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Google’s Big Deals

Google’s had some big deals the last week, and I’m going to lay them out quickly for anyone who didn’t read about them elsewhere while I was gone.

First, Google announced a deal with XM Satellite Radio to provide commercials on their non-music channels. I was wondering how Google planned to use dMarc radio advertising, since regular radio isn’t the right platform for most of Google’s long-tail advertisers, and they show us all how smart they are. While XM has millions of subscribers, they are scattered among over 100 channels, and Google can put cheap, targetted ads all over the platform. XM needs revenues, and Google can quickly dominate this field if the technology and advertisers come together. A great move.

Yesterday, Google announced a deal with Fox Interactive, owners of MySpace (the most popular site on the web, according to many sources), to provide search and text/keyword-based advertising. Google gains exclusive rights to targeted and text ads across those sites, most notably MySpace, through 2010, and right of first refusal on other advertising. Google guarantees MySpace $900 million a year minimum over the length of the contract, so long as MySpace continues to deliver the traffic.

In theory, it is a great deal. MySpace could have tipped things in a bad way towards a competitor if Google had not made this deal, and Google should be able to meet the revenue requirements. Google gains a huge amount of ad inventory and visibility as well. Of course, there are always things that could go wrong, and if Google were to fall on hard times, a popular MySpace combined with a weak ad market could mean Google paying MySpace far more than it is worth. Either way, Rupert Murdoch gets his money back almost twice a year on a $500 million aquisition, making everybody look like an idiot.

Biz Stone jokes:

“You keep doing what you’re doing and we’ll give you a billion dollars. Mmmkay?”

Finally, Google and Viacom announced a deal to distribute video clips and advertising. Google will make the clips available to AdSense partners, who can choose to include them on their sites for a split of ad revenue between Google, Viacom, and the site publisher. Google will also sell some Viacom videos on its site for $1.99 apiece. It could be very interesting to see what sort of form these videos take. For example, if I were doing a videoblog, and could insert a video ad in my video post and earn AdSense cash from it, I’d consider that a huge convenience over typical ad sales, and a great way to guarantee some money.

August 8th, 2006 Posted by Nathan Weinberg | AdSense, Advertising, General | 6 comments

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  1. I don’t think it’s $900 million a year, that’s the minimum amount payable over the period (Q1 2007 - Q2 2010):

    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.

    The wording also makes me wonder if MySpace will need to generate a certain amount of ad traffic, i.e. Fox gets 100% of the first $900m, then a percentage of everything on top of that. I’d be curious to know how many MySpace users actually take notice of the adverts.

    Comment by Miles Barr | August 9, 2006

  2. Looks like you’re right. Fixed it.

    Comment by Nathan Weinberg | August 9, 2006

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  5. […] This is the second time Google has done this program, the first with Viacom last year. The four-week test is already underway, and publishers can’t request to jump in. There’s no doubt lots of AdSense publishers would love to be able to use the ads, finding cool ways to turn the music videos into relevant content, so the rest of us can only hope the pilot program is a success. […]

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