free html hit counter Google's Radio Play | John Battelle's Search Blog

Google's Radio Play

By - January 18, 2006

Dmarc

So why did they do it? And what about that huge earnout? More than a billion dollars? My God! How did that come about? (Besides, of course, dMarc’s extremely Googley “innovation through automation” tagline).

My guess is that this is an artifact of the deal. Here’s a totally speculative scenario. Either through direct intent or serendipity (ie someone says to a Googler: Hey, you guys should check out dMarc!) Google decides it wants to do to the radio market what AdWords has already done to online – and by extension, print. In other words, redefine it, make it more efficient, invert the model, all the stuff we already know. OK, fine. But Google knows exactly zip about radio advertising.

So Google approaches dMarc (or vice versa), and the meetings ensue. Visions are whiteboarded. My God! the two parties rhapsodize, we just might redefine the entire multi-billion dollar radio business!

Google goes into buyer mode. It makes a flat our acquisition offer. Maybe it was $100 million to start (that’s what the deal was for, setting aside the earnout), maybe it was for more or less. Doesn’t matter for this scenario.

What happened next is the interesting part. The folks at dMarc said, essentially, No. We’re not going to sell so cheap to Google, just because you’re Google. We have a great market position, great relationships, and the ability to leverage this company without your help, thank you very much.

Now, that’s not a response Google is used to hearing. Usually it’s more like the Keyhole response: “When Google called, I realized that I was being tapped into the great fraternity of High Holy Possibility, and I couldn’t refuse. After all, Google has the resources and market position to make my wildest dreams for (insert business here) come true.”

But the guys from dMarc didn’t see it that way. Sure, they saw the upside of plugging into Google’s infrastructure and ad network. But they also knew they could shop this deal to Yahoo, or MSFT, or AOL, or even go it alone. So they had leverage to capture the direct upside that dMarc might represent in the form of a major payout. (And, of course, when Google bought Keyhole, or other companies in the past, they could say that the options which came with the deal were going to be worth a hell of a lot. But convincing someone that your stock is going from 465 to 500 or 600 is more of a stretch….)

Voila, Google’s second major business development deal for which they had to compete (first, of course, was AOL). Once again, signs of a maturing business.


Related Posts Plugin for WordPress, Blogger...

6 thoughts on “Google's Radio Play

  1. cmac says:

    Having met Chad when he was raising $ for dMarc (before the merger Scott Studio merger), your description sounds plausible; confident guy with plenty of $ in the bank from the AdForce acquisition.

  2. Of course one important factor is not being discussed – if dMarc did NOT join Google, Google could develop its own platform – or approach another innovative company and further invest in and develop their software…
    .
    The bottom line is, Google NOW has access to the brightest minds from all over the world –
    IT may not be necessary for them to reinvent the wheel,
    but- :LOL -if they have to, they can …(and maybe do it better)

  3. Steve Flinn says:

    Wonder how much IP due diligence they have done on the logical conclusions of this (and the print) deals? See, for example, pages 81-84 of the following:

    http://v3.espacenet.com/origdoc?DB=EPODOC&IDX=WO2005116852&F=0&QPN=WO2005116852

  4. Bruce Braun says:

    For those of us who grew up in the Radio business, Google presents a real puzzlement with Dmarc. What Google has accomplished in online is really a unique phenomenon without any strong or direct connection to what we call traditional media.

    The ownership of the vast majority of radio stations in this country is concentrated amongst six companies, Notably Clear Channel and Infinity (now CBS Radio again!). Most importantly, these companies control the majority of listenership and ad revenue in the top 100 markets! Does Google really think these group owners are going to allow Google to muscle in on their turf? If they are thinking that way, I predict a “come to Jesus” experience for Google very soon.

    DMarc, according to their site is a barter shop that sells remnant inventory. They tout generating revenue from all the unsold inventory on a station after the logs are closed each day. In turn, they will help a station lease equipment via bartering of station inventory.

    Does anyone really think CBS or Clear Channel need to do barter deals to pay off equipment leases? Maybe stations in Moosebreath, WY type markets but not anyone in the top 150 markets.

    What I think Google does not understand, is that the Clear Channels of the world beat the crap out of their station sales managers to make sure that EVERY spot is sold every day, 24/7/365 at top rates. Everything in radio sales management is about yield and maximizing it. Moreover, the radio station wants 100% of the revenue at maximum rates. Clear Channel and CBS did not achieve their success by brokering their inventory or bartering it. The only times stations entertain barter is if the market tanks. so barter is a down economy segment. Last I looked, the economy is doing very well.

    This DMarc deal is what Google print was trying to do…buying a remnant page and then chopping it up into smaller ads for the ad budget challenged businesses. People, Forbes, or Sports Illustrated do not play that game and never will. Funny, we don’t hear much about Google print, probably because it is on its ass.

    I wonder if the Googlers asked for a list of DMarc client stations and the spreadsheets showing the days and times all this “great” inventory actually ran. I’m betting small to medium market stations with low ratings and a ton over overnights are the rule. WCBS in NYC is probably not on the DMarc station list!

    When the accounting rules and IRS regs changed in the 1970’s requiring barter or trade deals to be treated the same way as cash sales were, barter became very scarce. Grossing up the values on both sides of a barter deal (merchandise, services and station inventory) became a boat anchor to the station’s bottom line. It was funny money versus compared to selling your inventory for just plain cash. BTW, I really miss all the old restaurant, hotel, and airline trade deals!

    This part of Radio history is not going to repeat itself, no matter what visions of the future Google may have.

  5. Jim Kerr says:

    Just read Bruce’s comments, and I think he really has nailed the essence of the deal. I wrote about this, as well (www.pollackmediagroup.net). It’s about the only play that makes sense at this point.

    I do think there are more possibilities with the major broadcast companies than Bruce is willing to accede. The radio business is struggling right now, and if this is the opening that brings in some additional revenue from non-traditional sources, the inventory may be there. It’s a risk, however.

  6. SM says:

    Hi, reading your comments I was wondering if anyone knows how I could contact DMarc and Google for information on getting Google Radio in the United Kingdom.