Murdoch's MySpace aims to expand ad deal with Google

NEW YORK - News Corporation's MySpace is looking to expand its advertising deal with Google after losing out to the search giant in the battle for video-sharing site YouTube.

Eric Schmidt, Google's chief executive, and Tim Armstrong, ad sales vice president, are keen to explore new ways of working with News Corp, the company that owns social networking website MySpace.

An expansion of Google's ad agreement, which it signed with MySpace earlier this year, to include video advertising, is understood to be one of the possibilities being looked at.

Ross Levinsohn, head of News Corp's Fox Interactive Media Division, told The Wall Street Journal: "If we can figure out the ways to work with [Google] or integrate with them, that could be really good for us."

However, there is speculation that any potential video advertising deal could become a competitive threat to MySpace, which is a direct competitor with YouTube in the youth market.

However, the two social media sites are intricately tied together. YouTube, which Google this week paid $1.65bn for, is estimated to have over 20% of its trafffic generated from MySpace users posting links to videos on their homepages.

It is understood that News Corp sent a letter to YouTube on Friday following the breakdown of talks over its proposed acquisiton of the video site, but there was no response.

According to sources, News Corps discussed closing all YouTube links on MySpace over the weekend in retaliation, but no action was taken.

Google will still allow the video-sharing website to operate as a separate business and retain its employees.

Chad Hurley, chief executive and co-founder of YouTube, said: "By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users."

News Corp is reported to have been in talks with NBC Universal and Viacom about creating a video portal over the summer, but no outcome was reached.

Viacom is in discussions with YouTube about the licensing of the website's video content.

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