Searching for Ads Offline
SAN FRANCISCO, March 28 — If there was any doubt about the scope of Google’s ambitions in the advertising world, one of its recent job postings should dispel them: It seeks a “head of national TV sales” to help build “a world-class national TV advertising sales team.”
Then there is radio. Google’s chief executive, Eric E. Schmidt, said last year that the company would eventually have 1,000 employees dedicated to radio advertising alone.
Google may one day rock the television and radio advertising markets. But its TV plans have yet to take shape, and its other efforts to extend its dominance over online advertising into offline media like newspapers and radio are inching along. The early results are mixed, suggesting that Google’s successful transition from online kingpin to credible player in traditional media is far from assured.
In particular, Google’s effort to sell radio ads, the oldest and most advanced of its major offline advertising plans, has run into several hurdles, including radio stations that are wary of losing control over the sale and pricing of ads.
The promise Google offers old-line media markets is that it can replicate the formula that has worked so well for it online. It is a formula that relies heavily on technology to allow advertisers to buy their own ads, have them appear on relevant pages across a vast network of Web sites, and then track the results.
The system has attracted a myriad of advertisers, many of them new to the Web. That, in turn, turned into a bonanza for Web publishers who had been unable to effectively convert traffic on their sites into dollars. Older media, with their entrenched infrastructures devoted to buying and selling ads, are not crying out for that kind of innovation — at least not from an outsider. But that will not stop Google from trying.
“If you use some of the things that we understand about finding appropriate value and targeting, we might get folks who haven’t advertised on radio before to advertise now,” said Douglas Merrill, vice president of engineering at Google. “New advertisers appear at the party. With those advertisers comes new money; with those, rates rise.”
Google has had trouble starting that cycle. It has been unable to sign up enough major stations in major markets to become broadly attractive to advertisers. Even in the markets where it has a presence, much of the air time that stations have made available to Google is what the industry calls “remnant” inventory — ad spots sold at the last minute at low prices.
Many in the radio industry are determined to keep Google at arm’s length, suspicious that its technology-based approach will turn their business into a commodity and take away the relationships with advertisers that stations have spent years building.
“It is a different model for selling radio advertising and it is controversial within the industry,” said David Benjamin, president of Triad Broadcasting, which owns about 40 stations in six markets. “There are those who believe that it could commoditize the product, leading to lower rates.”
Mr. Benjamin is not one of those people. He agreed to try Google’s system at a few stations, and he said that it had worked well so far. But he added that he was not ready to give Google his full endorsement.
“Am I a 100 percent believer?” he asked. “No. I just don’t know.”
Google’s recent foray into newspaper advertising has received a somewhat warmer reception. The company was able to recruit major newspapers like The Chicago Tribune and The New York Times, and most major newspaper chains.
The newspaper ads work much the same way that radio ads do, with advertisers bidding for available space. The tests, which began in November, are limited to about 100 advertisers.
Google said the volume of ads sold through the system was double what it had projected. Some newspaper industry executives say early results have been promising.
“From our perspective the tests went very well,” said Steve Rossi, executive vice president and chief operating officer of MediaNews, which is testing the Google ads in papers like The San Jose Mercury News and The Salt Lake Tribune.
Representatives for Gannett and The Chicago Tribune said the tests were encouraging but too small to be conclusive.
Success in offline advertising is important to Google’s future. Investors have bid up Google’s shares, in part, on the expectation that it will grab a portion of the market for radio, television and print ads. Google would benefit from even a foothold in those large markets, which still dwarf the $16 billion Internet advertising market.
Television advertising could prove particularly fruitful for Google, because the company might be able to combine its technology with that of cable systems to show different ads to different viewers based on demographics or personal interests. The company has said it is conducting a small trial with a few partners.
But television may not be revolutionized so easily. There are signs that Google’s reception in the TV world may prove to be as chilly as it has been in some corners of the radio industry.
For instance, Google has approached the cable giant Comcast about selling TV ads for it, according to a person briefed on the matter. The companies would not comment on any discussions. But D’Arcy Rudnay, vice president of corporate communications at Comcast, said: “We have a very successful company, Comcast Spotlight, which has thousands of employees who have been selling television advertising for many years.”
Google’s foray into radio got a jump start early last year when it paid as much as $1.24 billion for dMarc Broadcasting, whose technology helps marketers place ads on radio stations. Google has integrated the technology with its online advertising system.
Advertisers submit their ads to the system in digital form and specify what cities or regions and what kind of audience they want to reach. The system automatically schedules the ads based on the available inventory, or blocks of advertising time, and plays them on the air. Everything else, from confirming that the ads were played to billing and payments, is handled automatically, replacing older systems used in many stations.
“It has been a good experiment,” said Rick Cummings, president of Emmis Broadcasting, one of the largest radio networks that is currently testing the Google system.
But even Mr. Cummings said the system’s promise remained just that. “I think the jury is still out,” he said.
Emmis, which has about two dozen stations, is testing Google’s ads in a handful of markets, including Los Angeles and Chicago, Mr. Cummings said. Google has brought some new advertisers to those stations.
“They are getting it at cheap rates, because it is last-minute inventory,” Mr. Cummings said.
Indeed, winning guaranteed access to prime-time spots in top stations in large markets may be Google’s biggest challenge, according to industry analysts. Most of those spots are controlled by major networks like CBS and Clear Channel. And even at smaller stations, premium inventory is expensive.
“This is about getting access to prime-time inventory,” said David Bank, a media analyst with RBC Capital Markets. “That is going to be achieved in a handful of major deals. We haven’t seen those major deals yet.”
Google and CBS were in talks late last year, according to news media and analyst reports, but no deal has been announced. CBS declined to comment, and Google would not comment on specific deals.
Google has been upbeat about the program, saying it has signed up about 900 stations in some 200 markets. “As we have more advertisers, we’ll be able to work with more publishers,” said Susan Wojcicki, vice president of product management at Google. “And as we get more publishers, we’ll be able to work with more advertisers. It is a process that will take time.”
Some advertisers are pleased. “We’ve tested them with about three of our clients,” said Mark Hodor, vice president of direct response at Carat Fusion, an advertising agency that is part of the Aegis Group. “It has been pretty successful for all of them.”
But a recent list of participating stations, which was obtained by The New York Times, shows that Google’s access to major markets is spotty.
For instance, the list included 10 stations in the San Francisco Bay Area, but most were in outlying areas like Sonoma and Santa Rosa and have low ratings. None of the stations were in San Francisco, and Google’s top station in the area is ranked 18th in terms of audience share, according to Arbitron. Its top station in New York is ranked 27th. Google may have added more stations since the list was created last month.
Competitors are moving quickly to grab a share of the market. Bid4Spots, which sells remnant inventory through an automated system, says it has 2,400 stations in its network. Another Google rival, SWMX, said its network reached 40 percent of the American broadcast audience. The company recently began testing TV ads.
One of SWMX’s advantages is that it is not Google, Mr. Bank said. “That’s a huge selling point in the industry. On the other hand, they don’t have the credibility of the Google brand.”
Mr. Cummings, of Emmis, and Mr. Benjamin, of Triad, both said that Google had talked to them about buying higher-quality inventory, but nothing had come of those talks yet.
“It’s tiny,” Mr. Cummings said about the revenue generated through Google. But he said he was hopeful that over time Google would bring new advertisers to prime-time radio. “If we thought this was going to be remnant inventory forever, I would stop that tomorrow,” he said.
Google has been building its own radio sales force, hiring away veteran sales representatives from stations. That has heightened fears in the industry that Google could take control over relationships with advertisers from them.
Ms. Wojcicki said Google had proved in the online world that it could work with Web publishers without undermining the relationships between publishers, advertisers and ad agencies. But the concerns persist.
Google “would not say that they are replacing the buyer-seller relationship,” said Jeff Lanctot, vice president and general manager at Avenue A/Razorfish, an interactive marketing agency. “But it is what they are doing. For a radio salesperson, it is a fox-in-the-henhouse scenario.”