As readers of Radio World Newsbytes are aware, Google announced in February that it will shut down its three-year-old radio advertising business on May 31 when it eliminates its Google Audio Ads and Ad Sense for Radio services, cutting about 40 staff from its payroll in the process.
You may recall how Google entered the radio business in 2006 with the acquisition of DMarc Broadcasting, including the latter’s legacy from Scott Studios and Computer Concepts, early leaders in the radio automation business. Now Google is looking to sell off those assets, now known as Google Radio Automation.
While this move may appear to be yet another impact of the current economic downtrend, the story actually runs a bit deeper. Today’s financial crisis may have served as a catalyst or trigger to Google’s decision, but its underlying problems were not caused by the current economy.
Google’s radio ad business had never performed well, so it exited the market just as it had abandoned another short-lived effort to sell newspaper advertising earlier this year (the already shuttered Google Print Ads). Google’s television advertising business unit remains in operation, however.
So, with apologies to Howard Stern, what began with Google’s attempt to become “King of All Advertising” has now morphed into a more selective process, with Google saying it will focus on the Internet radio sector for future ad placement business.
On the surface, this is not encouraging for broadcast radio. Being placed in the same basket with newspapers by a new media leader today has got to hurt, and we all know in what direction that means they think radio is heading.
True enough, radio advertising revenues had begun their downturn in 2007, well ahead of the financial market meltdown, and looked to be following in newspapers’ footsteps. But there are other, deeper reasons behind Google’s radio exit.
Vive la difference
Google didn’t grow into the radio advertising business organically but by acquisition. The company’s business model for placing radio ads also made it a sort of “bottom feeder,” with access only to the last available slots at most stations. This did not amount to much of a formula for success.
Thus Google’s failure in the radio business may say less about radio than it does about Google and the specifics of its business play here. The lack of a good fit between Google and radio also can be seen as a bad sign for radio, but it’s just as viable to attribute it to a simple differentiation between media styles. Different strokes for different advertising folks.
In any case, Google certainly won’t miss the money it could have made in the radio business, which at best probably would never have achieved more than rounding-error status on its ledgers. Radio might have benefited from Google’s filling of slots in the dusty corners of the broadcast ad inventory, but even this would not have had earth-shaking impact to many stations’ bottom lines. So while this could have been a minor win-win, now we’ll never know.
Perhaps the worst impact for radio in this story is the association with newspapers, given their recent downward trends. Radio is not and has never been much like print, however. Radio’s cost model, advertising methods and overall agility are dramatically different from those of newspapers, and these differences can serve radio well today in its quest for continuing viability.
But it is important for radio proactively to change perceptions and fight off the association with other digitally challenged media forms like newspapers. Radio should not be tarred with the same brush as other legacy mediums, but this could easily happen when stories about items like the Google decisions above are circulated — if nothing is said or done to counteract them.
Radio can demonstrate its greater agility and applicability to contemporary advertising needs, and now is a great time to do so. Yet this can only be accomplished with proper investment, sharp innovation and strong leadership. (For example, there are now, or soon will be, a lot of smart technologists and good journalists on the job market. Hire them to create new radio news services for on-air/online/mobile delivery.)
Note also that Google’s move away from broadcast radio was predicated partially on the search firm’s preference for the ability to identify more precisely who is listening to what on Internet radio. The coming of the PPM will allow all forms of radio to enjoy this higher granularity and accuracy of audience measurement, however, so the validity of Google’s justification here may soon fade.
Two-edged sword
This column has often cited the powerful position from which radio can act in the new media world, in that it is well poised to enter the Internet environment, while Internet-based entities cannot easily move into the broadcast space. Further, the combination of on-air and online delivery can create potent synergies when optimally balanced.
It is this combination of legacy and emergent assets that can allow radio operators to maintain a strong posture in tomorrow’s media landscape. But it will not happen without the requisite competence and commitment on the part of broadcast management.
The search for an early object lesson here might turn up the following: Google was unable to parlay its Internet success into the radio business, yet Clear Channel and other radio groups already have achieved leadership position in the online radio environment.
Maybe you can teach an old dog new tricks (as savvy dog trainers insist that you can). And maybe the young dogs should just stick to the turf they know.
Skip Pizzi is contributing editor of Radio World.
