Google's Radio Daze: Search Giant Faces Big Competition in Radio Ad Market
Google is pursuing the $20 billion radio advertising market by controlling DMarc's automated ad-buying system, which sits between advertisers/agencies and the radio stations. Through DMarc, Google links electronically with stations to search for inventory that matches advertiser criteria. Currently, DMarc advertises relationships with over 800 stations. But unlike its corporate parent Google, DMarc isn't the 800-pound gorilla in its marketplace. That superlative belongs to SWMX, a radio and television advertising company that has relationships with over 1,500 radio stations. And whereas Google/DMarc sells 100 percent remnant ads (ads that are placed less than one week before air time), SWMX sells only 30 percent remnant and 70 percent upfront. According to SWMX, remnant advertising is viewed unfavorably by Madison Avenue, and Bear Stearns estimates the market size for remnant advertising to be only $6 billion of the overall $20 billion market. (For a look at a Google radio ad sales pitch, check out Donna Bogatin's post.) Not mentioned in the Bear Stearns note, however, is the fact that Google isn't just competing in the radio ad market. Google's plan undoubtedly includes selling advertising across media. So, when an advertiser approaches Google, Google can offer placement on the Web, on cell phones, and in newspapers, magazines and radio. Therefore, Google doesn't need to immediately dominate the radio market, since it can sell radio ad space as a value-add to advertisers. Of course, this assumes that advertisers are prepared to do radio advertising at all. And it also assumes that SWMX won't be acquired by a Google competitor.  "SWMX mentioned that they have been approached by many entities for partnership acquisitions but declined to name the potntial suitors," reads the note. "Regarding future partnerships with an online search property, SWMX mentioned that Yahoo would be the most logical candidate given their deep relationship with Madison Avenue, and would pursue such opportunities if appropriate. We also note that one of SWMX's board of directors is Jerry Schereshewsky, who is affiliated with Yahoo's advertising practices."The Bear Stearns note mentions several other hurdles Google faces in the radio ad market, including DMarc's set-up cost ($75,000 per station) and set-up time (90 days). This compared to SWMX, which has no set-up cost and a set-up time of 46 minutes. DMarc also apparently doesn't have the ability to sell into the telvision ad market, which SWMX does. |
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