Remnant Sale! Cheap Ads! Call Google!

Google sells ads. Like the long gone, good old days of television advertising they don’t actually “sell” at all. They simply take orders. Media being media and all things becoming more and more equal in the eyes of the platform Google has its sights set on helping fringe media: meaning broadcasters and publishers. How better to give a helping hand to the old and tired than offering a sales solution!

Retailers have a long understanding of remnants, leftover unsold merchandise. Mark down the price and clear the shelves. A remnant sale solves two problems. First, cash comes in; maybe less than expected but some cash is better than no cash. Second, new stock – at full price - replaces unsold stock.

With new digital radio and television channels in the offing comes more time for ads. The most recent draft of Europe’s new rules for television effectively increases the amount of ad time.

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The result of more channels offering ad time, more ad time allowed, pressure from new media and fear – real or imagined – of shrinking audiences will be – according to real economics – plunging ad rates. As with the tailor shop with 30 unsold pink shirts, it’s time for the remnant sale. Call Google! Open up bids!

The American radio sales manager might tell – sorry, scream – that an ad spot rate below “a dollar a holler” won’t be accepted and that available ad time might go unsold. But Google – in theory – might sell that ad unit at 39 cents. The question is whether or not Google can turn remnant ad sales into a profit center and migrate that business into prime time. So far, US radio broadcasters are resisting.

A year ago Google agreed to pay about $US 1 billion for dMarc, a company that designed a semi-automated ad sales system for US radio broadcasters. And deals were made with several newspapers, notably the Chicago Tribune for remnant ad sales. Now Google hints broadly that television is the next target.

Europe’s radio and TV sales houses are conspicuously quiet on the idea, says egta radio coordinator Malgorzata Sliwinska. Only a German sales house – not specifically identified but probably ARD – offered an opinion. Maybe it was RMS. egta keeps track of broadcast ad trends from Brussels.

“We are observing Google's activities on the American market for radio airtime sales after the dMarc-deal - even if German Google managers emphasize that Google is not planning to launch such a business model in Germany within the next years. At the moment we still call Google's Radio activities a "test market" since the number of radio stations cooperating with Google is still small. From our point of view Google's business model suffers from some severe problems: without a radio-focused personnel Google will be able to get some low-hanging fruits but Google will not be able to grow the market as our customers appreciate our qualified advice. In addition the stations will not reserve ad-time for Google, so Google can only sell the so called remnant inventory in a short term at a discount price. Some stations might prefer playing music for their audience instead of playing a $10 commercial. Concerning a possible market entry for Google Radio in Europe we think that the varying structures of radio and advertising markets within the European countries will be an important entry barrier. In addition we are convinced that the overwhelming part of German advertisers favors a qualified personal consultation instead of a computer-based self-service-system.”

Television and radio ad sales operate on the principle that once a “minute” is gone, it’s gone forever. Better to get 39 cents than nothing. Newspapers have the advantage of cutting the size and number of pages to fit the ad formula. A radio station or television stations shelf space is fixed.

Ad sales on web sites is a different beast. And, ad buyers love it. First, it’s the click-through culture. Advertisers don’t pay until a visitor gets the ad and, in most cases, actually buys. And then the dynamics of the internet are completely different. Once content appears on the Web it’s there forever…usually. So, too, are the ads. When ad buyers talk about accountability what they mean is counting paying customers associated with that ad.

On a recent visit to Hungary a board member of a significant television operator said his biggest fear is digital television…and all those new channels. And that would mean more available ad time. Lobbying by broadcasters in several countries, Hungary included, has successfully kept digital TV – even radio, too – a bay. So long as regulators delay or keep changing the rules, those suspected new channels never materialize.

Google is not the bad guy in this new ad sales equation. Google’s VP Engineering Douglas Merrill, quoted recently in the New York Times, explained that “finding appropriate value” would bring new advertisers to “the party. With those advertisers comes new money; with those, rates rise.”

Before rates rise, it’s a race to the bottom driving out, in the process, even the best content providers. The old economist also observes “bad money drives good money out.”