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October 11, 2006

Did Google Buy YouTube to Negotiate with MySpace?

posted by MR WAVETHEORY at 10/11/2006 05:50:00 AM
MySpace is one of the largest online audiences and with the recent ad deal between Google and MySpace, part of me says that Google bought YouTube so it could be in a stronger negotiating position with MySpace. The $900 million ad deal between MySpace and Google is no chump change even for Google, and in order to deliver on that number, it looks like the number crunchers at Google may have thought that adding YouTube to the fold would strengthen their bargaing position. The WSJ seems to agree. News Corp execs were upset over they got passed over.

Circumstances of the deal upset executives at News Corp. The media conglomerate had sniffed around YouTube several times in recent months, but never made a firm offer because the start-up's executives said it wasn't for sale, say people familiar with the matter.

Understandably, this is one the biggest deals in recent years. The deal really forces MySpace to work with Google.

Google Chief Executive Eric Schmidt and Advertising Sales Vice President Tim Armstrong are expected to meet this week in Los Angeles with News Corp. executives, including Chairman Rupert Murdoch, to discuss new ways of working together. One possibility is to expand Google's recently signed ad deal with social-networking site MySpace to include video advertising on the Web. "If we can figure out the ways to work with them or integrate with them, that could be really good for us," said Ross Levinsohn, head of News Corp.'s Fox Interactive Media division, which oversees MySpace. He declined to comment on specifics.

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