Google and MySpace Investor Conference Transcript + SEL's Key Take Aways
Google and FIM (owner of MySpace) came to agreements on a three year, nine month partnership with a minimum revenue share payments of $900 million. Google will be the sole search provider for MySpace, put AdSense AND a Google search box on all MySpace pages and have right of first refusal for remnant ad space.

Here are my key take aways from all the coverage I've looked at and listened to today:

• MySpace is now paid for. In fact, FIM just paid for 2/3 of its internet investments according to FIM's Levinsohn.
• During the call both FIM and Google CEOs indicated that this deal is just the first step. They made no clarifying statements about future operations, but my best guesses are content sharing and monetization for media such as video (considering Google's recent deal with MTV) and across mobile. Keep in mind that the deal is far bigger than MySpace. It doesn't include Fox Sports however, which still has lucrative deals with MSN.
• There's a MySpace toolbar coming, which will incorporate Google search.
• In one deal Google has gained access to mountains of social media user data, positioning them for gaining a rapid understanding of social networks. Depending on how the partnership progresses, MySpace could help Google in its currently impoverished social media position.
• The deal doesn't start until October.
• MySpace was looking more seriously at building its own video search than text search, an indication of the importance of video to growth.

Thought for Marketers: set aside some of your holiday season marketing budget to experiment with MySpace ads in October.

Danny Sullivan posits:

* Big win for Google? Sure. Lots of traditional players are worried about MySpace, even if the site itself isn't earning that much now, from what I understand. This gets Google in, keeps Yahoo and Microsoft out, and might be a cheap payment to protect Google's front in the social networking wars. In other words, even if Google doesn't make a net profit off of MySpace, the intangibles could be worth the cost. The closer ties also give Google deeper insight into the MySpace traffic, since it will soon see everyone going to these pages. That will be very helpful for Google if it wants to do a renewed social networking effort of its own.

* Big loss for Microsoft and Yahoo? Maybe, maybe not. If social networking is hot, both of them -- unlike Google -- have very healthy communities in several international markets. In fact, that potentially could have been an issue in trying to win MySpace. Revenue-wise, Yahoo indirectly provides ads to MySpace, but current revenue doesn't appear to be substantial, plus Yahoo already would have been giving a big chunk of this to whomever is the unknown middleman.

Here's the official press release:
Fox Interactive Media Enters Into Landmark Agreement with Google Inc.

And here's the call that Google and MySpace conducted with financial analysts and the press six hours after they signed the deal:
Fox Interactive Media and Google Management Conference Call

Battelle's post pointed me to the Google/MySpace call, which he summarizes this way:

In short, Google has guaranteed minimum payments based on expected revenues from search placements on MySpace.

The deal is all cash, there are traffic assumptions that they feel "comfortable" with, the deal feathers back if traffic goals are not met. "Our history is that we agree to these structures, and then we do better because of our synergies," says Schmidt.

Conference Transcript: I listened to the call and took notes. In the process I butchered the names of countless financial analysts and reporters who asked questions.

Included in the call were Tim Armstrong and Eric Schmidt of Google and Ross Levinsohn of FIM.

Q&A from the investment analyst community:
Rich Greenfield - what about video advertising?
FIM: Video not part of this deal, but we will have conversations with Google about future video possibilities.

Anthony Noto - what percent of search queries are sellable on MySpace?
FIM: They're all sellable, metrics indicate that consumers who use our sites gravitated towards Google anyway.

-will inventory be purchasable separately?
Google: Advertisers will have a different set of choices going down from broad to specifically targeting MySpace.
FIM is going to fortune 500, selling normal display ads, small, midsized advertisers can target MySpace specifically or put it in a larger set

FIM: additional opportunity: the real potential homerun is combining Google's technology with MySpace understanding of users.

Jessica Reve-Coehn - have you changed your outlook for digital revenue for Interactive?
FIM: This will help fox's 07 and the guarantee tracks the deal. It will take time to integrate and the deal doesn't start until October.

- you alluded to much bigger relationship - what steps in what time period?
FIM: Both companies had their heads down getting a complicated deal done in a short amount of time. Other than a couple nice conversations our teams haven't had time to dig into opportunities.

Schmidt: Where there are users and growth there are opportunities. MySpace has been gaining users' time very rapidly. This presents many new business opportunities for us to collaborate on. We can follow growth quite well.

Imran Kahn - testing MySpace referral traffic? conversion rates? rps for those customers?
Google: We have a good idea of what's happening to analytically model the growth and financials; the majority of the work of the deal teams was to make sure that the assumptions we made were accurate.

Mike Morris - can you provide detail on the timing of the pay, plus details on what goes over
Google: in terms of revenue sharing - this is a standard rev share detail, we're not going to divulge the specific terms.

Christa Krauls - toolbar distribution agreement? Recent Google video share with viacom, will there be content sharing?
FIM: We have a myspace toolbar that will integrate with Google search. Content sharing not part of the deal, but that could be something we discuss.

Spencer Wang - The $900 million: is that cash or credits or equity? traffic targets? what happens to rev share if not met?
FIM: it's all cash, based on traffic levels that are realistic and achievable. If we fail to make those the guarantee gets reduced accordingly. We aim to exceed them.

Jordan Rohan - Nature of the MySpace traffic; is it global in nature, how many countries, what is the myspace demographic?
FIM: MySpace audience is adding 250,000 new registrants a day (how many porn bot pages in there?). 90% us 10% international. We've launched in the UK and australia, 3 more countries in the next 2 months.

Yusef - Was this deal put out to yahoo and msn? FIM will sell display through the sales force? Google has remnant options across the full network?

We did have conversations with Google's competitors.
Regarding display advertising: IAB sized banners are used for branded sponsorship sales, inventory that's not sold is termed remnant, we currently work with 17 different providers. Google has first right of refusal.

PRESS
Eileen Vandune - which two geographies are the exceptions in the deal, accidentally released AOL research showed that 5% of Google users click through to MySpace; is that accurate?

FIM: the two exeptions - we don't disclose them, have contractual obligations and soon to be contractual obligations. We found that the majority of our users leaving myspace go to google.

AP, Nick Jedanune - what are the competitors that you considered, why were they passed, thought of doing search on your own?
FIM: We won't speak in depth about our competitors. We looked at everyone, extremely competitive environment, totality of the deal, Google was the preferred supplier. This went as smoothly as you could ask for, testament to all the people on the ground.

Schmidt: deals are about people, leadership, principles and mission - we knew pretty quickly that this would be a partnerhips based on collaboration

Bloomberg news, Cecile Deraut - Yahoo's technology used previously? Was it a problem that Google owns 5% of AOL, a MySpace competitor?
FIM: Yes, we used Yahoo, did some of our own work in certain categories in search. The internet has lots of crossovers - it's just sort of the make up of the industry. I'm not concerned about the relationship between Google and AOL.

Ben Fritz - Did you look at aquiring a search engine? How serious were you about building your own?
we were looking more seriously at video search than text search. Our users preferred Google search.

Kim Peterson - When does the agreement between fox sports and MSN end? will sports come to Google?
FIM: We don't talk about contractual terms. Our relationship with MSN is strong and solid in the sports category.

- why did this happen so fast?
FIM: Once you make a decision you want to do a deal as quickly as possible. we didn't want to drag this out.

Schmidt: They'd been chatting with us for a year, on and off. They had a management meeting last week and they set a deadline.

John Hagans - this is a good answer back to people who've expressed scepticism about MySpace. what does this mean financially for FIM from a profit standpoint, in a broad stroke what does this mean?
FIM: We've paid for 2/3 of all of our internet investments. There are 100% margins on this deal and we've paid for MySpace with 70% premium. We were confident in our ability to monetize MySpace and are confident we'll do a much better job on remnants now. We have a new head of ad sales, and have tremendous progress on display.

Other Coverage:
Paid Content's Staci interviewed FIM's Ross Levinsohn.
FIM-Google: Levinsohn: "When Sergey Comes Down, They're Pretty Serious"

Color excerpt:

Google’s push went into gear a couple of weeks ago with a visit to FIM for a broad-based discussion. Last Wednesday, a team led by co-founder Sergey Brin went to Pebble Beach during the News Corp. summit. “When Sergey comes down, they’re pretty serious,” said Levinsohn. Brin didn’t [stay - sic] the whole time; he didn’t have to. The execs involved clicked and by the end of the roughly eight-hour meeting, the deal was well on its way. He thinks the deal would have moved quickly whichever company was chosen.

MySpace, Google Ink $900 Million Search Deal MediaPost
Fox Interactive's Call For A Search & Contextual Ad Vendor Answered: Google; $900 Million Guarantee PaidContent
Google to Syndicate Search and Ads to MySpace ClickZ
What was MSN, Yahoo thinking? Bambi Francisco
Google & MySpace In $900 Million Deal On Search & Contextual Ads Danny Sullivan

more coverage:
Google Deal Will Give News Corp. Huge Payoff NYTimes
Google pledges $900 million for MySpace honors CNet
Google, MySpace Ink $900M Deal Red Herring
MySpace deal gives Google access to "oblivious teenager" demographic SiliconValley.com
Garrett French - MarketSmart Interactive | permalink | +marktd |