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Google ends project for selling radio ads

Google  entered the radio advertising business with grand ambitions three years ago. On Thursday, those ambitions fizzled.

Google said it was ending its radio project, Google Audio Ads, because it had failed to live up to expectations. Up to 40 people are expected to lose their jobs.

It was the second time in two months that Google had killed a program meant to expand its advertising business offline, suggesting that the appeal of Google’s automated model for selling ads may be far more limited than the company once hoped.

The company had planned to revolutionize the way radio ads were bought and sold. In 2006,  Eric E. Schmidt, the chief executive, said he foresaw a day when Google would have more than 1,000 employees serving a thriving radio advertising business.

“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,” Susan Wojcicki, a vice president for product management, wrote on a blog announcing the end of Audio Ads.

Ms. Wojcicki said Google would apply some of its radio advertising technologies to selling ads on online audio programs. She also said that Google would try to find jobs for most of the people involved in the radio ads program but that up to 40 people might be laid off. A Google spokesman declined to say how many people worked on the radio initiative.

The announcement on Thursday also highlighted Google’s efforts to cut costs and focus on fewer, more promising projects as its core search advertising business has slowed sharply during the recession.

Three weeks ago, Google ended its Print Ads program, which sold spots in newspapers. Only one of Google’s offline advertising initiatives survives – the more ambitious effort to sell TV ads. Ms. Wojcicki said Google would continue to invest in it.

While Google has had middling success so far in TV advertising, analysts say, the company is not likely to give up on the effort quickly, because the market is so large and the initiative could help  YouTube, Google’s video site.

Google is selling a relatively limited number of ads on the Dish Network, some cable networks owned by  NBC Universal  and a small cable provider in Northern California. But Google has not reached deals with any of the major cable companies.

“Clearly the TV industry isn’t queuing up to be helpful,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Company.

Google Audio Ads had faced challenges since it began in 2006, when Google acquired dMarc Broadcasting, a radio advertising technology company. The next year, the dMarc founders left Google amid culture clashes and a chilly reception to Google in the radio industry. Many radio stations feared that Google would turn their advertising business into a commodity. Some refused to do business with Google, while others offered Google only small slivers of their air time.

In April 2007, Clear Channel Radio, the largest radio station owner in America, agreed to let Google sell about 5 percent of its advertising space. The agreement included prime-time spots in major markets. Still, the program did not take off, as Google was not able to persuade a large number of its online advertisers to also advertise on radio.

“With the exception of Clear Channel, this is an insignificant event for radio stations,” said David Bank, an analyst with RBC Capital Markets. Mr. Bank added that even for Clear Channel, the deal fell short of expectations.

A Clear Channel spokeswoman said it was “disappointed that Google is ending the program.”

Google paid $102 million in cash for dMarc, but the agreement included additional payments of up to $1.1 billion based on the radio ads initiative achieving certain performance targets. Google declined to say whether it had made any additional payments. Still, the company invested heavily in the Audio Ads program and hired several prominent radio ad sales employees.

Google said it planned to sell the software that automates broadcast radio programming.

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