The potential billion-dollar investment marks Google's commitment to expand to other media.
Google's move into radio advertising should create more opportunities for advertisers, but the value of those opportunities will depend on the company's implementation, marketers say.
"We may be witnessing the birth of a new model of ad sales for radio, and to some extent other offline media," said Fredrick Marckini, CEO of search marketing firm iProspect. "The wisdom of this move will be measured by advertisers' adoption."
In a bid to expand its AdWords platform to radio, Google has acquired dMarc Broadcasting, a company with an automated advertising platform that performs much the same auction-based sales, ad-serving, payment and reporting functions as AdWords, but for radio ads instead of online ads. Google will pay $102 million in cash up front, but with performance-based payments, the acquisition price could top $1 billion over the next three years.
"Google's move beyond the Web just left beta," said Jeff Lanctot, VP of media at Avenue A | Razorfish. "While Google's foray into print has been done cautiously, a sizeable acquisition like dMarc shows their commitment to expansion into other media."
While the move may be surprising at first, a deeper look shows Google's platform can potentially be applied to many kinds of media, bringing the same benefits of an auction-based, pay-for-performance model to other channels. It's likely Google believes it can do a few things in the radio business, including making radio advertising more accessible to the "long tail" of advertisers, and making radio advertising more targeted and measurable, Lanctot said.
"If you consider those benefits, they really aren't search- or Web-specific. Over the next several quarters and years, I think Google will try to take this same approach with newspapers, magazines and TV; they would like to be the marketplace where all media is bought and sold," Lanctot said.
Radio makes sense as a starting point, both for its similarity to search in its historic direct response focus, as well as for its potential ties to Google's local efforts. "Local businesses could turn to Google for a package that includes search listings, radio spots...and eventually TV spots and newspaper ads," Lanctot said.
The added advertising opportunities managed by Google will be particularly beneficial to SEM firms with bid management systems that can adapt to the new inventory, according to Marckini.
"SEMs are going to be able to compete on the media buying side, managing the auctions and getting the best price. We've always expected that iSEBA [the company's proprietary software] would be used for bidding on more than just search ads," he said. "Companies that have investments in proprietary tools that are versatile enough to adapt to this are going to be in a great position."
If the integration is successful, Google will be placing a good deal of power into the hands of search marketers, said Andy Beal, president and CEO of Fortune Interactive. "Offline advertisers will no longer be content to be told that their radio ad will be heard by a potential audience size or demographic. Instead, they'll come to expect detailed reports and accountability. They'll want to know how effective the radio ad was and whether it resulted in new business," Beal said. "The same level of accountability that search marketers have been held to will now apply to traditional advertising. Expect the skills learned by those search marketers to be in very high demand."
Google will need to address the question of who will manage the creative process, of course. The company can opt to work with advertisers who have existing radio ads that want to place them, but that would limit the appeal. A more likely scenario is one that gives advertisers a self-service option to choose elements of a radio ad script and then use a partner to record them. A similar approach is taken by SpotRunner, which last week launched a tool that offered a similar service for local spot cable ads.
"The challenge in any or all of these areas is the creative. Google has mastered the text ad -- you do it or the SEM firm does it on your behalf. But what about radio ads or TV ads? Google will have to acquire production capacity to really make those media work for them," said Greg Sterling, director of Kelsey Group's interactive local media program. "You'll have to have people producing print ads and radio ads and TV ads -- and they'll have to be compelling -- for those new areas to work as well."
Besides giving marketers more room to spend, exposure in offline ads like radio and newspapers can often be beneficial to search marketing performance, according to Marckini. "In our experience, when a client hits a plateau, and then does some offline advertising, it reinvigorates their search ads and they all perform better. The offline advertising drives more traffic online from people who have more intent, and are more likely to convert."
Marckini speculates that Google will tie radio marketing to pay-per-call, making it more measurable. He also notes Google's acquisition of Urchin gives it insight into what marketers are willing to pay for a certain level of conversion in radio ads.
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