It’s over for Google and Radio. The Wall Street Journal reports “radio tripped up Google.” The company is pulling the plug on its attempt to automate radio ad sales on May 31, “exposing how far Google is from its goal of grabbing a big chunk of the multibillion-dollar business of off-line ad sales.” This, after attempts to sell it to others in the radio industry failed.
More from the article:
A look at what went wrong shows that Google misjudged the capacity of its technology to work beyond the Web, and underestimated the human side of the business. Radio stations refused to turn over airtime to a computer algorithm that set prices far lower than their own rates. Big advertisers steered clear.
The company teamed up with Chad and Ryan Steelberg of dMarc Broadcasting, which had developed technology that automated the task of transmitting ads to radio stations, scheduling them and keeping track of when they ran.
The radio venture was relatively small for Google… “but its rare flop in radio has larger implications,” said the story. “Google has been on a mission to extend its wildly successful model for selling ads linked to Internet searches to traditional media such as print and TV. Now it is beating a partial retreat. This year, it also shut its newspaper ad-sales effort. Its remaining toehold in traditional media is an effort to sell TV ads,” said the story.
In a statement, Google said it had “devoted substantial resources” to developing radio and print ads, but the resulting products “didn’t have the impact we had hoped for.”
Google CEO Eric Schmidt, in a brief interview, said the radio effort failed because Google never came up with a good way to measure listener response. On the Web, he explained, Google can charge advertisers based on performance — that is, how many times users click on an ad.
“With an enormous data corpus, our computers can do the math really well,” he said. “But in the audio case, there wasn’t a good signal back to us about which ads performed.”
Several years ago, Google began discussing a bold idea: creating a “dashboard” for chief marketing officers, a tool to let them measure, compare and spend dollars across print, radio, TV and the Internet. “Google executives would never say it out loud, but everyone thought that Google could make advertising agencies unnecessary” for selling ads, a former Google exec told the paper.
Here’s what one industry observer told us off the record: “Google was successful selling search engine click through on an auction model because they initially didn’t have an expensive infrastructure. They hadn’t paid $10 million to buy a radio station and have debt service. So if they sell a click for 5 cents, 50 cents, 5 dollars or 50 dollars, it’s all gravy. A radio station can’t sell a spot for 5 cents when it had debt service on $10 million and hundreds of current advertisers paying $50 or $250 per spot. The high price customers will learn they could buy for 5 cents from Google.”
RBR/TVBR observation: Google couldn’t get beyond remnant inventory to offer advertisers. Agencies did feel threatened by it, because indeed, its very concept eliminates the (necessary) middleman. The system also, inevitably, drove down ad rates—just by its very design. Another complaint was Google’s auction system often sold ads for less than half the price that stations could have gotten selling the spot on its own. Advertisers ended up going around the station’s sales staff to buy cheaper spots through Google. So, many broadcasters saw Google as an enemy and would not give up their inventory for Google to market.