MySpace, AOL bear fruit of Google's gain

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NEW YORK -- Google's ability to breeze past first-quarter earnings expectations could bode well for News Corp.'s MySpace and even Time Warner's AOL.

Analysts have said that social networking powerhouse MySpace is likely to slightly miss its fiscal-year revenue target, which has led to some ratings and price-target downgrades for News Corp.

However, analysts said Friday that Google's financial outperformance should be good news for MySpace.

Miller Tabak analyst David Joyce said News Corp.'s social networking unit "could benefit going forward from a number of technological improvements Google has developed" that improve the way it monetizes traffic to networking sites.

Similarly, Pali Research analyst Rich Greenfield emphasized in a note Friday that "News Corp. investors have become increasingly concerned with the monetization potential of MySpace," with many having expressed concern that Google might not renew a three-year search deal with MySpace that expires at the end of 2009.

However, the analyst also highlighted the more bullish comments on Google's earnings call. "It appears that substantial progress has been made and that Google is continuing to work on improving monetization," Greenfield said. "In turn, fears about MySpace's monetization should subside."

His conclusion was that News Corp. shares "have been penalized far too much for MySpace's modest shortfall in fiscal-year 2008 revenues."

Meanwhile, Time Warner's AOL also could benefit from Google's positive trends, Joyce said. After all, the companies have a search deal, and Google also owns a 5% stake in AOL.

Google shares won analyst upgrades Friday and closed up 20% at $539.41. The stock had been battered as of late amid fears the online giant might feel some effects of the weak U.S. economy.

Among others, RBC Capital Markets Internet analyst Ross Sandler increased his price target on Google shares by $20 to $550 and reiterated his "outperform" rating.

Jefferies analyst Youssef Squali upgraded the stock from "hold" to "buy," citing "impressive improvements in monetization, no signs of weakness from the economic downturn and upside potential from display, video and mobile over time." He has a $600 target on the stock.
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