Posted by: Rob Hof on February 12, 2009
In what would be more of a surprise had Google not already exited its Print Ads project late last month, the search giant just announced it’s tuning out of its nearly three-year-old radio advertising business as of May 31. In the process, it expects to lay off about 40 people as it sells off its Radio Automation business. Here’s what Susan Wojcicki, Google’s VP of product management, said in a blog post:
In 2006, we launched Google Audio Ads and Google Radio Automation to create a new revenue stream for broadcast radio, produce more relevant advertising for listeners and streamline the buying and selling of radio ads. While we’ve devoted substantial resources to developing these products and learned a lot along the way, we haven’t had the impact we hoped for.
So we have decided to exit the broadcast radio business and focus our efforts in online streaming audio. We will phase out the existing Google Audio Ads and AdSense for Audio products and plan to sell the Google Radio Automation business, the software that automates broadcast radio programming.
The move raises new questions about how far Google can extend its dominance in search ads to other media. While I think Google is more than a one-trick pony as the current cliche goes, its potential to run roughshod across all media, as some people assumed it would, clearly has run into limits.
Of course, many people always had doubts about Google’s ability to conquer other media, which have very different competitive dynamics, points of friction, and ability to measure results than online media. And as Sam Diaz at ZDNet’s Between the Lines puts it succinctly, the radio business right now is brutal: “Clear Channel tapped its credit facility and sparked bankruptcy worries. Other publicly traded radio companies, such as Cumulus and Sirius XM, are trading for pennies. Simply put, radio is an ugly business right now.”
So it’s understandable that if radio ads weren’t getting traction, this is the time for Google to put a quick end to them. Despite continuing to do better than expected, is clearly feeling the effects of the recession and cutting costs while continuing to invest in a number of areas even very recently in areas closer to home. That’s also what Google intends to do with its radio experience, Wojcicki explains:
Instead we will use our technology to develop Internet-based solutions that will deliver relevant ads for online streaming audio. We are dedicating a team of people at Google to explore how we can best add value for advertisers, broadcasters and listeners in this emerging advertising space. In addition, we will continue to invest in our growing TV advertising business, where we can measure audience response and help advertisers understand how effective their ads are.
Indeed, for several reasons, I think Google will stick with its TV Ads service, even though it doesn’t yet seem to have gotten the traction Google might have hoped. For one, TV is a huge market that arguably stands to suffer less from the recession than other forms of media. But mainly, it’s pretty clear that the long-awaited collision of Internet technologies with television is finally starting. And I don’t think Google wants to miss it.