January 17, 2006 6:24 AM PST

Google to buy radio ad company

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Google is acquiring a radio advertising company, broadening the reach of its ad business.

The search giant said Tuesday that it will pay $102 million in cash for DMarc Broadcasting, a Newport Beach, Calif., company that works with radio advertisers in the sales, scheduling, delivery and reporting of radio ads.

The deal calls for Google to make additional cash payments based on product integration, net revenue and advertising inventory targets. Those payments could total $1.13 billion over the next three years, Google said.

Google plans to integrate DMarc technology into its AdWords platform, creating a new radio ad distribution channel for Google advertisers.

"Google is committed to exploring new ways to extend targeted, measurable advertising to other forms of media," Tim Armstrong, Google's vice president of advertising sales, said in a release.

The Mountain View, Calif.-based search company has been expanding its advertising business beyond the Internet, branching out into print ads and possibly into television.

Chad Steelberg, chief executive of dMarc, said he modeled his company's automated advertising platform after Google's advertising system. "We sought out Google after we had an established product back several months ago," he said in an interview with CNET News.com.

Previously, Steelberg and other dMarc executives formed online ad serving company AdForce in 1994. It later went public and then folded in 2001.

"We found a company that is close to us in terms of spirit -- how they built their product, the technology and how they approached the market," Josh McFarland, business product manager at Google, said in the interview. "Radio, from a complementary perspective, really fits well with our vision."

Google's stock climbed $1.23 to $467.48 a share Tuesday, and analysts were pleased with the company's new buy.

"We believe this acquisition provides further evidence that Google is serious about extending its AdWords platform beyond Internet media," Imran Khan wrote in a research report for JPMorgan Chase. "We believe Google's efforts to extend its advertising model into traditional media could pay off over the longer term."

While online advertising is growing faster than other forms, radio and print advertising in the United States is expected to reach $25 billion and $78 billion in 2010, respectively, according to JPMorgan analyst Spencer Wang.

Robert Peck, an analyst at Bear Stearns, said he expects Google to make investments in advertising in local television and business papers, which could enable Google to become a one-stop shop for all types of ad sales and help it diversify from its dependency on cost-per-click ads.

"Additionally, this will allow Google to appeal to a broader set of advertisers, including CPGs (consumer packaged-goods companies) and other Fortune 1,000 companies who may have been reluctant to work with Google in the past," Peck wrote in a research report.

CNET News.com's Elinor Mills contributed to this report.

5 comments

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Bow Down Before The One We Serve
That's right, Google just went into radio. And to those skeptics out there that think that radio is dead.... think again. Also, to those who went with satellite radio to get away from commercials... just stand by.

Radio advertisement is strong. And as popular and convenient satellite radio is, it won't destroy terrestrial radio. Besides, it's only a matter of time before satellite radio starts to add more commercials and create a "premium" section which will cost more. Satellite radio won't be profitable until it starts to sell radio time. I foresee satellite radio going the way of satellite tv.

I'm a big fan of technology. But, the economic realities of any consumer-based technology is that sooner or later, ads will have to become part of it. Satellite radio will never come out of the red, until they start to bring in all those ads.

Just wait for Google's next move to go after a print ad company. It's a matter of time before Google becomes the biggest ad agency in all mediums.

No I don't own a single penny of Google stock. But, I do admire their bravado.
Posted by Dead Soulman (245 comments )
Reply Link Flag
Confused...
How will they bring "targetted and measurable" advertising to radio?

I'm guessing it refers to digital/satellite radio? Or do they mean systems that will listen to what the DJ is talking about and play ads that are related? GPS so you hear about the McFlurry special happening at the McDonalds across the intersection?

"If you want to learn more about laser eye surgery, press preset #1 on your car radio now."
Posted by TV James (680 comments )
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Why dMarc
dMarc makes automation systems for Broadcast radio stations that can be tied together to push commercials and instructions on how to play that commercial over a WAN / the Internet. dMarc also manufactures a system that simply distributes the audio and play instructions to stations that don't use their automation system.

I would assume Google could somehow determine the location of where clicks on AdWords are coming from and then inform the client "hey - you should buy radio time here, which by the way - we can help you do".
Posted by jbrannan (3 comments )
Link Flag
thanks
Ok, that makes sense. Thanks for the explanation.
Posted by TV James (680 comments )
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cursed news.com
once again, hit the "reply to story" instead of "reply to comment" button. argh.

News.com - if you're going to put the links side-by-side, then we need a move-up and move-left/move-right buttons to fix our incorrectly located comments.
Posted by TV James (680 comments )
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