MySpace Disaster By Google

There are blunders and then there are disasters! Last year Google could have bought MySpace for USD 290 mn but they didnt think much of that site. So they let it go. Here is the story:

In the latest (July) issue of Wired magazine, Rupert Murdoch claims that Google…

“…could have bought MySpace three months before we did for half the price. They thought, ‘It’s nothing special. We can do that.'”

So that means Google could have acquired MySpace a year ago for about $290 million. Talk about a strategic blunder… the thought of Google and MySpace, combined, boggles the mind. Instead, Google is left thinking of what could have been. And to add insult to injury, it may turn out that not acquiring MySpace may end up being more expensive for Google!

As widely reported, MySpace is now the largest source of search traffic for Google, accounting for over 8% of their inbound traffic as of early May. That essentially means that MySpace is responsible for about $400 million of Google’s annual revenues. Knowing this, MySpace is trying to capitalize by holding an auction for its search business. If Google wins, it will end up sharing a significant percentage of that $400 million with MySpace… John Battelle thinks the split to MySpace will be close to 90%. And Google would need to pay it every year. Needless to say, had Google acquired MySpace, no such payments would have to be made.

In addition to the real costs that Google is likely to incur, there’s also the opportunity cost. Had Google acquired MySpace, they would likely be ranked the #1 Internet property on all user & usage metrics… nudging out Yahoo! from that top spot. It certainly would have been quite a sight to see… being #1 overall, based on its dominance in search fortified with an even greater dominance in the social networking category. It certainly would have cemented Google’s leadership into a near-ineffable state of invincibility.

Why is it a blunder? Because now MySpace has beaten Yahoo and Google as the No. 1 ranked site by viewership!!

NEW YORK, July 11 (Reuters) – Online teen hangout MySpace.com ranked as the No. 1 U.S. Web site last week, displacing Yahoo Inc.’s(YHOO.O: Quote, Profile, Research) top-rated e-mail gateway and Google Inc.’s (GOOG.O: Quote, Profile, Research) search site, Internet tracking firm Hitwise said on Tuesday.

News Corp.’s (NWS.N: Quote, Profile, Research) MySpace accounted for 4.46 percent of all U.S. Internet visits for the week ending July 8, pushing it past Yahoo Mail for the first time and outpacing the home pages for Yahoo, Google and Microsoft’s (MSFT.O: Quote, Profile, Research) MSN Hotmail.

Hitwise does not provide figures for the number of unique visitors to a site.

MySpace, which dominates social networking on the Web, also gained share in June from other sites that aim to create virtual communities online for sharing music, photos or other interests, Hitwise said.

MySpace captured nearly 80 percent of visits to online social networking sites, up from 76 percent in April. A distant second was FaceBook at 7.6 percent.

Rupert Murdoch’s News Corp bought MySpace for $580 million one year ago as part of a strategy to rapidly build up the media conglomerate’s Internet presence.