• by Erik Sass  @eriksass1, June 7, 2007

Two online giants with little experience in media sales are diving headfirst into radio ad sales through partnerships with industry players.

Google, the king of search marketing, was the first to dabble in radio ad sales with its acquisition of Los Angeles-based dMarc, a firm specializing in the automated sale and placement of ads through an online interface. But Google now faces competition from eBay, which on Wednesday announced it had partnered with Bid4Spots (also in L.A.) to provide a similar service--albeit using a rather different business model: the eBay Media Marketplace for Radio.

In the eBay system, as with Google-dMarc, most stations will likely stick to selling remnant inventory--less desirable air time that remains unsold when a radio station's sales team finishes its work. That's out of a fear of commoditization or undercutting their own staffs.

Google has worked to transform dMarc from a service that dealt mostly in remnant inventory to a comprehensive automated ad placement system, dealing in both remnant and "premium" inventory, including desirable commuter drive-time. However, Google has struggled to obtain a sufficient amount of premium inventory to pique the interest of established advertisers.

Google closed the gap somewhat in early April through a deal with radio giant Clear Channel, which gave it access to less than 5% of Clear Channel's inventory--both premium and remnant. But the deal was probably an expensive way to prime the pump. Although exact terms weren't disclosed, Clear Channel assured its investors they were very favorable to the company--implying that Google shouldered most or all of the risk.

This brings up a key difference in the sales process used by the two companies, related to the nature of the inventory for sale.

Because it was founded with the explicit goal of selling remnant inventory, Bid4Spots uses a reverse auction model, in which multiple stations compete to unload leftover air time by bidding their prices lower. By contrast, Google's dMarc service uses a traditional single-seller/multiple-buyer auction model that drives prices up. While such a system might work for premium inventory, advertisers are hesitant to bid up the price of remnant inventory--which is, by definition, leftover.

By sticking to remnant inventory, eBay and Bid4Spots also have an easier time persuading radio stations to participate in their system. To date, eBay and Bid4Spots have signed up about 2,300 radio stations around the country, versus somewhere between 700-1,000 stations for Google-dMarc. Clear Channel Radio is also participating in the eBay-Bid4Spots system, which covers the top 300 radio markets in the country.