July 27, 2006 4:00 AM PDT
Google rides the radio waves
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"Why it raised so many eyebrows when the deal first came down is the fact that it opens the door to people thinking that radio ads would become a commodity; you put a bid in and get a buy," she said. "Most advertisers work through brokers, and (Google's automated system is) not the form most agency buyers would follow because it doesn't give you any choice to determine the real value of the media buy."
For example, advertisers may not be able to really pinpoint ads to run when a specific disc jockey is on the air, she said. "How do you know you are getting the lowest rate, the best mix or most efficient mix of stations? There's nothing to compare it to."
RBC Capital Markets
But Google's system is addressing concerns about discounted inventory, according to Greater Media Philadelphia's Fullam. "What's neat about this is the radio stations get to preview the creative copy and we pre-approve all rates before they get aired," he said. "Radio stations and Google will explore on a case-by-case basis which opportunities make sense."
Google contacted Greater Media a month or so ago and the two have since signed a one-year, nonexclusive contract, he said. Greater Media should be running ads by Google within the next 60 days, he added. Greater Media has 19 radio stations in its network, but Fullam said he did not know how many would be running Google ads.
David Bank, media analyst at RBC Capital Markets, predicted that resistance to change on the part of established ad agencies and some radio stations themselves will slow adoption of the automated system Google is offering. The new "transparent" buying system threatens to displace ad agencies, while radio stations are not likely to sell off their best ad time slots, he said.
"It's disruptive, and that's what will keep it from really getting off the ground in the short term," Bank said. "It runs counter to 75 years of industry practice. If you (radio stations) sell some of your inventory online, you are kind of competing with yourself. That probably won't make your sales force real happy."
Over time, however, the efficiency of Google's platform will win over the industry, he said. "The fact that it is more electronically based gives advertisers more comfort that they are getting what they are buying," he said. Ad agencies and stations "are still faxing invoices to each other and typing up affidavits."
"Will it be more successful than print? Who knows?" said Derek Brown, an analyst at Pacific Growth Equities. "Out of the gate, I would say expectations are extremely low."
But Google's strong sales and margins give it the luxury of being able to experiment, he said.
"It's a blending of old media and new media, and it's a validation that radio is still a vibrant medium," Struble said. "If you pair that with some of the new technology approaches of what Google has done with online ads, it makes a ton of sense."
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