After the news that Google is giving up on its print ad sales business (1/21/09 RBR #13), a story in ClickZ says Google isn’t yet giving up on its radio sales platform, even though radio ad sales are down significantly.
“Google is best known for its ability to monetize intangible services, mainly for connecting people with information on the Internet. But when Google leapt into offline media, it entered a world of sometimes clunky legacy systems that bear little resemblance to Google’s streamlined digital platforms.
The inefficiency of the systems associated with placing newspaper ads may have been a reason the firm ditched its print newspaper ad program last week. But Google appears dedicated to its radio ad business, despite the old media hurdles involved. For one, convincing radio stations to adopt its programming platform seems to be a challenge.
Google bought dMarc Broadcasting in 2006 to move into terrestrial radio advertising. Through the acquisition, it obtained technologies for radio programming and advertising that are provided as hardware, sold by resellers, and shipped just like computer hard drives or processors.
The newspaper industry’s gloomy outlook likely contributed to Google’s decision to shut down the print program. Yet, the radio business isn’t exactly healthy, either. The Radio Advertising Bureau reported year-over-year drops in radio revenue of around 20 percent in November, and continued declines are expected in 2009.
"The radio industry is bordering on a little bit of desperation at the moment," said Brad Saul, president of radio network and syndication firm Matrix Media, and a radio industry consultant. Saul and others question the viability of Google’s Audio Ads program for a number of reasons. One is the ability to provide sufficient inventory to advertisers.
"Part of the challenge is if you give up control of your inventory…that’s kind of a scary thing," said Saul.
In the early days, Google experienced problems obtaining enough radio inventory. In spring 2007, the company formed relationships with Clear Channel Radio and Emmis Communications, both of which provide ad inventory for the young program. There are 1,600 radio stations in Google’s network, according to the company. However, the inventory tends to be the stuff radio firms cannot sell themselves, mainly remnant, late-night ad slots.
In addition to the deals with Clear Channel and Emmis, Google appears to be banking on distribution of the automation platform, which it recently updated, to bring more inventory. And the company has used some creative ways to promote the system. "They offered us the latest software for free," said the chief engineer for several radio stations, who spoke on condition of anonymity.
Anthony Hamawy, president of Cruise.com, a former Google Print Ads advertiser who also uses the firm’s television ad service, has tested the ads, but wasn’t pleased with the results. "Radio is extremely difficult for us to track," he said. His firm relies on unique 1-800 numbers to track print ad results. Google Audio Ads does offer call tracking as a means of measurement; the company allows advertisers to determine cost per call by tracking call volume and duration according to geographic location, for instance.
…in comparison to average radio CPM rates, advertisers may be getting a good bang for their buck. While an average CPM rate may be $30, the same spot might sell for as little as $3.50 through Google’s auction system.
Google lists several audio ad success stories on its site for firms including Gifts.com, GolfNow, and Motor Trend Auto Shows. Yet, Google still does a lot of promotion and education to get advertisers interested. In October 2007, the firm offered advertisers $2,000 toward future radio ads when they spent a minimum of $1,000 on an individual campaign. And early next month the firm is holding AudioCast 2009 in its New York offices, an event for advertisers, agencies, broadcasters, and forward-looking innovators who are committed to creating a sustainable radio business."
RBR/TVBR observation: While it’s great that Google can provide stations advertisers to buy up unsold inventory, the common thread in this article and buyers we’ve spoken with is that Google’s system tends to drive down rates. Certainly, newspaper industry rates have been declining. So much so that Google got out? When we hear stories that Google is contemplating leaving radio, then we KNOW we are in big trouble. We also hope that ads sold by Google’s AdWords clients are not cheapening the sound of station clients. We know these are tough times and stations need every buck they can get, but in the end ratings determine rates. Listeners tend to gravitate away from stations that sound too canned and impersonal, right?