Posted January 18, 2006 9:16 am by with 3 comments

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So Google decided it’s time to see just how far they can take their “pay-per-action�? ad model and acquired a radio advertising network. I spent a lot of time yesterday, discussing this move with a number of people. Here’s a collection of some of my thoughts…

Accountability and Efficiency for Offline Advertising

This is a very bold, strategic move for Google. They are basically laying down the gauntlet and challenging the status quo of offline advertising principles. If they are successful in bringing a pay-per-action model to radio, they’ll certainly have a lot of traditional radio execs and ad agencies quaking in their boots.

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.” (as quoted in ClickZ).

[Update] According to the SF Chronicle, agencies are already preparing…

Given Google’s seemingly limitless boundaries, advertising agencies are getting nervous. Will this new way of selling ads, largely automated and with transparent measures of success, do away with their traditional role and hand-holding?

“Our business is constantly changing,” said Peter Gardiner, partner and chief media officer of New York ad agency Deutsch Inc. “If Google starts getting involved and directly placing ads for clients, you know what, we have to get smarter about how we are doing things.” [/UPDATE]

Why Move Offline

Google is now a public company, and one that needs to continue its incredible growth. There are only so many new people coming online each month, certainly not enough to maintain the growth Google has seen over the past few years. It makes total sense for Google to explore non-search channels in order to satisfy expectations of growth, placed on it by Wall Street.

Why Radio?

Of the three major offline marketing channels, radio has the lowest cost of entry. For a mere $100 million, Google gets to test whether or not their approach to ad buying will work in an offline environment. It’s no coincidence that dMarq is a company that is already trying to bring efficiency to the space and has an ad network in place.

“If they can bring the same efficiencies to radio ad buying that they’ve shown in the search space, they’ll be able to provide a cheaper alternative to more antiquated means of being able to buy ad space on radio networks,” (as quoted in the LA Times).

If Google is successful, you should fully expect Google to branch into television and push ahead with print.

Will Google Succeed?

While it’s a bold move, it’s also a move that is not guaranteed to succeed. The Adwords model works well in an environment where the consumer is in “hunt�? mode – that is, they want a product or service and they want it now. But will it work in an environment where advertising is more of a distraction? It’s a lot more difficult to target an audience when you really don’t know what they are interested in – at that particular time – or if they even really paying attention – driving home from work.

A New Google

As many have noted in the past, Google is moving further and further away from its mission statement. They are no longer content to organize the world’s information. Instead, it appears they are more interested in monetizing the world’s information. They also need to finally admit that they are no longer just a search engine. There’s no search process involved with radio – unless you count the “seek�? button on your radio – and there is no reason for Google to move into radio, other than a desire to capture a larger audience and diversify the risk of having 99% of its ad revenue come from the web.

“It’s the end of Google as a search company and the beginning of Google as a media company,” said Andy Beal, president of search engine marketing company Fortune Interactive. “And they’re not just an online media company. They’re offline now.” (as quoted in the San Jose Mercury News).

The Future?

This may not be too far fetched…Could we see Google buying a stake in XM or Sirius? Could you soon be driving in your car, hear an ad you like, push a “favorites” button which automatically saves the ad information to the MP3 player docked in your car’s radio? When you get home and dock your MP3 player with your computer, voila, the website for the ad you heard is now loading into your web browser.

  • Hi Andy

    Thanks for those interesting points. I too was thinking heavily about this move to radio. I worry about the lasting impact of radio in general. We are at a crossroads of technology right now with wireless and satelitte radio challenging this traditional media. Let alone the addition of a TV signal on your cell. With more and more options, radio is looking like the odd man out. I feel that even if they succeed, they might not gain as much valuable insight into the offline media marketplace as hoped.
    I do agree with you as well that if they can bring some sort of meaningful metrics to radio that the current radio execs will be shaking. I remember 10 years ago when banner ads were being sold at prices like radio, TV and print. With the internet’s easily measured metrics, prices dropped with this additional information. I have bought radio ads before for my retail store with very mixed results. I concluded that the ROI was not great, even without the additional facts, and discountinued them.
    I think this move by Google might make John Battelle’s #2 prediction for 2006 come true

  • Advertising is the business, search is just one of the vehicles. There is a huge $250B market opportunity for GYM (Google, Yahoo, Microsoft) in targeted advertising. For many years advertisers have spent billions of dollars without any clear measureable results. Marketing people would lament “Half of all advertising is a waste of money. We just don’t know which 50% is wasteful, and which 50% really works”. The GYM advertising networks are changing that. Madison Avenue types are very nervous.
    I wrote a blog on this topic today

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