At BusinessWeek online, Steve Rosenbush provides some interesting background on MySpace’s search for monetization which came up earlier this week in the context of a likely bidding war among Microsoft, Google, and Yahoo to handle their search business. Some excerpts:
Researcher comScore Media Metrix says it had a stunning 51.4 million unique users in May, giving it the seventh-largest audience on the Web. Each month, the site gets more visitors than Amazon (AMZN), Apple Computer (AAPL), or The New York Times Digital (NYT).
Yet for an operation of its size, MySpace still generates only a small amount of revenue. Its nearest rivals on the Web are multibillion-dollar companies. News Corp. won’t say how much revenue MySpace generates, but one person familiar with the company says it makes about $100 million in banner ads. That’s not bad for a startup, especially since industry insiders say it was generating several million dollars a year in profit before News Corp. bought it. However, it’s not nearly enough to move the needle at giant News Corp., where money is measured in billions.
Given MySpace’s power, Google (GOOG), Yahoo! (YHOO), and MSN (MSFT) are expected to compete fiercely for the right to be the search engine of choice for MySpace and the rest of Fox Interactive. News Corp. won’t say how much money it expects to derive from a deal, but industry experts say it could conceivably boost MySpace’s annual revenue several times over. “The deal will probably be worth hundreds of millions of dollars,” says Chris Sherman, executive editor of Searchenginewatch.com.
Given its power, MySpace may be able to bargain for 25% to 35% of all the advertising revenue on pages that it generates for a search partner, according to Ali Diab, a former Yahoo search executive.
Much more by following the link including the expectation that the lower quality (in several ways) of MySpace originated searches will reduce advertising revenues.