Sisyph.us - Erik's personal blogs

Google is giving up their newspaper and magazine print ad sales business. Will google be abandoning their terrestrial radio ad sales experiment next?

When I spoke at Radio Ink Forecast last year one of the mantras of the executive leadership of the industry was "well at least we're not as bad off as the newspapers". Truly, as bad as things are for radio, (Clear Channel fired 10% of their work force yesterday) the newspaper industry is in worse shape. The question really boils down to whether radio in on a different road than newspapers or the same road, just not quite as far along.

Newspapers and radio have very similar problems, neither on of them have any real accountability of the efficacy of the ads they run for their advertisers. This is the fundamental mismatch between google and both the newspaper and radio industries. The reason people advertise using google adwords is because you know precisely how effective your campaign is. I wrote about this nearly two years ago.

Both newspapers and radio have another similar problem. Both are distribution channels that are fundamentally becoming obsolete (the newspaper guys understand this better than the radio guys, there are a lot of tower huggers in the radio business). Both are in process of switching to new distribution channels (newspapers faster than radio). Both have a big mismatch between the cost structures and business models of the old channel compared to the new. Both have been hurt by an abysmal understanding of their traffic (or in their parlance, their cume/circulation). Both have been hurt by expanded expectations of both their audience and their advertisers.

The newspaper industry understands that the "dead tree" distribution channel is coming to an end. They have done a good job of leveraging their core competence (writing and photography) to the web. They have lots of web traffic. Their problem is monetization.

To understand newspaper's monetization problem we have to look at why print newspaper ads are seen and online newspaper display ads seem invisible. The answers are mainly templates and search. How do you find something interesting to read in a print newspaper? You turn pages and scan headlines, when one catches your eye, you stop and read it. Interspersed in an irregular pattern are advertisements. Your eye is forced to see those ads because of the page layout. Since they're not always in the same location you scan the whole page because you can't predict where the ads will be and it becomes harder to train yourself to ignore them. The behavior is very different reading an online newspaper. First of all, you tend to use search to find what you're looking for. You're not leafing through pages and scanning headlines. But the real problem comes from the templated nature of web design. If the ad units is always in the same places on the page it becomes easy for your eye to ignore them. This is the problem that the newspaper industry needs to solve to become viable online.

The lesson there is monetization techniques do not always transfer from one channel to another. It's easy to end up with a meatball sundae.

In many ways the radio industry is not learning the lessons of the newspaper industry. They are far behind the newspapers in leveraging their core competence to a new distribution channel. Sadly many people in radio see their industry in a temporary downturn rather than a fundamental paradigm shift (kind of like the newspaper execs myopia 5-10 years ago). It is not merely an issue of radio moving to a narrowcast model but how to monetize the audience once they get there. Listeners are moving online and to mobile, but the types of ad units that are effective in a linear broadcasting environment are not effective in an interactive narrowcast world.

These are the challenges that radio must solve or they will end up hanging out with newsreels, town criers, and print newspapers in the dustbin of obsolete media.

Last year Google bought dMarc for ~$100 million in cash and a earn-out option for another billion. Last week the two dMarc founders left Google and there's speculation that things are not going as planned with Google's into move into the $22 billion radio advertising industry. There are rumors of cultural clashes between the radio people and the Google folks, clashes between Google's fundamental belief in an automated sales process and the radio industry's historical use of sales reps.

Google's automated sales process for AdWords works so well because their cost per click model (CPC), tied to their auction system for pricing and selling ads, leaves emotion entirely out of the ad purchase decision cycle. The purchase decision ends up being a strictly intellectual process of looking at the cost of the ad buy, looking at the conversion rate of clicks to purchases, and setting an auction bid that gives you an acceptable return on investment for the ad.

Traditional radio advertising is a whole different ballgame. Radio ads cannot be CPC advertising; they are based on cost per thousand (CPM) impressions. The primary value of CPM advertising (especially in a one-way medium like radio) is increasing brand awareness. It is very difficult to make a hard correlation between radio ad buys and incremental revenue. The ROI on radio ads are much fuzzier and harder to quantify. Therefore the decision to do brand advertising, and more specifically how much to spend on brand advertising, is a more emotional sales process. An emotional sales process goes much more smoothly when a sales representative is there to ease the buyer along.

It's an interesting problem to tackle. The move toward mobile is creating a hybrid market. Which sales model do you follow? We're developing the clickable audio ad, which you can do with a feedback-enabled audio system like the cell phone. You can combine the emotional pull of audio ads with the demonstrable ROI of CPC ads. The goal of audio ads in a mobile medium starts to be less about brand building (though it still is), and more about invoking a direct call to action, AdWords-style. Hear an ad, press the "5" key, and be connected to the advertiser. You're listing to a movie review; you "click," the call is transferred to MovieFone, and you buy your tickets. Or you initiate any of the other options possible with a live connection -- like requesting follow-up emails with more information; or calling open API web services and, for example, clicking on a preview for a TV show and programming your TiVo. We're continually inventing new implementations for the clickable audio ad.

It's a new world out there.