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Google Not Buying MySpace Was Not A Strategic Blunder

By - June 29, 2006

Though it’s very easy to cast it that way, and certainly is a strong argument, think about it this way – If Google bought MySpace, it’d all of a sudden be waist deep in the content creation/publishing business, a business it’s been very wary of playing in. Now, I think Google is a media company, of course, but when they start owning sites that otherwise might be major AdSense partners, it’s the equivalent of pooping where they eat. Sure, you own MySpace, and it’s huge inventory, but you’ve just made the rest of your AdSense partners very, very nervous – all of a sudden you are not the neutral partner, you’re the big ol’ competitor in the content space. You’re the head, and the tail feels like it’s being wagged.

I think Google realized that buying MySpace could queer its AdSense business, and that’s why they didn’t do it. I was led to this line of thinking by a good pal in the industry with whom I was meeting yesterday, who for now must remain anonymous, but trust me, he’s deep in this game.


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38 thoughts on “Google Not Buying MySpace Was Not A Strategic Blunder

  1. King Troll says:

    Battelle your “source” is deep in shit to be frank. Sergey himself told Murdoch that buying Myspace was the best move of his life. Also, does Google Finance hurt others from advertising? No. You are usually on Battelle but you and your “friend” are off on this.

  2. Niki Scevak says:

    Err John, your friend and theory involves a lot of selective memory. After all both AOL and Ask Jeeves switched to Google AdSense for search as the company was eating up their business.

    I believe they even changed before Overture was owned by Yahoo. That is, they went from the independent to the bedsheets of the devil’s lair.

    Plus, all of this talk of strategy (and if you note carefully, Murdoch clearly states they got lucky on MySpace), the company is hardly the prettiest girl at the dance.

    It’s somewhere between Geocities 2.0 and Instant Messaging in HTML. If you look at Instant Messaging minutes and the number of people who use that over the past few years, it is stagnant to down. And it’s a huge part of daily usage minutes.

    We all know how much money the IM providers and Geocities/Tripod are making.

    The Math on $600m works out for News Corp and they’ll get a good return on it, I still believe. But to say this is strategic to Google is BS. Sergey probably just saw how much trouble they are having with Brazilian drug dealers on Orkut and decided he didn’t want to wade further into those waters.

  3. MikeM says:

    Your friend’s statements might hold water if Orkut had never been developed. They would give anything to see Orkut become as big as MySpace. They didn’t roll out Orkut to be the tiny complimentary app. it is today.

    Is it possible they are trying to spin the MySpace pass as a business decision here?

    Also John they could have kept AdSense off of MySpace and just hammered it with branded banners, GMail, search, GTalk etc. No, I believe passing on Myspace was a big mistake and surely they do too.

  4. Chester says:

    I don’t thin this is off-based. If Sergei said that, he might be right: it may be the best move of *Murdock*’s life.

    That acquisition could have hurt Google’s “everyone’s pal” karma in a much more subtile way than say, the China episode – not to mention the pain would be in a much more sensitive organ: the pocket.

  5. If they’re not in the content business, what about Deja News? Yeah, it’s technically Usenet, but I haven’t subscribed to a “Usenet” group in a long time, but I’m a member of several “Google Groups.”

  6. GoodMove says:

    John I’m really happy to hear some refreashing original thinking here. Was really surprised with the Nat’l INquirer stayle “Google woulda coulda shoulda bought MySpace” sensationalism that was spreading all over the blogosphere.

    MySpace is still not profitable. It’s a PR nightmare. More “company-branded” myspace pages = more defection. I work as a sys admin in a high school, and have seen MySpace’s traffic drop by 50% over the past 6 months. Yahoo actually PULLED its text ads off the site they were bringing the overall performance down so bad. I think Google are patting themselves on the back for ducking this one. Waaay too much hype.

    I will make a bold prediction: MySpace will be another has-been within 2 years. The actual usage of MySpace vs. the media hype is so out of line, there is no way the management team will ever be able to close the gap short of inventing time warping.

  7. dumbfounder says:

    If they bought it and did nothing with it but let it grow and integrate their search more deeply into the product it would have been worth it. At the time I am sure they thought it was a bad idea, or else they would have bought it, but can’t imagine they think so now. Orkut is ranked 30 by Alexa, so clearly they aren’t afraid of “owning content”. But I do believe that it was a better fit for a media company. Remember, Google also tried to buy Friendster a few years ago, they may have thought that MySpace would fizzle like Friendster. But MySpace is remorseless internet eating machine, and they know they made a mistake.

  8. Boy, memories are sure short. @Home bought glamour companies like Excite! and Blue Mountain Arts, which gave rise to potential competitive issues which got them further away from their core business, which was delivering high-speed Internet services to as many cable subscribers as possible. The media spin on “do no evil” plays far differently with Google than with News Corp, where Rupert has oft been compared with various movie villains. One media story about a child predator easily trumps the announcement of a new online payment system.

  9. none says:

    Oh Johnny boy

    When you get a chance.. could you take your lips off Google’s ass. Me thinks you’ve been smelling the same shit too long..

    Just a thought.

  10. damagedphoton says:

    You are so right. Why hasnt anybody nominated you for a Pulitzer or a Nobel ?

    Shame on us all for ignoring your talent.

  11. James says:

    There’s a lot of negative comments above. Please don’t take this to be negative, but I’m not sure I agree with this:

    “If Google bought MySpace, it’d all of a sudden be waist deep in the content creation/publishing business, a business it’s been very wary of playing in.”

    Wouldn’t you define Google Base as exactly waist-deep in the content creation/publishing business?

  12. Keith says:

    By all means, I don’t think advertisers really care much about Google acquiring MySpace. It’s just because MySpace got into some kind of “adult-teen issue”, that’s why your partner mentioned about not purchasing it. But how deep can it go?

  13. alice says:

    I fail to see how blogger or google pages are not content and MySpace is they are all user created content. Fair enough now Rupert Murchdoch owns MySpace he has taken the copyrights for all posted material, but surely thats the evil that google would have sidestepped had they bought it.

  14. Personally I hate MySpace. It sickens me when people refer to it as a web 2.0 application.

  15. Dan says:

    Why would Google ever even consider this for AdSense? The MySpace crowd produces 30% of the internet’s lowest quality traffic. They swamp websites but nobody wants to actually spend a time. They randomly click every ad they get spammed with in their bulletins yet have no money. They’d cost AdWords advertisers millions upon millions in per-click fees while simultaneously driving the average click-to-sale conversion rate on AdWords down a huge amount. That’d drive advertisers away to competitors like Yahoo!/Overture.

    Google knows that. They’re not morons.

  16. Dan says:

    s/time/dime

  17. Sebastian Aviña says:

    Actually Google have all the elements for build up a “MySpace”, they have a good Mail Client with a great user Base, also have the GTalk, one of the better IM client’s out there, but with almost no adoption by the usets, and of course googlepages, also a Social Web Site (Orkut)
    what google is missing is the integration of all the services.
    I mean, imagine the doc manager on writely, but where you can manage writely and spredasheets…
    I guess google is working on the integration of all their services, but after they integrate all of them, they are launching the services they don’t have (like web picasa) for testing and debugging.
    I guess that in the soon time we are having a google.com/ig, but better, wehere you can search public profiles of persons, look their googlepages, their google notebooks, chat with them with gtalk, look their photos with web picasa and maybe do some phone calls using gtalk…
    Maybe do some google groups interactions…
    And when that happens, who will use MySpace?
    Also, Seeing that Windows Vista is coming by the next year with so many features that will make users use more msn search, I guess that this integration it’s going to be ready after the first quarter / 2007.

  18. anson says:

    “You’re the head, and the tail feels like it’s being wagged.”

    Uhh, this is the most non-sensical metaphor I’ve read in a long time…

    In any case whether Google or News owns MySpace, I don’t really see it being relevant to content providers. Content providers can only increase their revenue with more eyeballs, and unless you’re runing a MySpace competitor, how does the popularity or lack thereof of MySpace affect your business one way or the other?

  19. Well that is crap (a little emotion please), because if your post is right my petty little prediction is all wrong.

    I can’t fault the logic though. At the end of the day I find its near impossible to predict too far ahead because small steps can look odd and only look in sync when you know their 5-10yr plan.

    Great read.
    Thx,
    Rog

  20. paperhat says:

    Interesting usage of the word queer. Is this a groudbreaking new usage or am I out of the linguistic loop?

  21. Rich says:

    The beauty of MySpace is that the Kids create the content for you. Bands, Artists, trends, buzzwords, the ‘cool’ guy who has the following and posts a clip of japanese pranksters building a port-o-potty that elevates the defecator straight up and out on top of the world for all to see (or a clip of whatever) – that spreads via word of mouth. Chris Anderson’s Article in the new WIRED is well worth a read, and Spencer Reiss’s cover story on Murdoch and MySpace is excellent. Im quite curious as to what kind of software will be developed to scan the masses of myspace users (users numbers have quadrupled since the purchase – WIRED) and seek out new trends.

  22. Mike says:

    that is the stupidest conclusion i’ve heard today so far – stop drinking the koolaid – as a substantial stock holder, i can speak somewhat objectively when i say: google just screwed up – they didnt buy, because they thought they could do it better for less – their engineers CAN do it better, no doubt – every engineer thinks they can recreate it better – but they should have bought it for $200+ million – here’s why: google gets $400 million in annual revenue from myspace alone – if they had bought it, then they could have kept the whole enchilada – they didnt because they made a strategic, somewhat arrogant decision – now its going to cost them threw the nose:

    myspace is in the process of negotiating to the highest bidder – myspace wants guaranteed revenue – the reports i am hearing are about 90% of the 400 million GUARANTEED – that means of the 400 million, like 310 million will be going into Rupert Murdoch’s pockets – ouch.

  23. jsw says:

    I don’t see how ‘not buying’ myspace is a problem or a mistake for google; your theory is at least one of the discussion points they could have evaluated.

    But there are others, some of which are more pertinent.

    For one, is the MySpace phenonmenon sustainable? I see this is a ‘top 10′ evaluation issue…for any company. From history it’s clear these type of sites (angelfire, et al) have difficulty maintaining their momentum and more importantly, creating revenue streams that get them to BEP and beyond…is myspace any different? It does not appear to be, and that is an issue.

    Second, does myspace ‘fit’ into the corp scheme and add value with its assets (members, views, content, etc). For News, it seems to fit. With some creative thinking, they can exploit the ‘hard asset’ of the myspacer’s (the people), for example – News can create ‘buzz drops’ for show ideas or they have a fertile test bed from which to launch interactive campaigns that leverage their cable tv biz, and more ideas like these.

    In short, myspace seems to be a good fit for News. I don’t think it plays as well for google.

    For google, the combination of gbase and gpay attacking ebay makes a ton more sense. The auction market is a proven market but extremely vulnerable…espcially if you look at what ebay is from 50,000 feet – a brand and an online database. Google is both of those…and bigger. Google would gain enormously by succeeding in this market versus sidetracking into the hot, but unproven ‘social networking’ arena.

    my take; google passing makes sense, news buying makes sense, one doesn’t impact the other.

  24. Abdu says:

    I never use MySpace and I don’t care about it. It doesn’t matter to me if Google or any other company buys MySpace. I am a Google advertiser and MySpace doesn’t matter to my business. I am sure this applies to tons of other businesses.

  25. Tony says:

    I have to disagree with most of the others. Your friend nailed it, John. For a search/advertising company, Google has a keen sense of channel conflict — what creates it and the +/- effect on your core business.

    Of course, if Google ever ceases to be the 800-lb. gorilla in online ad revenue then they’ll need a contingency plan. Until then, “sticking to their knitting” in this instance was a smart move.

  26. Papi says:

    I think you’re off, google blundered, your friend was doing ‘conjecture’. Google would be freaking silly to have passed up Myspace and it is in fact kind of silly.

  27. I don’t like the success of MySpace because I don’t like people such as Murdoch controlling such a large share of global media.

    Someone above thinks its all hype about how popular MySpace is.

    Sadly, this is not true.

    Being a web savvy type, I’ve be aware of and using social networking sites like tribe etc for ages, but the vast majority of people have still never heard of most of them.

    Because Murdoch has got his media empire to spread the word, LOADS of people I know who wouldn’t even recognise the terms “social networking sites” or “web 2.0″ have a MySpace.

    But what everyone seems to be missing is what MySpace’s USP actually is: MUSIC

    Where else can bands upload and share their music for all to hear? (and do all the friendy, messaging and posting gigs stuff).

    Music brings people together. The guy who built MySpace knew that.

    Still, while MySpace is for many their first social networking experience, I don’t personally think (or perhaps just hope) that users will have much of a sense of loyalty of solidarity with the service. The whole thing is rather clunky and when something better comes along, people will migrate.

    Overall (hopefully), perhaps the value of introducing people to the self-organising power social networking sites will out-weigh the costs of MySpace currently being dominant and part of the Murdoch empire.

  28. + of

    perhaps the value of introducing people to the self-organising power of social networking sites will out-weigh the costs of MySpace currently being dominant and part of the Murdoch empire.

  29. Bob says:

    I disagree that it wasn’t a strategic blunder. Google’s main business is search and what better way to get into the “people search” business then to own Myspace. Google makes money in the ad business but it’s CORE business is that it is a seach engine.

    http://www.bookscholarship.com

  30. addollars says:

    With MySpace having the 3rd most traffic domestically (only behind Yahoo adn Google) in the US and 5th most traffic globally, I find it hard to believe that “MySpace is not profitable.” Anyone who says this without qualification has no idea how Google makes money.

    I’ve heard that based on these figures, MySpace alone serves 20% of ALL internet ads. That is a lot of $$$$$.

  31. Greg says:

    Hey Goodmove…You are right about MySpace. I have a solution that I would like to make you aware of that is oriented at K-12.

    Please contact me.

    garnold@lifelinked.com

  32. M C says:

    You are right MySpace group is very young. To Young for sales. Just free stuff.

    Wise move not to buy.

  33. SutroStyle says:

    I do not know whether your facts are correct, but your concerns are valid. We are running a social platform, with 500k users which is under web 2.0 radar, but we read many web 2.0 blogs for our education ;-)

    And I can tell you that you raise a very valid concern- I veiw Google as my competitor, and I am VERY apprehensive of letting them measure my traffic with their adwords javascript. Now, if they truly went full speed into content creation business, then I would DEFINITELY freak out and turn to Adbrite or something like that.

  34. blogopogo says:

    the first i ever heard of myspace.com was a news spot or talk show segment with three 12-14ish(?) girls meeting an undercover guy who had been posing as a teenager they’d gotten to know online, so then they got to sit there while some older guy they didn’t know at all pointed out all the ways their confidence/safety perception was completely off. it seemed pretty effective — obviously uncomfortable for the girls. myspace.com just doesn’t scream “that google aesthetic” at me..

    a daydream: google goes back in time to preserve & invigorate mp3.com. nothing’s ever really taken it’s place, so many bands from so many places, too many seemed to dispersed beyond the searchability & some seemed to blink off the map entirely, either then or after never updating the initial band page they set up at some other lesser-known band hosting site.

  35. If they’re not in the content business, what about Deja News? Yeah, it’s technically Usenet, but I haven’t subscribed to a “Usenet” group in a long time, but I’m a member of several “Google Groups.”

  36. Dougie says:

    A high school admin up there said MySpace is not profitable. Wow, so wrong. They’re very profitable and were even before they were purchased by Newscorp.

    He also said the hype about MySpace doesn’t match the traffic. So wrong again. MySpace is the 2nd largets site in the US in terms of page views. Second only to Yahoo.

  37. None of the chitchat I have heard on this site mentions the names of the four persons who spawned MySpace withouttheir names ever becoming public. Those names are Andrew ALan Wiederhorn and his wife TIffany, and Clarence B. (UNcle Bud) Coleman and HIS wife Joan. This foursome is the controlling powers of Fog Cutter Capital Group, an infamous predatory subprime lender out of Portland Ore. THe Wiederhorns are infamous and despised by the large segments of the Oregon population, particiualy unionists because the Wiederhorns and the COleman were centrally involved in the largest pension fund theft of its kind in AMerican history, and Andrew Alan Wiederhorn was, in fact, in a federal pen in Oregon when his cohorts gained control of Intermix, the mom of the bastard child MySpace, the venture firms associated with MySpace, Redpoint and Vantage point, and all lthis has been under the radar of the lamestreammedia alghough blogger Trent Lapinski from L.A. area and me — Alan MacLeese, a retired newspaperman — published this newsy morsel in APRIL and all this can be checked out by googling ALan MacLeese, Trent Lapinski, Konspiracy Korners, theSounds of Crickets Chirping, the Catbird Forum, Scobleizer, Buzzmachine, TechDirt or, well, you all can google, can’t you. (If that sounds snappish, excuse it because I have been working with Lapinski on this sisnce March 27, and, well, one does get snarky after such a siege, but Lapinski will have a natonal magazine piece published all over the place, and, finally, the charade of cabinboys Tommy ANderson and Chrissy DeWolfe will come to a rather ignominous end. Al MacLeese, from Hallowell Maine where the beavers build granite dams.