• by Erik Sass  @eriksass1, February 12, 2009

As expected, Google is abandoning its ambitious scheme to sell radio ads via an automated platform, pulling the plug after nearly three years with little to show for the foray into the oldest broadcast medium.

Google Audio will cease operations at the end of May, the company said Thursday. The announcement comes less than a month after Google said it was closing down its experimental business to sell print advertising online.

Google's sally into radio ad sales began in January 2006 with its purchase of dMarc, a company which developed an automated online platform for placing audio ads in broadcast airplay. Google bought the company from its founders, Chad and Ryan Steelberg, for $102 million plus the promise of performance-based payments worth up to $1.13 billion if the business took off. A year later, however, the Steelbergs left the company, reportedly dissatisfied with paltry performance-based returns.

Nonetheless, Google stuck with the service for another two years, maintaining that "Google is committed to the audio business." But the basic problems that led the Steelbergs to leave continued to plague the company. dMarc was affiliated with only around 700 stations--too few to provide radio ad inventory on the scale needed to achieve high revenue targets. In part, that's because it cost about $75,000 to install dMarc--making it a pricey system, especially during lean times for radio.

Google also faced another obstacle: dMarc mostly trafficked in remaindered ad inventory--the unsold air time left over at the end of the business day, which is considered less desirable by advertisers. Since it was selling remnant inventory, Google did not allow advertisers to choose specific stations where their ads would run. Station managers feared that identifying their station as the source of remnant inventory would undercut the price of their premium inventory.

Per the marketing materials Google sent to participating stations: "To protect your local [rate] card, we do not allow our advertisers to buy/target specific stations." This, in itself, was sufficient to deter most existing radio advertisers.

To get into a higher bracket, Google had to secure premium ad inventory, such as drive-time ad spots. But station managers had their own reasons to be leery about turning over premium inventory to Google. dMarc's digital system would begin selling inventory automatically at the end of every business day, with no oversight from station employees; managers didn't know which ads would be broadcast the next morning.

Although Google offered the option of reviewing and rejecting ads before they aired, the "just-in-time" nature of the service made this difficult in practice. In addition, stations in desirable markets employ sales teams to move their premium inventory, and station managers chafe at the idea of paying Google's commission on top of salaries (or agency fees), especially when they might be undercutting each other.

To jump-start the system, in April 2007, Google bought a chunk of premium radio air time from Clear Channel Radio, the nation's largest radio broadcaster, at terms that were reportedly very favorable to the latter. But no more was heard of this deal, including whether the inventory was sold and at what price.

Last month, Google said it would close its Print Ad business. During the course of the program, Google Print Ads had experimented with different kinds of direct response, including unique Web URLs and 2D barcodes that could be scanned with a mobile phone camera. The last print ads placed by the service will appear on February 28.