Analysts Peek Into Google’s Pitch to Radio

Radio stations interested in working with Google are getting some insights this week from Wachovia’s Wall Street analysts.
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Radio stations interested in working with Google are getting some insights this week from Wachovia’s Wall Street analysts.

The analysts had a client conference call with Eric Mastel, Radio Division president of Max Media; he is responsible for 37 radio stations in seven markets. Mastel talked with Wachovia’s Marci Ryvicker and Timothy Schlock about his experience with Google/dMarc.

The analysts findings: Google provides broadcasters more flexibility than expected.

“Based on recent comments from public radio operators, you would think that Google/dMarc is looking to squash the entire radio industry,” they wrote. “However, Eric Mastel, a client of Google/dMarc since March 2005, shed some light on the significant flexibility of Google’s contract terms.”

Max Media’s first contract was signed in early 2005 and renewed a year later. It covered a 12-month period with no automatic renewal and granted Max Media the ability to cancel at anytime, given a 180-day advance written notice.

“The financial terms include a 50/50 split of all sales as well as a minimum CPM guarantee for all spots,” Wachovia summarized. “Mr. Mastel commented that at Max Media, Google has typically paid 3-4 times the minimum guarantee, and its rates are more than Max Media would get had it not used Google (since inventory that goes unsold generates no revenue).”

Inventory control “appears to be a non-issue,” they continued. “On a nightly basis, Google/dMarc is allowed access to the radio stations’ sales log and is provided access to sell all inventory (30 and 60 second spots) that has not been sold by Max Media’s sales force for the next day’s airing.” Max Media, they said, provides access to both prime and fringe remnant inventory.

Max Media can review potential sales prior to broadcast through an administrator system, and if it deems particular spots undesirable for reasons of content or rates, it can immediately reject them and cancel the sale without penalty.

“Max Media also has the ability to allocate more (or less) inventory to Google/dMarc, which could, in effect, heighten demand for other spots and increase rate. To date, Google/dMarc only accounts for ~5% of Max Media’s inventory sales although Max Media would look to do a larger deal (similar to Clear Channel) at some point down the line.”

The agreement with Google/dMarc has introduced “numerous” new advertisers to Max Media’s radio stations, Wachovia said.

“Most of these advertisers are focused on the frequency of advertisements rather than on reach and thus do not particularly care when the ads are aired.”

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