Google Struggles in Radio; Bid4Spots Gains Favor

Google’s ambitious effort to take its bidding system across media might be hitting a bump in radio. The company’s program started out fairly well when it bought dMarc (since renamed Google Audio Ads) for $102 million plus incentives in 2006. Since then, it must have been doing something right. It now claims affiliations with 1,600 FM and AM radio stations. DMarc only had 700 affiliates.

But Google Audio Ads has alienated some radio station owners by trying to force them to commit a percentage of a wide swath of inventory, said various station executives.

One owner complained that Google significantly cut his share of revenues “on the day that it made a deal with Clear Channel” for 5 percent of the radio station giant’s inventor. This included both premium inventory, such as drive time, and remnant inventory at off hours.

The Clear Channel deal made sense for Google at the time, since it provided enough desirable inventory to be taken seriously by quality advertisers. But it placed competing stations at a disadvantage.

By contrast, Bid4Spots has curried favor with its reverse auctions for unsold inventory held every Thursday, according to CEO Dave Newmark. The system is mostly utilized by national advertisers, which gain a broad reach at the local level.

To be sure, Bid4Spots doesn’t have the clout of a Google, and is less likely to be as persuasive in bringing as many new advertisers to radio, which isn’t an easy sell right now. Perhaps the stations need to be forced to give up some of their prime inventory. But results have been good, and the stations like it.

At this point, the auctions are grossing $100,000 to $200,000 every week. They have grossed an aggregated total of $8.5 million of auctions since the company’s founding in 2005.

Bid4Spots’ Newmark touts his reverse auction model as a win-win for radio stations. It is totally voluntary, there is no revenue share beyond normal agency commissions (15 percent), the spots generally come pre-produced, and the funds are pre-cleared.

Most importantly, the rates are sealed so that the stations are not competing against their own rate cards or revealing competitive information to other radio stations. If the stations can sell the spot at a higher rate, they can simply withdraw the auction. “This motivates them to drop their rates,” says Newmark. “When prices are this low, they must be sealed.”

The Bid4Spots system is especially appealing when compared with Google’s requirements for desirable inventory that could otherwise be sold at higher prices. If stations wanted to go that way, they wouldn’t go to the trouble of an unorthodox marketplace, says Newmark. That’s why previous “forward auction” models such as AdAuction.com failed (back in 2004).

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