Kara Swisher

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Exclusive: News Corp. Digital Media Group Contemplates Spinoff and Equity Sale of FAN

While there have been reports that News Corp. is selling off its advertising unit, Fox Audience Network, the company has actually been in talks with a variety of private equity firms about spinning it off and selling only a 20 to 30 percent chunk of it.

Such a deal might not happen, of course, but the strategy behind this approach is related to a desire to create a strong consortium of advertising networks to fight the growing power of Google in the race to match display ad buyers with display ad sellers.

The worry: If Google (GOOG) dominates that business in the same way it dominates search, it’s game over.

The strategy is being spearheaded by News Corp. (NWS) digital head Jon Miller, who has played a role in a variety of moves by the media giant to thwart Google in the content space.

Also involved is Adam Bain, who runs FAN and who would be CEO of the potentially independent unit. The well-regarded exec has been of interest to a number of other companies of late, so a new company might also be a way to keep him in place.

Sources said Miller began to get some incoming investor interest in buying FAN, which has morphed into the current talks.

FAN sells ads for MySpace and other News Corp. sites, as well as some third-party partners. It is in the Top 10 of ad networks, with 147.6 million unique monthly visitors.

Under one possible scenario, which values FAN at about $150 million, a private-equity player–such as Silver Lake Partners–would own a piece but also guarantee a certain amount of additional funding to spur growth.

The goal here is to take on Google and its ad-buying power either by rolling up ad networks or exchanges or by “federating” them–pulling them into an alliance.

Critically important to such an ambitious plan by News Corp. is cooperation from at least one of the trio of big of ad networks at Microsoft (MSFT), Yahoo (YHOO) and AOL (AOL).

In addition, other ad networks could be part of the group, such as OpenX, which is strong in Europe. Interestingly, Miller is the chairman of Los Angeles-based OpenX.

There is, of course, a mass of onerous logistical issues with such a scheme, including a variety of technical differences among ad exchanges and the need for cooperation among many different companies.

“We would not want this to be ad confederation light,” said a source at one major player in the space. “Because then it’s worse than working alone.”

In addition, not everyone is worried about Google–despite its acquisition of DoubleClick–taking over the display network space as easily as it took over the search market. Currently, while AOL has the top spot, there is no dominant player akin to Google’s overwhelming position in the search market.

News Corp. declined to comment about its plans for FAN.

(Full disclosure: News Corp. owns Dow Jones, which owns this Web site.)

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When AllThingsD began, we told readers we were aiming to present a fusion of new-media timeliness and energy with old-media standards for quality and ethics. And we hope you agree that we’ve done that.

— Kara Swisher and Walt Mossberg, in their farewell D post