For one thing, the rollout of HD (high-definition terrestrial digital) radio is widely agreed to promise a near-perfect medium for Google as it enters the radio pool. Digital radio is an attractive medium for Google because it allows multi-casting of different niche music and entertainment genres, which appeal to various sub-demographics (e.g., country in NYC). Given Google's stated goal of linking its 400,000 advertisers more effectively to local radio ad markets, the geographic and market specificity of digital radio makes it an obvious value-multiplier. Digital radio also promises text display, ad rewind, and TiVo-like record functions.
Gregg Lindahl, Vice President of Cox Radio Interactive, speculated that "they're not only thinking about terrestrial spot markets, but a new inventory of text displays that are going to be available on HD-equipped radios." Describing Cox's experience marrying radio airplay to its Web presence, Lindahl explained: "On our Web sites we have a featured advertisers listing where our advertisers can receive a featured text display. That's extensible to HD and RDBS-enabled radios, and as HD radio penetration expands, that tier of inventory is going to become bigger and bigger."
Chad Steelberg, CEO of dMarc, confirmed that HD Ibiquity--the company driving penetration of terrestrial digital radio--was a "longtime partner" of dMarc, which already handles all advertising sales through online interfaces. Presumably, Google will cultivate that relationship further.
For all the optimism surrounding this happy confluence of online and radio engineering, however, other radio ad execs took a "wait-and-see" attitude. Dave Newmark of Bid4Spots, an online radio ad sales agency that uses a just-in-time reverse-auction model, expressed skepticism that Google's traditional auction model would succeed in the face of new models that drive prices down.
"The Google model of bidding the price up has not worked in the past for radio," Newmark recalled. "Advertisers don't really want to bid something up, so there's no motivation on their part. By contrast, "A reverse-auction model has one buyer, the advertiser, for multiple sellers--the stations--who bid the price down," Newmark explained. "The reverse-auction model works so well because at this point radio stations have nothing to lose by lowering their rates dramatically. As an entity that is a single seller with multiple buyers, however, Google is never going to be able to offer that kind of market-driven efficiency."
Newmark was also dubious about the suitability of radio as a medium for many of the businesses in Google's 400,000-strong ad stable. "I imagine these include a lot of smaller businesses--mom and pop operations if you will--and in our experience, that's not where most of the dollars come from in auctions. Frankly, they tend to flail around and fail for reasons unrelated to radio as an advertising medium, and more to do with their approach to advertising period."
Nonetheless, Newmark put his finger on the anxiety caused by Google's move within the businesses most directly in the search giant's path: "The big unknown is how the media agencies who control most of the dollars and the radio station management will respond to this initiative. Essentially, what's done is to cut out the radio sales management and media buying industries, but I think most people still agree you need that human element to direct media intelligently."