Exclusive: MySpace and Google Zero in on Renewing "Realistic" Search Deal

After what started out as one of Web 2.0’s most frothy deals and soon became a contentious relationship, several sources said that Google and MySpace are moving close to signing a new agreement, in which the search giant would remain the provider of search and online advertising technology for the social networking site.

But, said sources, this deal is a lot different from the one signed four years back when the News Corp. (NWS) unit was flying high and Google (GOOG) forked over $900 million in guaranteed payments to stave off a competitive effort from Microsoft (MSFT).

This time, because MySpace’s traffic has declined so precipitously over these years, the new deal has no giant guaranteed payments and not even any of the bells and whistles the recent renewed and expanded search deal AOL (AOL) struck with Google has.

“It is a different time and MySpace is in a much different place,” said one source close to the situation. “This is a realistic deal.”

Sources stressed the deal with Google was not complete, although it could be struck within weeks.

Sources said Microsoft (MSFT), which had been in talks with MySpace too, has largely dropped out, although it certainly could put forward another offer at any time.

But, said sources, the search volume from MySpace is not as valuable to Microsoft’s Bing search service and it would have to pay MySpace more since it does not monetize as well as Google.

Another bidder, Yahoo (YHOO), sources said, was not considered a factor in the competition, although it could also still make a better bid.

Google and MySpace continued their talks about renewing the deal after their original contract ended at the end of July, agreeing to two one-month extensions.

The hope is, if struck, a new Google deal will perform better, given MySpace will launch a soup-to-nuts renovation of its site, codenamed Futura, in mid-October.

Before that, the Beverly Hills, Calif., company, which has undergone much management turmoil over the last year, has been dribbling out some of these new features.

That has included new profiles and also the ability to synch status updates on its site with Facebook.

Yes, the very social networking giant whose total decimation of MySpace in the consumer space has been at the heart of its problems in making its original Google deal as lucrative as was once hoped.

MySpace declined to comment on the status of its negotiations, and Google has not yet returned a query about the deal discussions.

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