Could Google have bought MySpace for half the price?

Updated

Murdoch

There’s been a lot commentary about the latest Wired piece about MySpace.

The reporter gets some great access to the News Corp’s Rupert Murdoch, describes in detail how the media titan selected Ross Levinsohn to take over the company’s Internet strategy, and how Levinsohn then recommended two purchases, one of them “a shady LA-based online marketing shop called Intermix, whose crown jewel – the riotous social network MySpace – had become the Net’s premier teen hangout. Murdoch loved it..”

But the line getting all the attention is a reference by Murdoch to Google, at the very end of the piece:

I like those guys, but there’s a bit of arrogance. They could have bought MySpace three months before we did for half the price. They thought, “It’s nothing special. We can do that.”

People are assuming — perhaps rightly — that this is a reference to a specific deal Google was thinking about consummating, and that Google decided to forgo it. But the quote is part of a list of out-of-context quotes pulled from an interview, and we’re left wondering whether it was more of a speculative point, i.e., that Google could have tried to cut such a deal, but that we don’t really know if there were really talks.

(Update: And John Battelle has a good point: Even if it were true, a Google pass on the deal would not necessarily have been a strategic blunder: all of a sudden you are not the neutral partner, you’re the big ol’ competitor in the content space.)

In any case, Robert Young does the math, and says that, if true, it means Google could have acquired MySpace a year ago for about $290 million:

Talk about a strategic blunder… the thought of Google and MySpace, combined, boggles the mind. Instead, Google is left thinking of what could have been. And to add insult to injury, it may turn out that not acquiring MySpace may end up being more expensive for Google!

As widely reported, MySpace is now the largest source of search traffic for Google, accounting for over 8% of their inbound traffic as of early May. That essentially means that MySpace is responsible for about $400 million of Google’s annual revenues. Knowing this, MySpace is trying to capitalize by holding an auction for its search business. If Google wins, it will end up sharing a significant percentage of that $400 million with MySpace… John Battelle thinks the split to MySpace will be close to 90%. And Google would need to pay it every year. Needless to say, had Google acquired MySpace, no such payments would have to be made.

We’ve emailed Google for comment, but we’re pretty sure they won’t bite on this one.