January 17, 2006 6:24 AM PST
Google to buy radio ad company
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.
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