With stations loathe to give up lucrative premium airtime, experts say Google's automated ad auction system--which allows advertisers to bid for spots on radio stations through the Web--might be good for low-priced, last-minute sales. But they say the company needs to sign up more radio stations and do more handholding.
Applying a national automated approach to a business culture that traditionally relied on personal relationships and local content has proven tricky for Google. For instance, a local car dealer, and not an international company like IBM, is the target advertiser on radio.
"This is clearly a high-tech culture colliding with a low-tech culture," said one industry insider, who asked not to be named.
There are also questions about how effectively the search giant's Internet advertising customers, which are located around the globe, can expect to break into the radio industry, which relies on targeting local markets.
"It's easier to create demand within your local area than it is to create it in cyberspace," said Tom Bender, senior vice president and regional general manager at Greater Media Detroit, which has radio stations that are running Google-sold ads. "Radio is primarily a local business and I think that maybe one thing that is being missed in this whole equation is that the vast majority of radio revenue, probably 80 percent of all dollars spent on radio, is spent locally."
Google hasto sell ads on the nearly 150 radio stations in that network, which would greatly boost Google's radio efforts. Google and CBS representatives have declined to comment.
Despite the fact that many stations are worried Google's auction-based system would commoditize the radio ad market, things seemed to be on track until Chad Steelberg and Ryan Steelberg, brothers and founders of dMarc, just over a year after Google acquired the company. The Steelbergs could not be reached for comment and Google representatives have declined to comment on their departure.
Whether Google can succeed in radio "is questionable, because you do need relationships with radio stations to give you something of value. If you don't have radio-focused personnel...you'll get the low-hanging fruit but may not be able to grow the market," said Maribeth Papuga, senior vice president and director of radio buying for Media Vest, a part of ad firm Publicis Groupe. "Their challenge is going to be having a broad enough list of markets and stations to make it a viable enough player on a national scale."
Executives at several radio stations participating in the Google test say they weren't concerned with the resignation of the dMarc founders, but they also weren't committed to working with Google long-term.
Google's AdSense for Audio test "is going fine. It's not a big-ticket item for us, (it's) still a small piece of what we do," said Rick Cummings, president of Emmis Radio, which is running the Google-sold ads through four stations in St. Louis, two in Los Angeles and six in Austin, Texas. "The rates are extraordinarily low."
The stations are offering so-called remnant inventory, ad space that has not been sold and that sells for a discount at the last minute, he said. They are not offering their premium inventory because they can get much better prices from traditional ad channels on that, particularly if sales reps can come up with package and promotion deals, Cummings and others added.
Google has asked the stations to reserve ad space rather than take what's left over, he said. But until Google can guarantee the space will be sold and at rates well above remnant rates, the stations aren't interested, according to Cummings. "Guaranteed inventory in prime-day parts (prime-time slots) on a big radio station in LA is expensive," he said.
Grabbing the leftovers
Three radio stations owned by Greater Media Detroit are also participating in AdSense for Audio, which is the ad sales service geared toward radio stations. "It literally is an experiment and the results have varied over the course of months," said the organization's Bender. "The total dollars that it has rendered to the stations have been relatively negligible."
Greater Media Detroit has also been providing remnant inventory to Google. "The problem is that it is economically disadvantageous for me to reserve ad space for a Google-type purchase," he said. "When you put the revenue generated by the self-serve system up against revenue generated by the traditional selling system there's really no contest."
But if prices are too low, the stations won't auction off their remnant inventory either. "Somebody could come along and buy time for $15," said Bender. "Well, you know what? I'd rather play a record because I know that my listeners would like it more."
Under Google's radio ad service, advertisers can offer to pay a maximum price for airtime on a designated day and time and for a specified period in certain cities or regions. They can specify which type of radio format (top 40, news, classical, etc.) they would like it to run on and provide target listener demographics such as age and gender. However, advertisers can not specify a particular station.
Advertisers care about the number of radio stations they have to choose from and what the stations' market penetration is, experts said. Stations also are able to help create ad campaigns, come up with multifaceted promotional campaigns that might involve product giveaways and contests, and help to modify ad strategies if campaigns aren't working, so-called "solutions-based selling," they said.
"The real heart and soul of radio is how are we going to do the creative? What's going to come out of the dashboard in somebody's car or from the radio on their desk and what is the pitch going to be? We get intimately involved with that stuff with our clients," Bender said.
"It's a question of software versus a more sales-oriented environment where understanding and solving problems can not be done, necessarily, through a simplistic software interface," he added.