MySpace’s Google Gravy Train Set to Stop Next Year

Midway through next year, Google’s $900 million, 3.5-year search advertising deal with News Corp. and MySpace expires. What are the odds that Rupert Murdoch’s social network gets anything close to that with a new contract?

Very, very low.

When News Corp. (NWS) first inked the Google deal in 2006, the pact was a huge shot in the arm for the company because it guaranteed that Murdoch would earn back the $600 million he’d spent on the site–and that was just for a small slice of its ad inventory.

But in retrospect, it’s clear that the agreement was a one-time only affair. If MySpace does get another Google deal next year, it will be at much lower terms. (News Corp. is the owner of Dow Jones, which owns this Web site.)

Barclays analyst Douglas Anmuth, who spent the weekend poking through Google’s 10-K filing, finds yet more evidence that Google (GOOG) has no intention of paying through the nose again. In 2007, he notes, Google spent $1.7 billion on guaranteed deals like the MySpace arrangement. Last year, that number dropped to $1 billion. (Click chart to enlarge.)

Anmuth, who also notes that Google has recently walked away from a distribution deal with Dell (DELL) and ceded a Verzion (VZ) deal to Microsoft (MSFT), concludes that “Google no longer sees the need to win distribution at any cost, and we also think it is internally re-evaluating its relationship with MySpace.”

Want even more data points? OK: Two years ago, Google let Microsoft win the Facebook bake-off, allowing Redmond to plunk down $240 million for an overvalued stake in the social network. And last year, Google Co-Founder Sergey Brin used the company’s earnings call to sound off about its disappointment with advertising on social networks.

Does this sound like a company itching to re-up?

This isn’t necessarily a disaster, by the way. Wall Street long ago stopped factoring in Google dollars in MySpace’s results (the unit posted flat revenues last quarter, which isn’t bad considering the rest of the online ad market). And Microsoft will certainly be interested in acquiring additional search inventory any way it can–ask the folks at Yahoo (YHOO) about that.

But without Google to help bid up the price, even Redmond won’t have to overpay for MySpace. Which means that if MySpace wants to keep bragging about its impressive growth, it’s going to have generate much more of that growth itself.

UPDATE: Here’s a response from MySpace:

“MySpace and Google have a long-standing, productive partnership on a number of levels including search advertising, our support of the Android operating system, implementation of Google Gears, and the co-development of OpenSocial. It’s extremely premature to speculate on what either company may do in 18 months.”