• by Erik Sass  @eriksass1, January 18, 2006

Recently, online search giant Google has been making moves on the traditional media world, cutting deals to broker print media space in magazines and newspapers, and recruiting experienced Madison Avenue media buyers. On Tuesday it plunged in feet first--acquiring dMarc, a radio ad services company that specializes in media buying and sophisticated tracking and accountability systems, in a deal worth up to $1.136 billion over the next three years. The deal comes at a time when big agency executives have been expressing angst and confusion over Google's ultimate goals.

But the move is also consistent with Google's stated mission of organizing the world's information and utilizing superior technology to do it, whether it is online or off-line. And radio would seem to be a logical place to begin that mission on Madison Avenue. According to a status report released on Friday by the American Association of Advertising Agencies on so-called "eBiz for media" solutions being developed by the major media, radio is tied with out-of-home, network TV, and--ironically--the Internet as the least advanced in electronic media buying capabilities.

That's something dMarc specializes in. The deal also is intended to help extend the reach of Google's AdWords advertisers off-line into radio, complementing the ongoing print media test Google has been conducting since last year. Recently, Google executives told MediaDailyNews that program was entering "phase two," but declined to provide details.

"For us the deal really came down to how it fits into our product portfolio," Josh McFarland, a business product manager at Google, said of the dMarc deal. "Basically, the goal is to extend the simplicity and accountability of advertising within online media to other forms of media--and radio especially stands to benefit here."

Reactions on Madison Avenue were muted, but cautiously optimistic. "I think it's terrific," said Steve Farella, president of TargetCast tcm, a media strategy firm with a significant radio media buying business. "Radio is a chronically under-marketed advertising vehicle for us because it really needs to improve its accountability. Google is all about accountability; the minute those guys get into that company, they're going to start setting up metrics for everything."

At a time when radio faces ever-greater skepticism about Arbitron's archaic diary ratings system, the appeal of real-time, reliable metrics is self-evident. DMarc already has a radio ad reporting service, boasting "pre-defined" and "customized" networks to deliver precise demographics, and promises data on "listener response in real time"--but the company clearly hopes Google can kick the operation into warp speed.

Wall Street's reaction was benign to the major radio industry stocks. Shares for radio giant Clear Channel Communications, radio sales rep Interep, and radio ratings firm Arbitron were essentially unchanged. But some investors believe Google's move could be transformational for the radio industry. "Who would have thought [Google] would have done radio a favor," screen name user echotoall posted on Yahoo! Finance's message boards Tuesday morning. "Cost of selling ad space just went down big time. Google will push dMarc hard, and if radio companies are smart they will accept this."

Google purchased dMarc for $102 million in cash and up to $1.136 billion in contingent payments tied to measures including product integration, net revenue, and ad inventory targets.

"We already have a system whereby advertisers can access a direct online interface, allowing them to more efficiently purchase and track their online campaigns," explained dMarc CEO Chad Steelberg. The system offers "automated ad insertion and real-time tracking of ad play." Nonetheless, Steelberg recognized that Google offers "an engineering team, the sales capabilities, the advertising customers, and the measurement capabilities we felt we need to really accelerate our vision."

However, when asked what Google's new approach to radio ratings might entail, McFarland was close-mouthed: "We aren't talking about new products from this partnership right now, but let me put it this way--you can certainly expect to see some innovative new metrics."

Farella speculated: "Electronic measurement will be powered by Google's financing, so now we'll have minute-by-minute audience figures for radio, instead of day-to-day or even week-to-week results. The metrics we're using today are so behind it's laughable."

One possible technology is Arbitron's Portable People Meter (PPM), much in the news recently following its adoption by major media agencies including Interpublic, Carat, and WPP. In any event, McFarland issued reassuring words for companies like Arbitron: "We think [measurement] is something that third parties will handle quite well in the future. We're happy to leave that to somebody else."

Steelberg also forecasted future cooperation with HD Ibiquity, which is now rolling out digital radio (capable of multi-casting extra channels targeting niche markets over a single bandwidth). "We've been long-time partners with HD Ibiquity and we're exploring in our product roadmap additional ways for us to take advantage of those broadcasting capabilities."

For example, again according to Farella, intelligent engineering could make radio a direct-response medium--saving it from irrelevance and slow decay. "Last year, radio had the poorest performance of any of the measured media," Farella charged, "but I think the digital capability of this huge analog business is an attractive point for Google. Radio can play a role in the direct response business, and that's a big untapped market."