Zach Baker: Story-Driven

I was confused at first when I read this article about the $900-million deal between Google and MySpace. Wait, Google is paying News Corp. (MySpace’s owner) the $900 million and they’re not even buying the website?

But it turns out that this is an interesting deal. Google is basically paying for the right to advertise on MySpace and profiting on the ad sales.

It’s like syndication in reverse. Syndication, in the TV sense, is where stations go buy shows out in the marketplace. They often come with some ads already in place, and then the local station put in their own. Ever wonder why Wheel of Fortune has a long section of miniature ads for things like jelly, er, Polaner All-Fruit? Those are the spots that come with the show.

So the basic pattern is that distributors pay for content and sell ads. In the Google-MySpace deal, MySpace provides the content and distributes it all by themselves, and Google is effectively buying a block of advertising and reselling it. So instead of selling the TV show to stations, it’s like the stations create the show and sell a big block of advertising to a single buyer, who then goes around and sells it in tiny pieces.

I like the philosophy Google has here - buy the technology, rent the content, sell the advertising. This could be a promising way for startup websites to raise long-term money without selling their equity.