Magazine article Marketing

Media Analysis: Big Numbers, Tough Audience

Magazine article Marketing

Media Analysis: Big Numbers, Tough Audience

Article excerpt

Murdoch bought it, Google has paid to be part of it, but will MySpace's user base spurn their advances?

Google's announcement last week that it is to pay dollars 900m (pounds 475m) to exclusively provide search technology and SMS advertising services on social-networking site MySpace was granted the same kind of gravitas once reserved for venerable media brands such as Disney or Time Warner.

Jordan Rohan, a digital analyst at US investment bank RBC Capital Markets, calls the deal, which takes effect from the fourth quarter of 2006, 'a huge strategic victory for Google and an enormous financial windfall for Fox Interactive Media' - the Rupert Murdoch-owned subsidiary that acquired MySpace for dollars 580m (pounds 306m) last year.

The phenomenal growth of MySpace - which has done for user-generated content what eBay did for auctions and Friends Reunited for unhappy spouses - is key to the significance that observers are placing on the deal. At last count, it had 100m members (mostly teens and young adults), with 250,000 joining daily (see panel).

These attributes were sufficient to attract Murdoch, who is desperate to reinvent News Corp as a digital pioneer. But while MySpace may be a social phenomenon, analysts have been sceptical about whether it can ever generate sufficient returns from advertising to justify its price-tag.

Google's three-year tie-up with MySpace and Fox stablemates such as movie reviewer RottenTomatoes.com and sports site Scout.com is seen as vindicating Murdoch's strategy. News Corp president Peter Chernin says: 'In one fell swoop, we have paid off two-thirds of our internet investments. From now on, we are playing with house money.'

It is possible that Google's investment - which also gives it the right to sell any display ads not sold by Fox - will prove to have overvalued MySpace as an advertising vehicle. But by taking control of what Rohan calls 'the last big chunk of untamed internet traffic', Google has killed off the threat from Yahoo!, which was also keen to secure MySpace.

Ben Hart, joint managing director of interactive agency Glass, says the deal is important for two reasons. 'First, the media industry recognises that community or social networking needs to be monetised' - MySpace made just dollars 12m (pounds 6.3m) in ad revenue during June - 'and second, its audience can make or break brands very quickly.'

Matthew Tod, partner at digital media consultancy Logan Tod, adds: 'MySpace's significance to marketers is that it has brought rapid word of mouth into the heart of the marketing process. The site thrives on recommendations about what to buy and where to buy it. Plug a sophisticated keywords search tool into that world and it is a powerful proposition.'

While the prospect of combining a Google search with MySpace's dynamic audience looks compelling, there are concerns about the fit. Alex Burmaster, European internet analyst at Nielsen//NetRatings, says: 'The thing about MySpace that appealed to users was that it was distinct from traditional channels. But now News Corp and Google are involved, the big question is whether users will still feel the sense of community that first brought them there.'

This is a crucial point, since audiences have shown how quickly they can disperse to new destinations. …

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