Google’s Radio Ad Service Shutting Down May 31

Posted May 14, 2009

On May 31, Google will be officially ending their radio advertising service.  Google was working closely with Chad and Ryan Steelberg, who  had developed technology to transmit and schedule radio advertisements over the last couple of years.  But now the service will be shutting down on May 31.

One of the problems was the business model itself.  The radio stations refused to give Google airtime for advertising rates that were much lower than what they were offering.  Even though Google runs about 30% of the online advertising market, they have been unable to break into traditional mediums.  Their TV, print, and radio advertising attempts have not done very well.  About 97% of Google’s revenue in 2008 was from online advertising.  Google’s 2008 revenue was about $22 billion.

David Friedberg, a former executive at Google discovered dMarc Broadcasting Inc., a three year old company that transmitted radio ads automatically.  Google bought them out for $102 million and offered an additional $1.1 billion based on airtime and revenue produced through the acquisition.

Around February 2007, Google had told the Steelbergs that the arrangement for radio ads has not been working out.  Both brothers quit the company shortly after.  Shortly after that Google had to negotiate advertising airtime with Clear Channel.  The whole process took one year and the final agreement was that Google would have to pay Clear Channel for a certain amount of spots every quarter regardless of whether they actually sold or not.

Google decided to end the radio ad program in January but kept it confidential until now.  Susan Wojcicki, sister-in-law of Sergey Brin and VP of Google’s ad products played a vital role in the project.  Google’s first office ever was in Susan’s garage.

[via WSJ]