Written by Jay Fortner and edited by Richard MacManus
MySpace has some hard decisions to make, as last year they entered into an advertising relationship with Google and now they find themselves unable to make similar deals with other companies. An alliance between MySpace and Google last year, where Google became the sole provider of text ads on MySpace, guaranteed News Corp's media darling $900 million in shared ad revenue over the course of three years. The deal, made six months ago, has not been finalized but it has already taken effect. A Google search bar and ads are already present on the site and MySpace is receiving payments from those.
But now MySpace is looking to partner with eBay, to allow MySpace users to sell items using eBay's PayPal. And like a jealous lover, Google is protesting. The Wall St Journal is reporting (full article behind paywall) that MySpace's dalliance with eBay is holding up finalization of the ad revenue deal between MySpace and Google. You can imagine the Google ultimatum: it's either him or me! :-)
The issues each company faces:
- MySpace wants to empower their user base and become more of a centralized hub, by allowing "peer commerce" with eBay's PayPal mechanisms.
- eBay is facing negative backlash from investors, who are looking not only for growth, but to stay ahead of competition from Google's new payment system Checkout.
- Google has a hard time sharing ad space. They certainly don't want to share MySpace with eBay, when they're trying to steal market share with Google Checkout.
So what we have here is three companies trying to grow revenue through partnering with other industry powerhouses. The Wall Street Journal pointed out that while Google and eBay say they have entered into their own advertising partnership, the general concern is that each company is competing for the attention of MySpace users and so neither maximizes their revenue on MySpace.
Then there is Google Checkout, a direct competitor to eBay's Paypal. That can only make the relationship between eBay and Google (and now MySpace) that much more strained. It's a classic case of what happens when companies take the easier road to growth, which is partnerships, but then one of the partners gets big enough to want to do everything on their own.
Well, for MySpace, the solution is easy. Use Google Checkout instead of PayPal. It will become widespread enough to not have to worry about brand recognition (or lack thereof).
But this love triangle speaks to a larger issue at hand - can Google continue on their path to media monopoly? They've effectively used their search method of gathering data to impede on nearly every kind of business imaginable. Some stick, like Gmail and Checkout. Others the average person has never heard of, like Orkut and Froogle. But Google's power tactic is reminiscent of Wal-Mart's industry dominance, because they increasingly leave little room for partnerships between other companies. In this case, eBay may end up being the jilted party.