October 11, 2007

Google Math: Buy $1,000 in Radio Ads, And We’ll Give You $2,000 Back

Erick Schonfeld

40 comments »

Here’s a good brain teaser for those famous Google job interviews: If you pay me $1,000, and I give you $2,000 back, how much profit does that leave me?

Unfortunately, this is not a hypothetical question. It’s an actual promotion for Google’s radio ad network, known as Google Audio. That’s right, Google is offering $2,000 to any advertiser who spends $1,000 on a Google Audio ad campaign. The $2,000 comes in the form of a credit on future ad campaigns, but part of it still comes out of Google’s pocket since it needs to pay the radio stations who will run the ads. It amounts to a “buy one, get two free” offer and is good through the end of the year.

This is but the latest piece of evidence that, while Google may be golden in online advertising, its forays into off-line advertising have yet to catch on. Google must be having a real hard time selling those radio ads to have to resort to such a blatant attempt to buy market share. It’s not the first time it’s tried such tactics either. Last year, in an effort to jumpstart Google Checkout, for instance, Google paid $10 for every $30 in sales that merchants directed through its PayPal competitor. I’m not sure how well that went. But last time I checked, PayPal was still around.

Just because Google has cash to burn doesn’t mean it should use that cash to try to buy market share. If it truly has a better way of buying and selling radio ads, advertisers and radio stations will quickly figure that out on their own. It is not a good sign when Google has to resort to paying customers to try out a new product.

Sphere It

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Comments

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Ronald Lewis

October 11th, 2007 at 9:34 pm

Good for those who are interested in radio advertising. Good for Google, too.
bob cobb

October 11th, 2007 at 9:40 pm

Google checkout is still offering the $10 off promotion. Just check out buy.com. Ive used that discount a ton of times
Spandana

October 11th, 2007 at 9:42 pm

the problem is that the secret sauce is missing in this whole radio/print product. adwords was on steroids due to relevancy. what’s it for radio and print?

nothing, except bundling. and if it in fact is bundling, how is it different from the monopolistic practices that microsoft used years ago..?
Jake

October 11th, 2007 at 9:46 pm

I normally don’t do this, but I have to call shenanigans on this post.

How long exactly have they been selling audio ads online? And how long did it take for everyone (and even my mom) to start buying “regular” ads on Google? Adwords is everywhere and even non-Internet savvy people know about it.

Big deal, they launched a new service that’s not really online (accept for the payment portion) and has no real-time way to measure effectiveness. This “buying marketshare” is exactly what they should do to gain eyeballs and traffic.

In the long run, you just wrote about an offer I had no idea about. Guess how many other people just read it
Ritu

October 11th, 2007 at 9:54 pm

I agree with your point Erick, There are something that you are good at and there are something that you should just, well, leave it alone. Google’s has become the largest search engine ever and they should be quite content with that.

Since their establishment in 1998 they have already had 44 or 45 ( not sure ) acquisitions, most of which have not worked very well for them. Also theie revenue for the year 2006 was 10 billion dollar something for a company that young, they should just be content and do what they good and leave some things for others to do as well.

My point, Google needs to slow down, remember they didn’t make a saying ” slow and steady wins the race ” for nothing
Wade

October 11th, 2007 at 9:56 pm

What part of the word “PROMOTION” don’t you get?
Faramarz

October 11th, 2007 at 10:15 pm

It doesn’t matter how much credit/refund they offer. On a grand scale Google is once again breaking new ground and thinking outside the box. No other radio ad management has dared to give such perk. By giving a thousand dollar credit, google is opening the door for a much wider market, the small business. I.e the bakery down the street. etc

All they need to do is grab attention, and they’ve done it superbly. Starting tomorrow Google will be calling the shots for the radio ad business.

Bravo!
TheHaHaPitchAndSwitch

October 11th, 2007 at 10:22 pm

Faramarz–Losing money is not breaking new ground, it’s loosing it. It’s a promotion, fine, but those who need the promotion just to place an ad are not the target audience, so your remarks are silly.

I’ve haven’t seen anything ground breaking out of Google since the days of BackRub. Perhaps Google should google for good ideas. Now that would be ground breaking…
Tony

October 11th, 2007 at 10:28 pm

Radio ads are/were a total mystery for the little guys.

Bravo to Google for creating a unique system that makes radio ads brain-dead accessible.
100rabh

October 11th, 2007 at 10:47 pm

Have you heard of advertisment. Well what google is doing is another way of doing it
Aaronontheweb (AjaxNinja)

October 11th, 2007 at 10:55 pm

Does it seem like Google is just throwing money at anything that moves?
Don Wilson

October 11th, 2007 at 11:06 pm

I believe that’s called Bubble Math.
shame on google

October 11th, 2007 at 11:18 pm

even google can act foolish
shekar

October 11th, 2007 at 11:32 pm

testing
Carlie Flossberg

October 11th, 2007 at 11:49 pm

This makes no sense. With their commitment to online advertising wouldn’t radio be going against their model? It’s not selling because no one listens to the radio anymore. $1000 doesn’t go very far - even $2000. I’d be interested in seeing the ROI, of a typical google advertiser, for $2000 in radio vs $1000 in online.
Saptarshi

October 11th, 2007 at 11:53 pm

I’m still wondering what Google is thinking… Either they r way too clever or foolish. I think Google has enough money to gamble and that’s good for the Casino because even if Google wins, its actually the Casino that always wins!!
Omar Ismail

October 12th, 2007 at 12:00 am

“If it truly has a better way of buying and selling radio ads, advertisers and radio stations will quickly figure that out on their own.” Come now this is a pretty tough sentence to swallow. I mean, the ONLY people who advertise are the ones that don’t have a good product/service? All of those iPod commercials and PCvsMac are done to disguise the horrible offerings that Apple gives?

Companies buy marketshare all the time. Acquisitions, promotions, advertising, etc. That’s one of the nice things about having a wad of cash, is that you can spend now to carve a space for yourself in the future.
Slappenstance

October 12th, 2007 at 12:05 am

Google is stretched way to think in my opinion. They are in as many markets as microsoft now with 1/10th the employees. They seem to have the strategy of going in a 100 different directions and see which one sticks. This will probably lead to all of those directions being subpar.

I’m not sure if the company even knows the hell its doing anymore. It has to focus better. Radio ads, video, gtalk, google checkout(why oh why.).

And talks about mobile and a second life clone makes things worse. Google needs marketing, support, maintainance on all these products and they don’t have it. These leads to the products becoming invisible.
Exclusive

October 12th, 2007 at 1:24 am

Thanks for sharing
sputnick

October 12th, 2007 at 2:55 am

It’s called dumping - selling something at less than what it takes to make the product - and if anti-dumping legislation extended to the domestic sphere, this would be illegal. If Google were, say, a Japanese company, there would be talk of trade sanctions and a case at the WTO.
Togi

October 12th, 2007 at 3:29 am

They can do what they want. Its not a bad idea and breaks the conventional advertising. The radio network will be profiting of this model as well, internet radio too???

Imagine the possibility of doing the same for Internet TV, placing your ads by featuring good quality video ads. The future holds vast potential.
Radnips

October 12th, 2007 at 4:08 am

I don’t understand how offering a $2,000 promotion makes the ads available to small businesses. You still need to pony up $1,000 to get the $2,000 credit, plus you need to spend money on creative to put together an ad - Google doesn’t help with that.

I think a better solution is internet radio advertising. There are companies that allow small businesses to create ads for free using online ad creation tools, run campaigns across major radio properties online and target based on location, demographics, etc. See TargetSpot, Ronning Lipset, Net Radio Sales and others for examples of this model; expect to see these companies and this market grow much more rapidly than Google Audio. Internet radio is where the future audience is, internet technology allows for search-type targeteing and the cost of creative is lower.

That’s the future, not Google Audio!
Steve Ballmer

October 12th, 2007 at 6:04 am

Gaggle ponsi scam!
It’s always been a scam, thank you mam.

http://fakesteveballmer.blogspot.com
Andrew Koyfman

October 12th, 2007 at 6:06 am

“If you pay me $1,000, and I give you $2,000 back, how much profit does that leave me?”

That question doesn’t make much sense since Google is giving out $2000 in producst, not in cash. The article never mentioned how much it costs Google to do the radio spot. If it only costs them $200 for a $1000 campaing, then they are still making a healthy profit, even with the $2000 cash back. (Costs: $200*3 = 600; Revenue: $1000; Net Profit: $400)

Now if they were giving you $2000 back in cash for every $1000 you spent, they’d be the most popular service in the world.
Voices

October 12th, 2007 at 6:13 am

Google is also chipping in $300 towards the production of the radio ad should the advertiser choose to use their Creative Ad Marketplace.
Permeate

October 12th, 2007 at 6:19 am

I think radio is an incredible waste of money. I was one of the beta testers for audio ads, and I found it to be a complete waste of money. I didn’t see much of a rise in traffic or sales and I spent more than $1,000 on spots in big markets such as LA and NY. I think Google is desparately looking for new clients because people aren’t seeing a good rate of return on this form of advertising anymore.
Dan

October 12th, 2007 at 6:48 am

They are doing the same thing for print.

I bet they will do the same for TV…plus, this is just a promotion…once people use it they might be more apt to use it again and again. I got print ads at a HUGE discount when I used it….and will again.
Jay

October 12th, 2007 at 7:04 am

Criticism of google? Whoa whoa whoa, now you’re crossing the line.
Permeate

October 12th, 2007 at 7:50 am

I heard Google was coming out with a new form of advertising where they paint your sales copy on girl’s titties.
Dan

October 12th, 2007 at 8:23 am

Buy 1k now and get 2k in credit for ads in Q1 of 08…

how is this a scam?
Pablo

October 12th, 2007 at 8:28 am

Google may be around forever and ever - but doesn’t it trouble anyone that a $200b company is basically relying on ONE sinlge product?
Rob Blatt

October 12th, 2007 at 9:27 am

Don’t forget the $300 credit towards the creation of your advertisement.
Fake Richard

October 12th, 2007 at 9:30 am

Good for those who are in radio advertising.

http://vidsonly.blogspot.com
Paul

October 12th, 2007 at 9:32 am

Ok. Here’s probably what’s really behind the promotion. About 18 months ago, Google acquired DMarc. DMarc provides radio stations with digital automation and broadcast equipment. A lot (if not all) of these deals are financed on a barter basis. That is, the stations trade a few minutes per hour to DMarc for the use of the equipment. It’s a win-win. Stations get new equipment and DMarc gets to broker ad time on those stations and pocket the proceeds.

Thus, Google/DMarc wants to sell every minute available to them…regardless of ad unit price. Because once that inventory passes…they never get it back. So we could say that the airtime is free to Google or at least heavily discounted. So why not introduce as many people to the medium as possible?

The only problem that I have experienced with Audio for Adwords is that it doesn’t allow you to purchase campaigns based on reach and frequency. These are the hallmarks of solid radio advertising.

What Audio for Adwords is more akin to is a PI model (Per Inquiry). Unfortunately, Google hasn’t built in a pay per action component yet. But I think they’re on their way. They’re currently providing advertisers with toll-free numbers to help measure campaign effectiveness. And I can see them eventually charging on a pay per call basis (perhaps even a pay per click - with a unique url being advertised).

Well with that said, I’m sure I’ve mentioned more than anyone really cared to know…but that’s it in a nutshell.
pamon

October 12th, 2007 at 6:28 pm

Only issue I see with radio advertising it when the consumer is in the car driving and hears a website advertised, how are they supposed to remember it for later. The office listener or student I can see going to the site, but if i’m driving an hear “abc.com”, will I remember it long enough to go there? Dunno….
matt

October 13th, 2007 at 10:20 am

Actually its buy one, get one free… not two free. Both are not free because you’ve paid for one.

With your logic, every time you buy one donut, its buy one, get one free. That’s a blissful life!

matt
Vishal

October 16th, 2007 at 8:12 am

Nothing wrong with this strategy. Its a promotion. They’re obviously still making money with it (as their cost may be as low as $200 for $1000 worth of ads) … and even if they are burning some, its acceptable. This is marketing and I completely fail to see why you mr arrington have negative comments about it. On the contrary - its a brilliant move, and you need some foresight to see why. Perhaps you didnt catch on mr A. Look deeper.