Google strikes advertising deal with XM

MSO Observation: Google's AdWords model has revolutionized how advertising gets placed on the Internet. It's nothing short of brilliant. AdWords allows you to deliver your ad in the context of an online search as well as deliver advertising on specific sites.  So, this morning, the headline reads:

Google strikes advertising deal with XM

NEW YORK (Reuters) — Google on Wednesday said it struck a deal with XM Satellite Radio to help the search engine's advertisers automatically insert ads on XM's non-music radio channels.

The deal would give Google advertisers a way to reach XM's subscriber base of more than 7 million people as they tune in to talk-based offerings such as Major League Baseball and an Oprah Winfrey channel.

It also could allow XM to increase revenue with new advertisers while lowering the costs related to processing ads, the two companies said. [ USA Today Story ]

The dMarc partnership allows advertisers to place ads on terrestrial radio stations and now on satellite radio. The only thing that this model appears to be missing is the "quantification" of the audience. With AdWords, one can pay for the ads on a "per click" basis, getting charged every time someone clicks on your ad. In the site/search context model, one pays on a CPM basis for eyeballs - it's all about page views.

It would appear that the only thing missing from Google/dMarc model right now is the

ability to quantify the station's audience in "real time" and price the CPM accordingly. With the PPM methodology right on the horizon, we're probably only a couple of thousand lines of code away from that becoming reality.

This could quickly evolve into the the new paradigm of national sales. Advertisers could buy "tonnage" on a system running parallel to the CPM model or could buy specific stations with a "site specific" type of model.  It would truly "commoditize" what has already become a commodity - radio's national inventory.

This idea must have merit - there's already pushback.  In Business Week earlier this month, the headline read

"Today's Search, Tomorrow's Ads?  Media folk fear Google with choke off their existing deals with advertisers."

Since print still struggles with slow growth, it's interesting that not all executives welcome a potential source of new ad dollars. "I'd do business with them again. But I have no illusions about what they are trying to do vis-à-vis my business, which is take it over," says a senior magazine executive who has worked with Google. "They want to be the central clearinghouse for advertising for everyone."

The potential side effect this executive fears is that Google eventually undercuts magazines' existing relationships with advertisers by offering them cut-rate deals. Whether this fear is realistic or ridiculous, it nevertheless echoes how established media often views tech-driven newcomers. If this becomes Google's universe, what happens to the rest of us?

"GOOGLE HAS A near-religious belief that its digital [ad] bidding platform will be used for all media," says Jordan Rohan, a managing director and Internet analyst at RBC Capital Markets. But "outside of search, their batting percentage is pathetic." Like another behemoth, the one called Wal-Mart (WMT), Google cloaks ambitions to mediate a substantial chunk of the economy beneath rhetoric about obsessively focusing on the customer, or, in Google's favored techie parlance, the "end user." And Armstrong, unsurprisingly, is careful to downplay Google's ad ambitions in traditional media. "This is not a zero-sum game," he says. "We would love to be one of the winners."

This could develop quickly for radio - an industry that is begging to find new sources of revenue AND any possible cost savings that consolidation hasn't already squeezed from the expense lines.  MSO

Comments

[Mark Shannon O'Neill]

The "added value" in a model like this would be to free up the sellers who are involved in the commodities portion of the businss to concentrate on developing new local - or national - business.

It would be interesting to learn from any existing AdWords partner sites if the revenue generated for them by AdWords has become consistent, reliable and predictable. MSO

[Josh Rose]

It will be interesting to see if Google can bring additional value to national radio sales, rather than simply "commoditize" it further.

There doesn't seem to be a clear adaptation of the genius of adwords into tradional radio sales, but I'm crossing my fingers hoping that Google can figure something out to bring more of the ad pie into radio.