Murdoch underpaid for MySpace

Rupert Murdoch’s $580,000,000 purchase of MySpace now looks like a steal. At Bambi Francisco’s encouragement, Bill Tancer at Hitwise ran some numbers to show that MySpace accounts for 8.2% of traffic to Google.

Google’s market cap is a hefty $111B today (it will probably be anywhere between $80B and $400B tomorrow). That means MySpace’s traffic could be worth as much as $9B to Google.

It’s not quite that simple, though, since Hitwise is just tracking people who go to Google immediately after they go to MySpace – so MySpace isn’t really controlling the flow of that traffic, but if they did… It seems like they should really emphasize the search box on their site to make running external searches more intuitive and more common – giving them more control of the search engine used by their users and putting them into a solid position to sell that traffic to the highest bidder.

Google paid $1B for 5% of AOL, partially to protect the 11% of Google revenue generated by AOL. That sets the current value of MySpace (if they control the search traffic) to at least a few billion.

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Another interesting tidbit from the Hitwise analysis is that MySpace users navigate to Google.com in huge numbers to run searches - but Yahoo is the default MySpace search engine. That sounds like bad news for Yahoo’s competitiveness.

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Fox Interactive (bought MySpace) and IAC (bought Ask Jeeves) would be pretty powerful if they merged. It seems unlikely that Diller and Murdoch would get back together, though.

Related Tags: myspace, rupert murdoch, barry diller, google, hitwise