14 DAY TRIAL // It's common knowledge that MySpace has seen better days, as the once-biggest social network in the world loses even more traffic and users. But at least it had something to fall back on, a $900-million deal with Google running until mid-2010, which would guarantee at least part of its profits. But this isn't the case anymore, it looks like the traffic numbers are so low that the social network isn't meeting the minimum required agreed in the deal and will get less money from Google as a result.
News Corp. has released its financial results for its fiscal year's first quarter and they aren't pretty. Its newspaper and TV businesses are doing better than expected, but News Corp.'s Digital Media Group, which handles MySpace, is seeing some rough times. The unit's revenue was down 26 percent year over year and most of the blame comes from the lower income from traditional and search ads.
When asked in the conference call after the announcement how hard MySpace's revenue would be hit, the three executives present put forth some rather different numbers. Rupert Murdoch, News Corp. CEO, said he didn't have an exact number, but the figured it could be as much as $300 million. The other two, Chase Carey and Dave Devoe, though, replied it would probably be much lower than that, something like $100 million or maybe ten percent, which would work out at $90 million.
The reason for these smaller payments is failing to hit the “very high guarantees” it has agreed to. Google and MySpace signed a deal in 2006, when the social network was at the height of its power, which would run two and a half yeas until the second half of 2010. MySpace would get $900 million spread out over this period for using Google to power its search capabilities and also employing it exclusively to serve its contextual ads. It's highly unlikely that Google will renew the deal, but it was thought that it at least gave MySpace some breathing room until it managed to come up with a plan to get back on track.