News Corp. To Take Equity Stake In The Rubicon Project In Exchange For FAN

News Corp. (NSDQ: NWS) is prepping a deal to fold the Fox Audience Network (FAN) in with ad optimizer The Rubicon Project, with the deal set to be finalized within six weeks, sources told paidContent. Reps from Rubicon Project declined to comment. Under the non-binding term sheet, News Corp. would take an equity stake in the post-merger Rubicon. We have learned the planned stake is 19.9 percent, similar to other property-for-equity swaps News Corp. has made.

The deal would include FAN’s technology and a considerable amount of employees. The arrangement comes a month after parent News Corp. announced plans to fold FAN into MySpace. No word on what this deal means for Rubicon’s executive team and its founder Frank Addante.

Sources explained the rationale for the deal by saying this is a better result for both News Corp.’s investment in the FAN platform and for its staff as opposed to folding it into MySpace. (Those announced plans, which came after Adam Bain, who “founded” FAN, said he was joining Twitter as president of global revenues.) In turn, it gives News Corp. an instant boost in terms of the technology going forward and avoids duplicative duties within MySpace with respect to staff.

On a smaller note, Rubicon and FAN are both based in Santa Monica. The talks came together fairly quickly, as Rubicon and other companies expressed interested in gaining the FAN technology when News Corp. announced its plan to integrate FAN into MySpace.

Still, some observers have their doubts about the ability of Rubicon and FAN to link up in terms of the more substantive aspects of the deal beyond being in the same city. “I am very familiar with the assets that Rubicon Project would acquire in any deal with News Corp’s Fox Audience Network (FAN) and it will be a monumentally difficult task for Rubicon to successfully integrate it with their own systems,” Rajeev Goel, the CEO and founder of Rubicon rival PubMatic. “We see this as a Hail Mary pass by Rubicon and an affirmation that they have failed to technologically innovate internally. With this ‘acquisition,’ Rubicon is trying to play catch up with the other players in the market and it will be at least a year before anyone will know if they can make this acquisition actually work — and it won’t be easy to.”

Both Rubicon and PubMatic have been attracting more attention as publisher look to manage the new landscape of ad exchanges and real-time bidding has led led to greater popularity for their supply-side platforms to balance out demand-side platforms used by agencies and marketers.

In the months that have led up to this point, Rubicon been pretty active in both streamlining its business and adding new abilities. A few months ago, Rubicon sought to expand its offerings to publishers by acquiring malware monitor SiteScout for an undisclosed sum. Before that, the company raised $9 million in a third round led by NBC (NYSE: GE) Universal’s Peacock Fund.

FAN, meanwhile, has been fledgling and still developing its focus. It was initially set up to sell ads for News Corp. sites, including MySpace, and also for third-parties. The unit had claimed success with its self-serve ad platform and initiated a reorganization last spring designed to put more emphasis on that business. But the fledgling unit was dealt a significant blow in August when Twitter hired away FAN president Adam Bain and named him president of revenue.