What The Google / dMarc 'Marriage' Means For Radio (02/27/06)
The news took virtually everyone in the radio industry by surprise last month (Jan. 17) when Internet giant Google announced it was acquiring Newport, CA-based dMarc for $102 million - a deal that actually could top $1.2 billion, if performance targets are met.
According to a corporate statement released at the time, Google was interested in dMarc because it “connects advertisers directly to radio stations through its automated advertising platform.” This platform “simplifies the sales process, scheduling, delivery, and reporting of radio advertising, enabling advertisers to more efficiently purchase and track their campaigns. For broadcasters, dMarc's technology automatically schedules and places advertising, helping to increase revenue and decrease the costs associated with processing advertisements.”
“Any time we evaluate a company, we look at a few core areas,” says Patrick Keane, head of advertising sales strategy at Google. “One is technology, another is people, and a third is the customer base. We found that dMarc had a great combination of all three. We also saw how dMarc services its customers and the radio marketplace, and decided they complement our vision of advertising. Their Ad Force system is highly scalable, relevant, and accountable, and provides a complementary vision of how to service and advertise in the marketplace.”
“We have been passionate about the radio space for almost 10 years now, when we first started our Internet company, Ad Force,” says dMarc President Ryan Steelberg. “One of our goals has been to bring efficiency, automation, and accountability to the radio space. When we closed on the acquisition of Scott Studios and Maestro, we felt that we really started gaining traction and making progress in the total advertising sale cycle. We have been focusing on this for three years, and this is a state of vision and strategy that is shared by our soon-to-be new parent, Google.”
Describing the dMarc-Google merger as a marriage, Steelberg says that the union “makes a lot of sense, because we share a vision of what we are trying to do to the advertising space and bring radio's level of accountability up to par with other media. With the inventory that we have, and several hundred client radio stations, there's an opportunity down the road to open up that inventory to Google. That's exciting not only for the advertiser, who will hopefully get a more consolidated yield, but it will be a huge win for the radio space, because there is a lot of synergy between a web user and a radio listener. Hopefully, we can drive revenue and increase the entire pool of the radio.”
Ryan and his brother Chad started dMarc in 2002, after successfully founding Ad Force in the 1990s. As the parent company of Scott Studios and Computer Concepts, dMarc boasts the largest installed customer base for radio automation and digital systems, spanning thousands of stations across all markets and formats. Computer Concepts, through its Maestro product line, is widely considered one of the radio industry's most popular digital audio systems vendors. Google, of course, is the most widely used Internet search engine in the world, with a market cap exceeding $100 billion.
Shortly after the dMarc acquisition was announced, Radio Ink sat down with Keane and Steelberg to get a sense of what this “merger” really means to both companies, as well as to advertisers, customers, and the overall position of the radio industry in the new media landscape.
INK: In the press release that was issued the day of the announcement, dMarc was described as “a digital solutions provider for the radio broadcast industry.” What exactly does that mean to your existing radio clients, and to Google?
Ryan Steelberg: Two important points. First, we intend to maintain, build, and grow our studio automation company. We are committed to taking care of our several thousand customers who use Maestro to run their digital systems and do the automation platforms. We kept that message consistent when dMarc bought Scott Studios and Computer Concepts, and we want to make sure that we still have the best product out there.
Our vision is to increase the positive visibility of radio to the advertising world on a definable matrix and accountability - meaning that they know when their schedule is booked, when it is supposed to play, and when it does play, thereby adding a whole level of accountability and dynamics around a campaign. Then, if the campaign is not working, they can change it on a market-by-market or regional basis. This flexibility and management side of radio advertising is critical now for larger advertisers to ensure they maximize their return on investment, so that if a certain commercial is not working effectively or the overall campaign and the message are wrong, they have the ability to make modifications to it.
And the benefit to Google?
RS: This dovetails nicely into what Google has perfected in the advertising world, where you can place a very large buy and make changes to it quickly, in near-real time. By providing tools that produce this level of accountability and flexibility, radio advertising can be made more relevant - and hopefully increase the entire pool of radio advertising.
Not long after this acquisition was announced, some observers questioned whether the merger might obviate the need for media rep companies. Will there still be a viable place for rep firms in a cross-platform media world?
RS: Technology can always bring efficiency to a process. Having said that, the process of buying radio advertisements is an established industry, and companies like Katz and Interep fill a significant niche. A lot of advertisers want that personal touch and feel to their campaigns. Again, our partnership with Google will help grow this space overall, including crossing the threshold to the new HD Radio. There is room for all of us, and our partnership is consistent with Google's march on other media to help increase the overall pool.
What about rep firms in the Internet or streaming space? Are they at risk?
RS: There are still reps that are thriving in the Internet space. I believe there will be certain niches and roles for all these constituencies to service their respected advertising clients.
Patrick, what does Google see in dMarc's product and technology that makes it valuable for what the consumer world perceives as a web-based search company? What synergies do you see?
Patrick Keane: I should point out that we are significantly more than just a search company. We are a company that delivers accountable solutions for advertisers across all media, including newspapers and magazines, giving our clients a real level of performance, accountability, and scale. That's similar to how we view dMarc's space. We envision a future Ad Force product that will incorporate not only some elements of print, as it does today, but also radio. That will take time as we work through some product integration, but it is an ultimate vision for what this partnership will look like over time. To the lay world, Google does look like a search company, but more broadly defined we are in the information business. We organize the world's information and make it accessible to users. Today, that looks mostly like web content, but increasingly there will be radio content, streaming content, video content, etc.
Do you envision a time when you will be creating audio content yourself, or is Google primarily using content that exists and providing it in an integrative way?
PK: Google does not see itself in the business of creating content. Instead, we want to make content easy for all users - businesses and consumers - to access information.
What is your planning with dMarc? Are you looking to create a cross-platform selling system that ties national advertisers into a number of media in order to reach a more targeted audience?
PK: It's hard to say what Google will look like in the future. We want to give advertisers choice. Google is serious about a democratization of access to information, as well as a democratization of advertising. In the past, it has been challenging for small advertisers to get exposure to a massive radio audience, and for big advertisers to get access to small radio stations. With dMarc's technology, we envision deep integration across our products and theirs.
In the past few years, national radio ad dollars have been shrinking, especially as new media ventures have emerged and media buyers are looking for greater accountability. What do you view as radio's challenge in that exodus of dollars from the advertising pie?
PK: With Google's automated buying platform, national advertising should stabilize. We're hopeful that we can grow some of those dollars back into radio by making it more accountable and efficient. With the web, advertisers now have a broad platform that no longer restricts them to marketing in their respective communities or regions where they have a retail outlet. This presents a great opportunity for a national advertiser on the radio to monitor their campaigns and evaluate their return on investment in real time. It is difficult for radio and other media to do an apples-to-apples ROI comparison with the web on a national platform. There is a concerted effort by all constituents in the radio space to increase radio's performance, to make it more attractive and competitive against these other new forms of media, which do provide these tools. We view Google as an important piece of that equation, to help create the tool sets that will give radio this accountability and efficiency.
Is Google interested in the local advertiser, or primarily those national accounts that may carry more dollars?
PK: We are not eliminating any type of advertiser, whether they are showing up at the Google platform or online or on national radio. That said, the majority of our clients that we're focused on for dMarc are on a national basis. Obviously, if we are going to service Google's advertising in the future, dMarc does have a large stable of local advertisers. With these newer tools and efficiencies, we can service smaller and independent advertisers very efficiently, compared to traditional models. We feel there is great potential to grow national dollars as well as local.
Radio has gotten a bum rap for being an old medium that is dealing with competition from iPod, cell phones, and WiFi. Meanwhile, Google is a new media company that is loved by Wall Street and Madison Avenue. What does Google see in the radio industry that many media buyers seem to be ignoring?
PK: Certain behaviors will never be replaced. The Internet has been seen as a medium that cannibalizes newspapers, magazines, television, and radio. But people will always need to be in a vehicle, and I do not think the Internet will replace radio. We do not think radio is an antiquated media channel, despite some challenges in the greater marketplace right now.
Since the first days of the Internet boom, we've heard about converging media. Five or 10 years down the road, do you think radio will exist as it does now, or will there be more media options in that receiver in your car or your home?
PK: I don't want to “crystal-ball” radio too much, but I can try to “crystal-ball” media in general. Fragmentation will continue. Users will have more control over all their experiences via radio, television, newspaper, etc. People will become their own media networks. The way people make considerations to purchase goods and services is far different today than it was even five or six years ago. The combined media of the future will be highly targeted and highly segmented.
RS: I agree. We're turning to a more fragmented world for media users, and whether that is broadcast or on-demand or consumer-driven, there will be a battle among mobile media, including radio. Everything will be web-centric. This merger between Google and dMarc was done to provide solutions to help, not slow down, this progress. We want to provide a view across these holistic fragmented mediums so we can continue to grow the space without slowing down the ad spend, because advertisers can consolidate a campaign across different segments.
Of course, many radio broadcasters still believe their core business is just selling spots. How does what you're talking about fly in the face of traditional, local radio broadcasting?
PK: This does not change the face of radio at all. Radio inherently prides itself on being the ultimate interactive, local medium. People need to realize this is a great opportunity for radio. With the HD2 formats, auxiliary channels, and streaming opportunities, there is more fragmentation, which allows us to get closer to the consumer by not only delivering the relevant programming, but the relevant advertising in marketability and accountability. That will make the experience even richer for today's radio listeners.
What is radio's greatest challenge in growing ad revenues more quickly than the single-digit growth we have seen the past few years? Can the Google and dMarc merger move that needle more quickly?
PK: Many factors can change the rate of ad spend, but a few of them are the operational systems of managing and accounting for advertising dollars. One of the million great things about Google is their vision and approach to scale. We want to make sure that we service the entire advertising spectrum, and that includes smaller, local, direct-response advertisers all the way up to national agencies. We have to make sure that we can facilitate those national buyers and work with them, no matter what kind of internal management system they're using. We have to make sure that, once the demand is there, we can quickly expedite that buy-sell process to ensure that dollars can flow through the system.
RS: It is the medium's job to educate the advertisers and help them build their media plans. We have to recognize that, in some cases, other media might work better than radio for a specific product. If the systems are in place to create the reports and do an apples-to-apples comparison of radio vs. the web or television, we can analyze that data and quickly get back to the advertiser with results. The faster we can do that, working closely with the advertising client, the faster we can grow the radio space. I am not going to make predictions on the growth of the overall radio ad spend, but I think these are all positive elements that should increase it.
What do you see as the number one challenge facing the radio business today, and how can we find a solution?
RS: You can answer that from an advertiser's perspective or from a consumer's perspective. More than anything, radio has a growth plan and a future with digital HD or online streaming. But the industry must be able to work together as a group to affect that change, and do it in an expeditious manner. Radio's leaders need to recognize these new technologies as future growth opportunities, and cooperate as a group. Radio people must embrace entrepreneurship, collaboration, and communication in order to drive change within the industry.
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