“Got kitesurfing on the mind, mixed with some search & classification tech, and a dab of political ranting”

Google-MySpace deal could be bigger than it looks

Posted by direwolff on August 17, 2006

What I love about the MySpace-Google deal is that where so many put down the ability for social network sites to generate real revenues, all of a sudden the economics of this deal has really put a different face on the value of community sites. But more importantly, this deal got me thinking about some other facets of this relationship and as part of that I also tested a hypothesis to see if indeed some of these other benefits were already beginning to pan out.

One of the areas that I believe is already benefitting from this deal is Google’s indexing of MySpace pages. In thinking through this, I randomly went to an accessible member’s (public profile) page, looked for a fairly unique sentence that they might have used on their page, and typed it in quotes into three search engines, Google, Yahoo! and Ask. As it turns out only Google came back with a response and it was a dead on hit to that member’s profile. Talk about opening up real-estate for Google ads. Especially when you start to see all of the commercial advertising opportunities that can be derived from that member’s profile. As it stands today, advertising is already supported on members’ profile pages, so this becomes an instant bonanza for Google.

The second opportunity lies more in the area of behavioral advertising versus contextual advertising. The value proposition that behavioral ad networks like TACODA, Revenue Science and Blue Lithium bring to Web publishers is the ability to place ads for things that their visitors are interested in because they have followed those consumers’ behaviors across other sites. For advertisers, it’s a way to get their message in front of the right consumer regardless of what site they happen to be on. If you’re a visitor to a site that sells cars, chances are you’re interested in buying a car so why not put a car offer on a gossip site if they know it’s you visiting there, since the ad network knows of my interest in cars, or so the behavioral targeting proposition goes.

In contrast with this, you have Google’s AdSense, that are more focused on contextual advertising (other ad networks like Kanoodle are also more focused in this area). Here, relevancy is determined by what content is on the site or page that the visitor is on. Hence, if you’re reading a story about football, you might see a pitch for a book about football or football gear from a sporting goods site. The way context is determined has been getting better, but initially it was simply tied to a keyword that best described the content present on the page so as to match that with advertisers who have bid on that keyword.

With the MySpace relationship, Google is perhaps the first ad network that could viably begin to experiment with both contextual and behavioral advertising to see which works better. Not only that, it could also begin tweaking its campaigns to see if at a user level there is an effect in moving from one method to the next. Given the amount of profile information that can be mined on MySpace member profiles, there’s a wealth of data from some 100 million members that can be leveraged for behavioral targeting.

I’d say that with the $900M as a guarantee, Google got off cheap (even if we were just to buy member profile info for $9 each). I expect that they will be able to generate quite a bit more than this from this information, and even if there is a revenue share agreement for revenue generated beyond the guarantee, it’s still more than worth it since they’ve not only gotten new valuable inventory for advertising (especially given the target audience), but also they now have a richness of data from which to hone their advertising targeting skills going forward.

The bottom line is that is that I believe there are anciliary benefits to this deal that make it more powerful than what seems to be the case at first blush.

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