Saturday, February 14, 2009

Google Cans Print & Radio: And Then There Was One

This past week, Google announced it was signing off from the radio space just a week after closing the books on its print division. I can't help feeling like these decisions were a bit short-sighted with Google caving to investors' insatiable demand for increasing immediate profits, rather than riding out the recession and readying to rule the traditional ad roost.

dMarc was a $102 million cash (with earn-out up to $1.13 billion) acquisition just 3 years ago. How do you just throw in the towel? I can't imagine the burn-rate was all that high. In its announcement, Google said it will have to lay off some 40 folks and sell off its "Radio Automation" technology. This company has nearly $16 billion on cash in hand and over 20,000 employees! Google Audio Ads was but a drop in the bucket. And radio advertising is still a $20 billion industry.

In the post-mortem on the Google Traditional Media blog, Susan Wojcicki's said, "Deciding to close products is never easy, but we will continue to focus on advertising products that provide measurability for advertisers, and are relevant and useful for users, listeners and viewers."

So what was the problem with Google Audio Ads?

It wasn't measurability. Per the Audio Ads AdWords homepage -- "Using call reporting and integrated Google Analytics tools, you can track customer calls, website conversions, revenue, and other metrics to measure the impact of your radio campaigns."

So was it the relevant and useful piece? Hard to quantify but Google seemed to have plenty of case studies showing positive consumer response. After all, the fundamental promise of opening up traditional media to the long tail was that consumers would receive more targeted messages by having smaller/local advertisers able to play alongside the national bigs.

As for Google Print Ads -- those were hella-measurable what with their 5 trackable calls-to-action and even a 2D barcode. Here's what the bottom of the ads looked like...

Google Print Ad - Blue Nile

Perhaps the real problem was that neither division was able to secure sustainable sources of prime inventory. With publishers and networks leaning more towards Google as enemy than friend, it wasn't able to procure the type of space that would hold up against the mass budget cuts happening all around us right now.

And that whole bit about accountable advertising being the last to go from the media budget? Not so much. At least not when it came to Google Print and Radio, given that they were still somewhat experimental platforms being tapped by the types of advertisers that are likely feeling the brunt of decreased consumer spending.

So this leaves Google TV as the last traditional format standing. They seem to have had moderate success here, lining up partners such as NBC Universal. But, by many accounts, most of the inventory it has access to is remnant. And, with TV advertising still a roughly $50 billion indsutry, you can bet the folks holding the keys to the prime space are not going to relinquesh them to Google anytime soon.

So is it just a matter of time before Google tunes out of TV and gets back to what it does best -- "organizing the world's information and make it universally accessible and useful?"

Or will it continue along this parallel-ish path to disintermediate, er... streamline the worldwide advertising ecosystem and make it inherently measurable and valuable?

Or, perhaps the real question is, will Google continue to pander to the Street's demands to stay profitable today or build for the long-term by continuing to gain share one point at a time in traditional media so that, when the recession clouds clear, it is poised to be the top beneficiary from increased ad spending?

Ahhh.... to borrow the old NBA tagline -- I love this game!

Anecdotally, as of today, Google was still running paid search ads for its Audio Ads division:

Google results for 'Radio Ads'

Google Audio Ad

I always wondered who manages Google's in-house campaigns. And how does the algorithm rank their ads? Does Google get a quality score like everyone else? How do they tie back ROI to their campaigns? Could it be that the decision to shutter its Audio Ads division was that the opportunity cost of showing house ads instead of paying advertisers got too high? :)

4 comments:

Scotty K said...

I think you'll see Google leveraging their technological capabilities in other, more creative ways not even tangentially related to queries. Like this...

http://www.greenbiz.com/news/2008/09/22/ge-and-google-partner-a-smart-grid-and-green-power

Aaron Goldman said...

They really just need to up and change thier mission statement to "Optimizing the world."

Patrick Fitzgerald said...

Aaron, I read your post on the Google traditional media misadventure and was compelled to comment. I have experience in the radio business and with the Google effort directly. The Google “partnership” with radio was really good for the radio business, but did not benefit Google at all. Google thought that with the acquisition of dMarc that they could take their Google super powers and optimize radio by aggregating the unsellable inventory and organizing it so that the broader market could purchase it directly and not have to deal with the Herb Tarlicks of the world. The dMarc purchase was indeed no big deal; the money they paid to Clear Channel to buy up expiring inventory, even at discount rates, was where the deal became silly.
I was contacted by a Google recruiter and took them up on their invitation to “meet some of the Google team, and learn more about the new program they were launching.” After the first meeting, I new this program was DOA, for several reasons, primarily that it lacked a real value proposition. Their premise in three presentations to me was ease of use to the buyer and that by being a part of Google they could get the inventory out to millions of people and they would buy it because it would be cheap and easy to do. There was no transparency for the buyer to know what station, format and audience they had bought. Google’s perspective was “so what, you got it cheap”. Radio has done a good job of devaluing their inventory; with this system Google efficiency would actually do that better.
The other benefit that Google provided radio with this effort was to really lean out unproductive elements from radio sales staffs across the country. Similar to the way that Castro emptied the jails when Carter offered asylum to Cubans who could get to the U.S., Sales managers across the country were able to open up account lists from experienced, underperforming sellers who lived off of agency RFP’s. This group drank Google Kool-Aide and took the two year salary ride. Sure some good ones got away and probably contribute to Google in other areas, but my office looked like Mariel Harbor and we were a better sales organization with Google’s help.
Long and short it was a bad plan poorly executed. I marvel continuously at how tech companies need to be more than what they are. Microsoft has the anti-Midas touch with every effort they put forth on the web. Now Google wants to be a traditional media player and throws billions into the effort without bothering to recognize and respect the field they are playing on. These are simple lessons; know the field you are competing on, have a real value proposition, understand culture and status quo, or die by without ever knowing why. Otherwise be ready to piss on the fire, call in the dogs and head on home, empty handed.

Aaron Goldman said...

Great insight, Patrick. Thx for sharing.

Seems like the moral of the story is that remnant radio inventory is never going to convert like pay-per-click keyword inventory no matter how it's bought/sold. In fact, the 2 ad formats couldn't be further apart on the ROI spectrum.

The reason Google got to where it is today is because all those keyword ads coverted for marketers. Seems like their takeaway should be to focus less on taking the friction out of the media buying/selling process and more on creating/identifying highly-targeted and valuable sources of ad inventory.

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