A new "friend" on MySpace
Chuckle if you want, but will Google (NASDAQ:GOOG) really find a friend in social networking hub MySpace.com? Google is agreeing to pay at least $900 million to provide search ads and other contextual marketing displays on News Corp.'s (NYSE:NWS) sites for a little more than three years. That includes several FOX sites and the video game-related IGN.com properties, but it's Google's presence on MySpace come January that is really stirring up the imagination.
Last month, MySpace attracted nearly 46 million visitors. That's an audience too big to ignore, but we have to put things in their proper perspective. News Corp. has only taken baby steps towards monetizing the wildly popular and wildly wild MySpace. Paid search through Google's own sites has been lucrative because folks come to Google only because they want to go somewhere else. Google's third-party network continues to grow, but its organic traffic has been the faster grower over the past few quarters.
Don't get me wrong. If anyone can make this work it will be Google. It has the greatest inventory of advertisers and ads. It has nearly perfected the technology to serve up relevant ads. But if I'm an advertiser, do I want to waste a click on the typical MySpace teen? If I'm selling something, probably not. Nobody logs on to MySpace with an open wallet. Most searches aren't going to be for lucrative legal, health, or financial terms. Advertisers aren't forking over more than pennies for search terms like "free MP3s" or "Jessica Simpson naked" (or the more likely "MySpace friend trains" or "garishly obnoxious templates") on MySpace.
This doesn't mean that Google won't make it up in volume. It may be a great way to serve up low-bid ads to low-quality traffic, but is that a good thing? If Google AdWords advertisers feel that they aren't reaching the audience that they covet, they may turn to rivals like Yahoo! (NASDAQ:YHOO) or Microsoft (NASDAQ:MSFT) for their contextual marketing needs.
The Mickey Mouse march
It was no goofy quarterly report out of Disney (NYSE:DIS). The family entertainment giant smoked analysts. The thing that really impressed me there was that the greatest improvement took place in its studio entertainment division and that was before Pirates of the Caribbean: Dead Man's Chest opened and before it even started recouping the race winnings from Cars. Can you imagine what the numbers will look like when those two films -- the two top-grossing flicks at the stateside multiplex this year -- hit the DVD market in a few months?
Sure, I'm worried that ABC may start to stumble. Desperate Housewives is feeling awfully vulnerable. Monday Night Football won't be on ABC. I'm still watching Lost, though the third season is going to be challenging.
The theme parks performed splendidly, though everything from pricey gasoline to Thursday's airline terrorist scare may come to weigh on turnstile clicks in the near term. That's okay. Disney doesn't need to be running on all cylinders to produce market-thumping returns. It just needs to keep Goofy far away from the accounting department.
Until next week, I remain,
Rick Munarriz
Disney is a Motley Fool Stock Advisor newsletter recommendation. Microsoft is an Inside Value pick.
Longtime Fool contributor Rick Munarriz recommends windshield wiper fluid when trying to look back. He does own shares in Disney. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
