and have a credit card or something, I am simply pointing out the fact there is no way to know.
Those kids will grow and more will get into it, somewhere down the line it may fade for many reasons, but we don’t know what will happen now will we.
As for Google not buying it they could do it better and possibly failed, simple. If they really tried I know they could do better they have the people with the intelligence and ect. This brings up the question do you want them to spend money on trying to build another empire and wasting it because it will end eventually as all fads do, something better will come out or attention will be diverted to another technology, a newer better possibly virtual technology.
In the long run they didn’t know they were gonna somehow get hit with a loss, but at the time I’m sure they knew that it probably wasn’t worth it then. A $290 million dollar fad.
Although that is just my opinion.

adam

MySpace is for children and morons, Google is better off without it. Perect buy for Murdoch though, his audience is made up almost entirely of morons.

CK

Let me provide some additional anecdotal evidence that MySpace was a good property to avoid. I work in the IT staff for a University of around 20k students. During the fall semester nearly half of the traffic going to student housing was for MySpace. During the spring semester (the one that just ended in May) that dropped by almost 20% and the gaps were filled in with other sites, predominantly facebook. MySpace is loosing its cool factor with this generation. The thing about the MTV generation is that their attention spans are short. A sure fire way to ensure that more of the youth market flees the site is by making it more corporate.

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