Friday, September 15, 2006

Google Signs Online Advertising Deal with News Corporation


Topic #2: Google Partners with MySpace to Include Contextual Based Advertisements

Last month in August, Google signed a three year $900 million deal with News Corp. to bring contextual based online advertisements to MySpace, IGN, and Fox Interactive Media websites. News Corp., who owns MySpace has definitely received the better end of this deal. Since News Corp. acquired MySpace in 2005 for $580 million, they have not seen the advertisement revenues that they had initially expected. This was due to MySpace’s limited non-target-based banner advertisements. The future of online advertising truly lies with contextual based ads. Currently, Google is the largest site for contextual, search based online advertisements.

Nowadays, anyone who has a website that promotes a product or service wants to know how they can get their site ranked on Google. Back in 2000, when Google noticed the increasing trend of people who demanded their sites be listed on their search engine, they decided to launch Google AdWords. This is Google’s Pay-Per-Click online advertisements that you always see at the top and right sides of any search in Google. People who subscribe to this service pay Google whenever someone clicks on their link that is listed for certain key search words. More recently, in 2003, Google launched its contextual online advertising program known as Google AdSense. This is a program where people can subscribe to have online ads that are similar to the content of their site placed on their websites. Google pays the people that display the ads on their websites based on the number of clicks each ad receives. The AdSense program is similar to what Google is offering MySpace with this deal, except on a much larger scale.

MySpace, which is America’s most popular website, receives 4.46 percent of all Internet traffic. Google obviously saw this as a huge opportunity to place their contextual based advertisements on sites that would generate millions of clicks. Even though MySpace is America’s most visited website, they were not earning anywhere near their maximum potential revenues based on online advertisements. Internet advertising revenues increased by 30 percent in 2005, but MySpace did not follow this trend. This happened because their advertisements were tacky banner based ads that were attached to profiles randomly, not based on the profiles content. Google noticed this and decided to step in to help MySpace in their dilemma, and also make some revenue while doing so.

This is not the first time that Google has partnered with a major company to promote online advertisements. Earlier in August, Google signed a deal with Viacom, who owns MTV, to syndicate video clips from MTV and Nickelodeon over Google’s AdSense program. The reason so many companies choose Google to advertise their services is because Google places the ads where buyers are likely to see them and click on them, which then turns into a potential transaction for the advertiser. Google is certainly the undisputed champion in the online advertising world. Their deal with MySpace to place contextual based ads on user profiles is yet another reason you will want to advertise with Google.

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