New York — Media conglomerate News Corp. is in discussions with Google Inc., Microsoft Corp. and Yahoo Inc. about replacing social networking site MySpace’s crucial search-advertising partnership with Google, which expires next month, the Wall Street Journal reported Monday, citing people familiar with the matter.
Under the current deal, Google had admitted to make up to $900 million in guaranteed payments for the right to sell small ads as users surf and tap out searches on News Corp.’s MySpace.com and on a handful of smaller News Corp. websites, the Journal reported. Nevertheless, of late, MySpace has dropped far short of Web traffic and other milestones indicated in the Google contract, which expires at the end of August.
Google in 2006 trounced Microsoft and Yahoo for the ad pact, which was considered at the time as justifying News Corp.’s purchase of MySpace’s parent company for $650 million. News Corp. also owns The Wall Street Journal.
The deal is cooling down at a turbulent point. People close to News Corp. quoted as saying that any new agreement will be for significantly less money. That would be a further financial challenge for MySpace, which has seen ad revenue slip. MySpace has seen turnover among several top-level executives, including Co-President Jason Hirschhorn last month.
MySpace became the most popular social networking site in the U.S. in June 2006. When Facebook rolled out new features in an effort to attract a variety of users, Myspace found itself in a continuing decline of membership. Now, the website also is in the midst of a remodeling to stand apart from Facebook Inc., which has outstripped MySpace as the dominant online place for people to swap stories, comments and photos with friends and acquaintances.
MySpace, Google and Yahoo declined to comment. Microsoft was not immediately available on Monday, a U.S. holiday.
Overhauling MySpace is a high-level project for News Corp., which nominated Chief Digital Officer Jon Miller to oversee the effort. MySpace also is a test of whether Internet properties can rebuild buzz and revenue growth once they have ebbed. That is also the task facing AOL Inc. and Yahoo, both of which are in the middle of turnaround efforts.
News Corp. executives asserts that they consider privacy and other concerns about Facebook leave an opening for MySpace to attract new users and business partners, though they also say MySpace does not expect or need to be as big as Facebook.
MySpace also proposes in coming months to introduce new applications for cellphones and to overhaul its site, possibly including a new logo.
Aaron Shapiro, a partner at online-marketing firm Huge, said MySpace can establish a niche alongside Facebook and Twitter, but he cautioned that MySpace still has a long way to go to make the website easier to use and to incorporate slicker design and technology.
“They have been frozen in time for four years in terms of their degree of innovation,” he said.
More than a year into its shift, MySpace attracted 109 million unique world-wide visitors in May, down nearly 13% from the same month last year, according to comScore Inc.
Facebook had more than 548 million global users, up 74%.
MySpace executives explained that they are concentrating on increasing the percentage of the U.S. population of 13- to 34-year-olds who visit the site each month to 75% from 50%.
“My goal is to saturate that specific audience,” said MySpace President Mike Jones.
Jones became the top MySpace executive after Hirschhorn stepped down in June, which in turn came just months after Chief Executive Owen Van Natta was pushed out.
MySpace also has cut about 30% of its work force, and News Corp. took a $450 million charge last year to write down the value of MySpace and other digital businesses.