WSJ: Why Google Failed At Radio
May 12, 2009 at 5:03 AM (PT)
THE WALL STREET JOURNAL reports "GOOGLE INC.'s foray into selling radio ads was supposed to show how its online-advertising brainpower could revolutionize an old-fashioned people business. The company teamed up with CHAD and RYAN STEELBERG, who had a technology for transmitting, scheduling and tracking radio ads. 'GOOGLE is going to conquer radio,' boasted CHAD in 2006.
"Instead, radio tripped up GOOGLE. The company is pulling the plug on its attempt to automate radio-ad sales on MAY 31st, exposing how far GOOGLE is from its goal of grabbing a big chunk of the multibillion-dollar business of offline ad sales.
...when Google executives asked how they could get him to pump better airtime into the Google system, he told them, 'Add a few zeros to the spot price.'
"A look at what went wrong shows that GOOGLE misjudged the capacity of its technology to work beyond the Web, and underestimated the human side of the business. Radio stations refused to turn over airtime to a computer algorithm that set prices far lower than their own rates. Big advertisers steered clear. "
Google Couldn't Measure Response
"GOOGLE CEO ERIC SCHMIDT said the radio effort failed because GOOGLE never came up with a good way to measure listener response. On the Web, he explained, GOOGLE can charge advertisers based on performance -- that is, how many times users click on an ad. 'With an enormous data corpus, our computers can do the math really well,' he said. 'But in the audio case, there wasn't a good signal back to us about which ads performed.'
"GOOGLE 'thought the advertisers would come to them,' said LINDSAY WOOD DAVIS, former EVP of the RAB. But media-buying agencies, fearing GOOGLE's technology would put them out of business, were a tough audience. GOOGLE refused to create bundles of spots and negotiate prices ahead of time, which was how radio was generally sold, say people familiar with the discussions.
The Numbers Didn't Add Up
"TONY RENDA, GM of PITTSBURGH-based RENDA BROADCASTING CORP., was mystified by how the pricing algorithm would work. 'They want me to put my faith and wallet in this?' he recalls thinking. After the switch, he says, he saw a 30% revenue drop from the GOOGLE ads, compared with the prior year.
"EMMIS RADIO, one of GOOGLE's biggest partners in the program, pulled premium stations such as LOS ANGELES's POWER 106 last fall. EMMIS CEO RICK CUMMINGS recalls that when GOOGLE executives asked how they could get him to pump better airtime into the GOOGLE system, he told them, 'Add a few zeros to the spot price.'"