Google hears static on radio bid

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Google does offer an Ad Creation Marketplace that matches advertisers up with professionals who can create ads for them, but that doesn't compare to the kind of attention radio ad salespeople can give to marketers, experts said.

An executive at a radio ad buying agency that works with Google said while Google "has been very attentive to us," participating in the Audio Ads test hasn't provided the best results for his customers, who are running radio ads that provide a Web site or phone number for customers to contact them.

"We are absolutely committed to this business, to expanding the inventory, the number of broadcasters...and growing the pie."

--Josh McFarland, product manager, Google

So-called "direct response" marketers may not be the best customers for Google's radio system, said Jeff Small, president of Strategic Media, an agency that buys radio ads for clients. In addition, because the ad space is sold at the last minute, advertisers don't have adequate time to plan ad campaigns, and advertisers don't have a station sales representative to call when something goes wrong, he said.

"With Google, it's all done through systems with no human element. I've got the Google representative, but he doesn't work directly with the station or have the contacts at the station that I need," said Small. "And the media they bring to the table is in a lot of smaller markets and it's not bringing the reach that I need to be profitable."

However, Small said he was convinced that Google would be able to work it out. "I think that what they are doing is going to be evolutionary for radio," he said. "They're going to figure it out and they are going to be able to monetize it."

Google has been shifting its strategy in the face of industry resistance, selling advertisers and ad-buying agencies on the benefits of having a coordinated offline and online campaign, according to David Bank, an analyst at RBC Capital Markets. However, the lack of prime inventory at the stations in Google's network is keeping prospective large advertisers at bay, he said.

"Without prime inventory they can't really get the major ad agencies to test it," Banks said. "Without being able to prove that it will drive up pricing as well as demand, there is an inclination on the part of radio operators not to take the risk. It's a bit of a Catch 22. If you layer that on top of the fact that Google is trying to do multiple platform deals, it slows things down."

Google, which has a "significant sales force" that works with Fortune 500 advertisers on display and pay-per-click ads, has been hiring more sales staff and has account managers specifically allocated to radio stations, said Josh McFarland, a product manager for Google's Audio Ads business. The company has "a very high respect for what we call the direct (sales) side of the business," he said. "At the same time, we are committed to the self-service model."

McFarland dismissed notions that Google was offering only remnant inventory, but also said such ad space has gotten a bad reputation. "From an advertiser perspective, those are still really great spots," he said. "It could be in the middle of the day or in the morning drive time on a big station." In perhaps a tacit acknowledgement that more radio stations need to sign on to Google's audio ads program, McFarland said the company's goal is "building out involvement from the station side."

"We've been very pleased inside the company with the progress we've made," McFarland said. "We are absolutely committed to this business, to expanding the inventory, the number of broadcasters...and growing the pie."

Radio isn't the only area that Google has been targeting for expanding its lucrative online advertising system. As part of a test, the company is selling ads to run in more than 60 newspapers and it briefly ran test ads in a few magazines in 2005. And now Google is buying in-game ad provider AdScape Media for $23 million, according to a source who asked not to be identified.

"Eventually what's going to happen is that paid search growth will slow," said Greg Sterling, principal analyst at Sterling Market Intelligence. "The markets are looking to Google to maintain their astronomical growth rates and so they have to develop these other market opportunities to maintain their revenue growth."