Google Beta Tests Audio Ads - Radio World

Google Beta Tests Audio Ads

Internet giant Google Inc. is moving forward with its plans to sell advertising in traditional media, including radio.
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(click thumbnail)This is what advertisers see when they access their account on the Google Audio Ads Web site.MOUNTAIN VIEW, Calif. Internet giant Google Inc. is moving forward with its plans to sell advertising in traditional media, including radio. Some radio industry watchers worry the search company's involvement could drive down ad rates and stunt revenue growth.

Google's Audio Ads is an auction-based advertising buying model in limited testing. The company is giving approximately 20 of its online advertisers the opportunity to bid on ad space from more than 720 terrestrial radio stations and XM Satellite Radio, according to Google. The company expects that number to grow into the thousands following a full rollout of Audio Ads this year.

While Google's initial plans call for it to focus on existing online advertisers, the company eventually will seek a wider base of radio advertisers, it said, further expanding its AdWords platform, which also includes print ad placement in newspapers and magazines.

Google's entry into radio advertising began with the acquisition of dMarc Broadcasting in January 2006 for $102 million in cash and other considerations. Since then, programmers have worked to integrate dMarc technology into the AdWords platform of advertising auction methodology. AdWords allows advertisers to buy keywords and deliver targeted ads based on specific searches.

Analysts note the auction-based interface of the beta test differs from dMarc's previous “set price” model. Radio stations also have traditionally offered dMarc their remnant inventories to fill after-hours when their commercial logs close. However, with Audio Ads there is an increased focus on gaining inventory guarantees from broadcasters, company officials say, with radio stations selling off blocks of air time to Google.

Beta testing

Google believes radio will benefit greatly since the service will bring mostly non-traditional radio advertisers to the industry. Companies participating in the beta test include FloorOne, a hardwood flooring Web site, and Working Planet, a search firm marketing agency, companies that Google says typify non-traditional advertisers.

“We have a very transparent mechanism where advertisers can service their ad campaigns and easily target customers by locations station types, day of the week and time. We really look at this as an augmentation of traditional sales forces to help service the buyers who haven't done traditional radio buys in the past,” said Ryan Steelberg, Google's head of radio operations and co-founder of dMarc. “We are totally committed to bringing unique advertisers to the radio space thus increasing demand for radio inventory.”

Google spent months building its own in-house radio sales staff in preparation of the beta test, which is expected to continue through early 2007. The company would not say how many employees are focused on radio sales. Steelberg declined to give specifics of Google's revenue sharing model and would not confirm if broadcasters are allowed to set minimum bids.

“We are open and flexible with broadcasters. We look at this as a partnership. Some groups are providing remnant inventory while other groups are providing us guaranteed inventory,” Steelberg added.

Emmis Radio President Rick Cummings told the Washington Post that his company is participating in the experiment. “It has not had an impact on the company's bottom line but has been worthwhile, regardless.”

Greater Media Inc. launched dMarc's inventory replacement system last year at one of its stations in Detroit, with plans to expand use of the Google ad-insertion platform if it proved successful there. However, Rick Feinblatt, Greater Media's vice president for radio, said his company is not participating in Google's Audio Ads experiment.

'Early stand-off'?

Some analysts expect Google's entry into radio placement sales to benefit the industry by creating incremental new revenue.

“I suspect radio would like to see a successful beta test,” said Jim Boyle, media analyst with CL King & Associates. “It could introduce a 'long tail' of very wide, but much smaller ad clients that have never used radio.”

Boyle views Google as radio's “new business development partner” providing the industry a valuable new business sales force.

Bishop Cheen, analyst with Wachovia Capital Markets, said, “I envision an early stand-off, with Google looking for lots of cheap inventory and broadcasters saying 'We want to sell you stuff, but we don't want to give it away cheap.' However, Google will be an eventual force.”

Radio must be careful to protect “rate credibility” and not set a “low-bar hurdle” to selling its inventory, Cheen said. “But if Google can bring sustainable, critical mass to radio without upsetting the balance of rate and inventory it could be a great thing for radio.”

Possible impact

Google's radio involvement could greatly affect the “middle” people in the advertising process, Cheen added.

“The possible impact on the national reps and agencies with Google as a substitute for ad placement could be substantial,” he said. “Google will offer a much more streamlined process for buying time and creative.”

In addition to Audio Ads, Google is rolling out the “Ad Creation Marketplace” for audio where clients can hire “ad creation talent” to develop audio ads at a cost of $100 to $1,000.

“The Ad Creation Marketplace is a searchable directory of professional ad specialists that advertisers can use to locate someone to assist them in creation of radio advertisements,” Steelberg said.

Opponents to the Google auction process of selling advertising include Lew Dickey, chief executive of Cumulus Media, who told the Wall Street Journal, “We invest a great deal of time and money to train our sales people, and the Google approach ... represents the antithesis of value-added selling. We're certainly not going to cede control.”

Several analysts said Google's approach to selling “commiditizes” the product if existing customers bypass present selling channels to obtain lower prices through the auctions.

“Any bid-based model tends to commoditize a product, thus placing downward pressure on rates. It's possible you could have clients simply waiting to the last minute to gain the cheapest rate,” said John Sanders, media analyst with Bond & Pecaro.

Radio appears to possess “much nervousness” over what is to come, said CL King's Boyle.

“One can only imagine the 8,000-pound gorilla plopping itself down at your dining room table and asking you to pass it the first serving platter,” Boyle added.

Mark Fratrik, vice president of BIA Financial Network Inc., said, “Certainly one can imagine a downside to all of this for the radio industry. However, I believe broadcasters will succeed in controlling their inventory. And given the recent poor revenue performance of radio, this added demand for inventory, could actually be very beneficial to the industry.”

Analysts say the potential still exists for Google to strike up a relationship with a Clear Channel Communications or CBS Radio to secure a large share of regular radio inventory. They say such a move would provide the critical mass needed to attract large mainstream advertisers and media buyers. Despite some speculation, they also say it is unlikely Google wants to enter the ranks of radio ownership.

“I do not see Google acquiring a radio group. However, an inventive model might involve Google acquiring large blocks of guaranteed radio inventory and then re-selling it,” Sanders said. “I believe a partnership with a large broadcast group is a likely scenario.”

Other analysts say they are focused on the inevitable next Google step: TV ads.

“TV is certainly next on Google's radar as it expands the AdWords online advertising platform,” Cheen said.

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