Google acts to ease News Corp concerns

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Google’s chief executive Eric Schmidt on Wednesday met senior News Corp executives to smooth over any concerns raised by the search giant’s acquisition of YouTube and ensure the co-operation of MySpace in Google’s effort to make money from user-generated video.

Mr Schmidt flew to Los Angeles for a meeting scheduled to include News Corp’s top executives, Rupert Murdoch and Peter Chernin, the first since Google bought YouTube for $1.65bn on Monday

The decision to fly to Los Angeles reflects the importance that Google attaches to its News Corp and MySpace relationship.

In August, the two companies teamed up, with Google agreeing to pay the fast-growing social networking site $900m in a multi-year search and advertising deal.

Someone familiar with Google’s position said the company’s executives were going to LA to ensure that “lines of communication” remained open with News Corp and that there was a “forum” for the two companies to discuss their differences.

“It is a relatively new and important relationship [for Google],” this person said.

MySpace was bought by News Corp last year for $580m in cash. The Google search deal instantly paid for the deal, but it also held the promise of the creation of a huge new online advertising market as companies seek to reach people who spend time online.

MySpace, now with 115m registered users around the world, is an important source of traffic to YouTube, which boasts 100m video views per day. Google is keen to ensure that News Corp continues to regard it as a partner rather than a competitor, according to people familiar with the planned meeting.

On Monday, Mr Schmidt stressed that he was “very excited” to work with the “next generation of internet sites” – MySpace, YouTube and Facebook – “in all sorts of ways, whether it be partnerships or...as a merger”.

Google plans to combine its technical expertise with the content of YouTube to create an entire new advertising market. So far, it is not clear how user-generated content, mainly short, home-made video clips, can be linked with advertising.

Google’s acquisition of YouTube marks a shift in the company’s strategy.

It shows that it is prepared to buy audience share online, and to use its highly rated stock as a competitive weapon to outbid other
companies.

However, Google will still need partnerships with other online heavyweights and content makers to ensure it has enough inventory to sell advertising against.

Watch the video and read the transcript of the FT’s interview with Google CEO Eric Schmidt

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