Advertising; Out Of Print And Off The Air

Michael Hedges February 15, 2009

Google’s exit from radio and print advertising says little about the company yet speaks volumes about advertising and media’s place in it. It’s a media buyers market and will be for the foreseeable future. Retail traffic and branding are only part of what advertisers are buying. Google knows this.

Last week (February 13) Google let it be known its AudioAds tool for buying radio ads will be phased out by May. Three weeks earlier it closed down a similar tool for newspapers. It will, nonetheless, press on with Google TV.

Technology wags wheezed about overreach as financial wags whinged about recessions. In truth, Google discovered – as Microsoft has – that good ideas easily fall prey to the weakest link in the value chain. Rather than expend time, talent and money fixing or changing the weak link – in this case US radio broadcasters – Google let it fall. 

Google purchased dMarc, the developer of an automated ad sales system for US commercial radio, in 2006 for US$100 million, promising more if the platform performed. Google Audio Ads launched the following year with the dMarc technology. Shortly thereafter the dMarc founders left, complaining of a culture clash.

Google Audio Ads offered broadcasters a technical solution to a sales problem. The problem, however, was broadcasters – and their print brethren – saw it differently than Google. Broadcasters saw, at first blush, a cheap and easy means of getting revenue for remnant ad slots, those left over at the end of the day, often far into the night. If the system worked and advertisers demanded more spots broadcasters might adjust. Revenue with lower cost of sales warms the hearts of shareholders and the accountants who feed them.

Google saw something else, a rather elegant solution to a mix of demands from media buyers as the worldview of their clients – advertisers – changed. That worldview changed because Google changed it. Web advertising is highly accountable; advertisers know which messages result in sales immediately. Changing those messages for the context of each viewer looks better on websites and may even increase response. Allowing buyers to bid for ad space brings another level of accountability, market discipline. 

According to information from Google, about 1,600 US radio stations signed up for Audio Ads. That would be about all of the Clear Channel stations plus three.  Clear Channel signed up early, offering 5% of its spot inventory. What none of the US broadcasters would offer was prime time over which they needed rate leverage and, perhaps more importantly, incentive for time salespeople.

Though the early posturing from Google suggested strongly that Audio Ads would be available to broadcasters worldwide it remained a US centered business. There is no relationship between Google Audio Ads and the audioads.de platform of German agency Ad On Media that places ads in podcasts. AS&S, the advertising sales house of German public broadcasters, has a business relationship with audioads.de.   

Google, unquestionably, wrote new rules for advertising to old media’s detriment if not downfall. The company has entered other information technology sectors with the abandon of kids in a candy store. Having more money than it could count and a fair amount of hubris allowed experimentation – particularly large scale – where other feared to tread. That Google has closed the door on selling radio and print ads like it sells click-through ads on the web says far more about the advertising revolution taking place.

The ad world has changed sufficiently that spots and space may have less value to advertisers than the data that can be collected. Knowing more about consumer behavior is intrinsically vital to advertisers, beyond, perhaps, the message itself. Ad agencies have responded by significant investments in online agencies with a knack for consumer data mining. At the end of 2006 French advertising goliath Publicis Group bought digital agency Digitas for US$1.3 billion. Google and Publicis have a special – and otherwise undisclosed – relationship.

AdAge reported last week (February 9) that GroupM, WPP’s media buying house, is changing contracts with advertisers, separating media insertions from data collection. 

Having all this data on consumers’ behavior may delight ad agencies and their clients but it has also raised – again – privacy questions. It seems British ISP BT used spyware called Phorm to collect – rather unannounced – information on internet usage from several thousand customers in 2006 and 2007. The UK government – more or less – waved off complaints and concerns. That hasn’t set well with EC Info Society and Media Commissioner Viviane Reding who can’t quite understand why privacy shouldn’t be a bigger issue in the UK.

Last week the EC sent yet another letter to the UK government asking for an explanation for lack of enforcement of European privacy laws against BT and Phorm. “We may have to proceed to formal action if the UK authorities do not provide a satisfactory response to the Commission's concerns on the implementation of European law in the context of the Phorm case," said Commissioner Reding’s spokesperson.

Advertisers thirst for consumer data cannot be quenched. Technology can deliver so long as media has two-way capacity. Mobile media and IP technology offer that. Privacy issues notwithstanding, other media risks finding its place in the new advertising world in the ‘other’ column.  Globalized markets being what they are, Google certainly doesn’t want another fight with the European Commission over small change.

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