• by Erik Sass  @eriksass1, February 9, 2007

Chad and Ryan Steelberg, the founders of an automated radio ad placement company purchased by Google in January 2006, have left the company.

The brothers resigned amid reports of growing tension between dMarc, the company they founded, and Google over differing approaches to radio ad sales. There was also said to be tension over the limited remuneration dMarc could expect under the performance-based terms of its original deal with Google.

A Google spokesman confirmed the departures, adding that the company intends to continue testing radio ads despite the exits. "Google is committed to the audio business. We will continue to gather feedback during the Audio Ads beta test, and are happy with the progress to date," he said in an e-mail to OnlineMediaDaily.

Google bought dMarc for $102 million in cash plus the possibility of further payouts totaling up to $1.13 billion, if certain revenue targets were met. But last week, Valleywag.com, a blog covering Silicon Valley businesses, reported that a source close to dMarc said management and investors were unlikely to get more than $200 million under the terms of the deal.

While Google started using dMarc to test radio ad sales last year, the initiative faced some obstacles. First, dMarc is affiliated with only around 700 stations--too few to provide radio ad inventory on the scale needed to achieve high revenue targets. Second, before the Google purchase dMarc mostly trafficked in remaindered ad inventory--unsold air time that is low-value by definition. Google has struggled to ramp up both the quantity and quality of inventory available through dMarc, with limited success. Although Google is rumored to be in talks with CBS Radio to acquire over $1 billion in premium ad inventory, so far nothing has come of the reported discussions.

Finally, the two companies apparently differed over the need for a "human touch" in the sales process. Although dMarc was a pioneer in automated radio ad sales, the company still employed human beings to explain the dMarc system to prospective customers and tutor those who signed up. As Google began integrating dMarc's system into Google AdWords, it pushed to limit the number of product reps. DMarc executives in turn blamed this policy for their sluggish revenue results.

Despite the rocky year with dMarc, Google remains intent on penetrating the offline or "traditional media" ad business. Over the last two years, it has experimented with selling newspaper and magazine ads--but these have been limited beta forays, and Google is circumspect about their results. Google's Vice President of Ad Sales, Tim Armstrong, has also indicated the company is interested in TV ad sales. Significantly, dMarc's digital ad placement system can also be used in TV.