Google Goes on the Offensive

In response to industry concern that its Audio Ads Web-based purchasing process for radio ads could deflate rates, Google is saying the company's involvement in broadcast eventually will increase demand for radio commercial inventory.
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MOUNTAIN VIEW, Calif. In response to industry concern that its Audio Ads Web-based purchasing process for radio ads could deflate rates, Google is saying the company's involvement in broadcast eventually will increase demand for radio commercial inventory.

The departures in February of Chad and Ryan Steelberg, founders of dMarc Broadcasting, led some broadcast analysts to speculate the rollout of Audio Ads has slowed. Google purchased the ad-insertion software company in 2006 for $102 million in cash. Google executives did not comment at the time of the Steelbergs' departure.

Subsequently, though, Drew Hilles, Google's national director sales, audio, and Jim Woods, director of product management, audio, spoke to Radio World freelancer Randy J. Stine about the Audio Ads platform and the future of automated ad placement technology.

Hilles joined dMarc Revenue in 2005 and oversaw dMarc's advertising sales and RevenueSuite program. He previously served as senior VP/market manager for Infinity Broadcasting managing the Philadelphia market. Prior to joining Infinity, Hilles served as a regional VP for Clear Channel Radio.

Woods spent 22 years in the Harris Broadcast Communications Division, including time as Harris' vice president and general manager of automation and digital asset management solutions. He joined Google in 2006.

RW: How is the Audio Ads beta test progressing?

Woods: We have been evolving the broadcaster-interfacing products so the automation platform and the interface to Google are maturing. It's a little more mature than the advertiser-facing side at this point.

We did a further expansion [in March] of our beta for the advertiser-facing system. We have integrated some changes and new functionality that we have learned and opened up the beta to a lot of new advertisers.

We are in kind of a managed rollout in this beta phase. We are managing it. That means controlling and managing the scaling and make sure we do it in a way that capture feedback to make the product better. We are getting the participation we were hoping to get.

Hilles: In March we increased the number of online advertisers participating in the Audio Ads beta test and gave them the ability to coordinate radio advertising campaigns online. We have agreements with approximately 900 radio stations to provide us commercial inventory [including some Emmis and Greater Media stations.]

RW: How are test-phase advertisers reacting to Audio Ads?

Woods: As part of the beta process we are working very closely with the advertisers and are actually watching them book a campaign. That is part of the learning process for our advertisers and for us. We can better evaluate what we can do to improve the system.

Hilles: We are in beta so there are areas where we can improve it and we are. We have two sales channels. There's the online tool, which is the online interface for advertisers. We also have a large direct sales channel that is working with our advertisers across all platforms at Google. They are selling all kinds of products and audio is included in that. …

RW: Are advertisers finding enough available inventory, specifically in larger markets?

Hilles: I think it depends on the client and what their goals are. We are in a growth phase and continue to be able to offer our advertisers more stations in more markets. We are in the building mode. We are in discussions with a lot of broadcast partners to be able to expand that footprint.

RW: Some broadcast analysts say the progress of Audio Ads has been slower than expected.

Woods: We are right on our product plans from a couple of quarters ago. So we are happy with the level of integration we are achieving the pace of integration of the beta cycle. It's a learning process.

RW: Are you looking to add more flighted business and guaranteed inventory rather than relying on radio's remnant inventory?

Hilles: I think that is a misperception people have. Unfortunately, a lot of people have defined what they think we should be. In reality, we have all kinds of inventory available throughout the day.

We secure our inventory in many different ways and our agreements with our partners vary depending on what type of relationship they want. We have lots of inventory in just about any day part. Our goal is to partner with companies that have a broad reach in both large and small markets. …

RW: Would you be forced to hold up the full launch of Audio Ads if you do not secure guaranteed inventory from a CBS Radio or Clear Channel?

Hilles: We are in dialogue every single day with a number of broadcast partners looking to strike up inventory deals. We have a great business model and will continue to look at launching when we feel the time is right.

Woods: Our business model is not dependent on a single deal with anybody. We have a variety of ways to acquire inventory and build out the network.

RW: Doesn't Google run the risk of having advertisers who may be inexperienced with buying radio time see their campaigns fail because they do not understand demos and formats?

Hilles: It is very important to Google and the radio industry that advertisers who are new to the medium have a good experience. As a result, we provide advertisers with full service support, which includes campaign recommendations. In addition, we offer advertisers an Ad Creation Marketplace to connect them with vendors who can work with them to create their ad spots.

RW: What do you tell broadcasters who fear your auction-based model will drive down advertising rates and cause them to lose control of inventory?

Hilles: Look at what AdWords has done in the online space. We have actually been able to drive rates up.

And there is a huge difference between the Internet and radio. In the Internet there is endless supply of inventory, where is radio that is not the case. There is only so much inventory to go around.

The reality is we hope to drive rates much, much faster than in the online space. Our intention is to unlock our hundreds of thousands of AdWords advertisers and bring them to the radio space.

We believe that will have a very significant impact on rates across the board as we bring new customers and demand to radio, therefore increasing rates. Once you start pumping that much demand for ad space into a place with limited inventory like radio … you'll see rates grow dramatically.

Woods: And with our technology platform, as new advertisers come to the table, we'll do that in a way that will not add additional pressures or stresses on the systems our broadcasters are utilizing already. Traffic, scheduling and billing we handle all of that.

We expect rates to go up and commercial loads to increase with little impact on the operational scale broadcasters currently have. This is a completely paperless automated system.

RW: Do broadcasters have the ability to set minimum bid amounts that they will accept for Audio Ads?

Hilles: We do not discuss any specific partnership agreements. But we are very flexible with all of our partners. We customize each agreement. But I will tell you that each broadcaster has full visibility and full control of their agreement and their relationship with Google.

RW: Google handles billing, but do you share 50 percent of the ad revenue with each station? Is that the standard agreement?

Hilles: We offer broadcasters a variety of programs designed to compliment their existing sales and inventory structures. These partnerships include a revenue sharing component and a combination of guaranteed and variable inventory. The specific details of the deals are confidential.

RW: When do you hope to open the beta to general availability?

Woods: We haven't disclosed that yet. Our goal is to continue to evolve the beta product.

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