Kara Swisher throws a sharp elbow: In a post this morning that ridicules Facebook’s ever-larger valuations, she argues that monetizing Facebook’s users will be harder than it looks, then tosses in this casual aside:
According to many sources, Google is struggling to make ends meet in its own sweetheart guaranteed ad deal with Facebook rival MySpace, which is much larger, and Google has the best monetization engine out there.
Reminder: Google’s deal with News Corp. (NWS) guarantees $900 million over three years for the right to sell AdSense and provide search on MySpace and the other Fox Interactive Media properties (IGN, Fox Sports and now Photobucket.) Although it still hasn’t been formally signed, it started kicking in last year, and is now expected to account for half of MySpace’s growth this year.
It wouldn’t be a shock to hear that Google may have overpaid for the MySpace deal, since conventional wisdom is that Google was most interested in keeping Microsoft out of the property. But News Corp. says that’s not the case: Things are going well with Google, the company said this morning, and FIM is “hitting its minimums” on the deal.
But even if the Google deal is performing adequately for both sides, that won’t be nearly enough for News Corp. We estimate that MySpace revenues grew an OK-but-not-supercharged 20% in the first half of this year; we think the growth targets News Corp. threw out in August — $800 million in the next 12 months — represent an 82% increase. In order to get that kind of growth, News Corp. will need dramatic growth in the ads it sells itself. Which means that its highly touted program to sell targeted ads at a big premium had better work.