Google's Radio Daze is Over - But the Model Remains a Good One

While letters went out to its Adsense Audio partners back in February, Google made it official that May 31st will mark the formal cessation of its automated service for purchasing and placing audio ads on local radio stations. In a story in The Wall Street Journal, reporter Jessica E. Vascellaro provides more background, asserting that the failure resulted from an inability to track radio ads with the same precision expected from Web-based advertising. But that should have been obvious from the beginning. Ms. Vascellaro also notes that Google underestimated "the human side of the business". This phrase turns out to be a euphemism for the fact that, in the words of Dean Landsman of Landsman Communications, Google had put itself "in the remnants business". It set up an automated system that, in effect, identified left-over airtime and put it up for auction that often resulted in asking radio stations to sell excess inventory at highly discounted rates.

This is not a way to make friends in a new (or, ahem, old) medium. Google entered the audio advertising business with the purchase of a company called dMarc for a reported upfront payment of $102 million in January 2006. It was part of a company-wide effort to provide a single portal through which businesses could buy advertisng on broadcast outlets and in print media, in addition to the Web. Reflecting the optimism that both parties had, the deal carried performance bonuses that could have exceeded $1.1 billion. But the approach described above turned out to be self defeating. The inventory of available ads under the control of the automated system remained to small for the vaunted Google tracking and placement algorithm to perform effectively.

The idea of a multimedia advertising portal remains a good one. Yet it has proven too small an opportunity for the giant of search advertising. And it's a business proposition that was made worse by the precipitous decline in advertiser spending on print and broadcast media. Still, we see several candidates in the advertising, media buying and search marketing businesses who should continue to develop plans for automated, cross-media advertising placement.