Media
Google (GOOG) Deal Will Hurt News Corp (NWS) Earnings
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Google (GOOG) has a three-year deal to sell search advertising on News Corp’s (NWS) huge social network MySpace. The arrangement will soon be up for renewal. Google did not get a return on its $900 million revenue guarantee and there are rumors that it wants to cut its obligation from $300 million a year to less than $100 million.
If News Corp cannot come up with a Google partnership to match the one that is ending, the earnings at its Internet unit could be significantly undermined.
News Corp’s solution to the problem may be to offer Google access to a number of its other Internet properties. This would be likely to include the Fox News site. But, there are not enough visitors to the sites to make up for Google’s need to see a return that may be three times what MySpace has given it. The MySpace audience is bigger than those from all of the other News Corp sites combined.
According to Reuters, “News Corp hopes to sell Google Inc. access to a greater swathe of its media properties.”
The MySpace deal was too much of a failure for Google to renew a contract that has anywhere near the value that the one which is expiring did. Investors can brace for bad earnings news from News Corp.
Douglas A. McIntyre
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