OK, I know I am at least two days late on this news, but here’s my take on how Google could incorporate radio advertising into their ever-expanding portfolio of disconnected products.
Google is already experimenting with pay-per-call on AdWords, They also offer “Site Targeting” which is sold on a CPM basis. I figure that one of these two concepts will be instrumental to any Google Radio product.
Pay-per-call seems like the most logical choice for me. Google can, in essence, create thousands of radio spots in a multitude of categories (starting with the spots you would most likely hear currently on AM radio, like diet pills, mortgages, get-rich quick schemes, etc). Each of these ads would have a call to action at the end with a unique phone number, but there wouldn’t be any company name mentioned in the ad.
A sample ad might sound like this: “Do you want to fit into your prom dress again? Recent scientific breakthroughs have resulted in a new and all-natural diet formula that can help you lose weight fast! And best of all, you don’t have to stop eating your favorite foods. Call 1-800-XXX-XXXX today to learn about our free offer on this revolutionary new product!”
When someone calls the number, the call is routed to the diet pill advertiser who paid the most to receive this lead. Thus, Advertiser A might receive the phone calls in the morning, until he is outbid by Advertiser B in the afternoon.
Of course, having a call center sit idle because you were outbid for an ad spot won’t make advertisers very happy, so perhaps the better model would be to allow advertiser to bid in advance (upfront buying) for specific slots, on specific radio stations. In this scenario, the advertiser could actually run its own pre-created ad that they have stored with Google, since Google knows at least a day in advance who won the bidding auction.
But since most Google advertisers don’t have existing radio spots at the ready, Google could also offer an additional ad creation service (for a price, of course) for companies that don’t want to use the generic ad suggested above.
The CPM model mentioned above could also be used for Google Radio. In essence, radio is already sold on a CPM basis (I think they call it “reach”?). Google could use the Arbitron ratings to allow an advertiser to buy a certain number of listeners on a CPM basis, and of course targeting by geographics and demographics would also be available, for an additional charge.
The $64,000 question is: will this work at all? The answer, as always, is “maybe.” The good news for Google is that the radio advertising industry is still very fragmented. Other than ClearChannel, buying radio spots often means calling numerous local stations and negotiating numerous local deals. The transactional costs of talking to 20 salespeople is just too much. And the ClearChannel model works well for big advertisers, but small companies either can’t afford ClearChannel’s prices or can’t get the time of day from a ClearChannel rep. So, in one sense, the idea of democratizing radio advertising is a compelling business idea.
On the flip side, Google is stepping way outside its core competency. Radio is probably the poster child of “old world media.” Google will encounter a lot of players who want it to fail and to butt out of their industry. Radio is also a lot harder to track than the Internet, so the precise ROI metrics that savvy advertisers use via tracking URLs on the Web won’t work. Sure, pay-per-call has tracking functionality, and you can always include an offer code in your radio ad, but radio is still a long ways away from the measurability of Internet advertising.
I see two historical analogies that could fit here. The first is Virgin, Richard Branson’s baby. Despite its origins as a somewhat kooky record label, Branson has successful apply the Virgin model to many dissimilar industries, including airlines, cola, and ISPs. The unifying theme of all of the products Virgin produces is “cool, fun, and affordable.” Could Google do the same for radio, print, and TV? Sure, it could happen.
There are plenty of examples, however, of failed attempts to expand beyond what you know best. Levi’s Jeans going into mens suits, big airlines copying SouthWest, the World Wrestling Federation producing football, TV companies starting Internet portals, etc, etc. Just because you’ve done something right in one industry doesn’t mean you can simply transfer your success into another.
For now, whatever Google touches turns to gold, so I suspect that if they can move quickly into radio and offer a turn-key solution to advertisers great and small, they could make some inroads into this industry. But they will have a lot of entrenched enemies in the business that will do everything they can to make Google fail (starting with ClearChannel). And if Google keeps going into five new industries a week, eventually, like the Roman Empire, they may stretch themselves to thin and the collective power of many enemies may be too much for them to overcome.