Google Aims To Revitalize Advertising On Radio
Saturday, December 9, 2006
Last week, listeners in Boston and Sacramento heard a commercial for Floorone.com, a small Internet company that aired its first radio ad with the help of Google Inc.
Until recently, Fred Yazdizadeh, owner of the Simi Valley, Calif., company, said radio air time was too expensive and the process of creating an audio message had been too daunting to consider. But under a new program being tested by Google, Yazdizadeh's ad was affordable and easy to manage. And, more important, it generated calls from potential customers living in the areas where the ad was broadcast.
"What Google is doing now is so good because I can now penetrate any market area I want," said Yazdizadeh. "It's going to take my business to the next level."
By tapping into its customer base of millions of small online advertisers, Google is looking to transform old media by removing the middleman, such as a radio station's ad department, and make it easier for small companies to gain access to radio, magazines and newspapers through the same types of online auctions that Google has used to sell its popular search ads.
This week, the company formally launched a test of the program, following almost a year of experimentation since it acquired dMarc Broadcasting, a small radio advertising firm, for $102 million in cash last January. DMarc had developed a technology that allowed radio stations to sell excess ad inventory at the last minute, using online tools.
Here's how the Google program works: A small advertiser logs into Google's Web site and creates a radio ad campaign online, selecting the geographical area, demographics of the radio audience, time of day and radio format. The advertiser bids on how much it is willing to pay to buy the air time, but doesn't know the exact station that will carry the ad.
If the advertiser doesn't already have a radio ad created, Google provides access to on-air talent and producers who bid on the job, allowing the two sides to negotiate the price and content.
The radio stations can see how many advertisers bid on each slot, listen to an ad and choose or reject one -- all online. Google makes a commission off of the transaction with the radio station.
"One of our primary objectives is to mobilize and introduce radio to our extensive advertising base and also introduce new advertisers to radio," said Ryan Steelberg, a founder of dMarc and now head of radio operations at Google. "If we can mobilize a few thousand advertisers, it's great for Google and great for radio broadcasters."
Some radio executives have expressed concern that Google's entry could force their own sales teams to compete against the search giant for the biggest customers and eventually degrade the value of a radio commercial. But others see Google's approach as a low-risk opportunity that could help bolster radio companies' lackluster results in recent years.
National radio advertising sales grew 2 percent from January to September, according to Radio Ink, an industry publication, but local ad sales during the period fell 1 percent. Next year, radio ad revenues are expected to rise 2 percent, said Mark R. Fratrik, vice president of BIA Financial Network.
Google's radio ad system "really has potential," Fratrik said. "It will take a little while, just because it's a new technique. . . . We will be seeing some impact in a year or two."
The search giant faces competition from SoftWave Media Exchange, which has a similar online technology and also sells cable television ads through its Web site. SoftWave's chief operating officer, Bill Figenshu, said Google lacked many big-market radio stations as part of its network, and its emphasis on small advertisers and excess inventory would go only so far in terms of generating sales.
"There isn't a market for all those small little advertisers to be on these big radio stations," he said. "The flower shop in Reston can't afford to be on WTOP."
But broadcasters participating in the Google test said they have been satisfied with the results.
XM Satellite Radio executive D. Scott Karnedy said Google had sold "hundreds, if not thousands of ads" since August. Rick Cummings, president of Emmis Radio, which owns 23 stations, said the experiment has not had an impact on his company's bottom line but has been worthwhile, regardless.
"There's been so much fear of Google -- they are red hot and we aren't," Cummings said. "We think doing more things in a Google-like manner might rub off on this industry and would be good for it."