Google sells radio advertising business as part of plan to shed underperforming operations

Wednesday, August 5, 2009

Google sells underperforming radio ad business

SAN FRANCISCO — Google Inc. has found a buyer for a radio advertising business it has abandoned as part of efforts to cut costs and jettison underperforming operations.

WideOrbit Inc., a privately held company that makes software for the broadcast TV and radio industries, said Wednesday it has agreed to buy Google’s technology for automating radio ad placement. The San Francisco-based company did not disclose financial details. It will inherit 3,600 customers and an undisclosed number of employees.

Meanwhile, Google said it is buying On2 Technologies Inc., a provider of digital video compression technology, giving the Internet search leader a way to cut costs for its popular video-sharing site YouTube.

Such compression is important given that YouTube users upload some 20 hours of footage per minute; by shrinking the files, YouTube needs to buy less bandwidth from Internet access providers.

The all-stock deal is valued at $106.5 million and is expected to close in the fourth quarter.

Google’s departure from the radio business, announced in February, was the latest retreat for the online search company from its 3-year-old foray into traditional media. The Mountain View, Calif., company discontinued a similar ad selling business for newspapers this year after disappointing returns on the investment.

It is still trying to sell television ads that are targeted to viewers’ individual interests. NBC Universal, Bloomberg TV and Hallmark Channel have been among the networks participating in the television ad service, which Google started in 2007.

Emboldened by its dominance of the Internet ad market, Google expanded into broadcast radio three years ago with the purchase of dMarc Broadcasting Inc. for more than $100 million. The company could have had to pay an additional $1.1 billion if certain financial targets had been hit, but the push into radio evidently didn’t pay off.

Instead of trying to place ads on broadcast radio, Google said it will try to deploy some of the technology for audio streamed on the Internet, while shedding the operation that automated the placing of ads on broadcast radio.

The dMarc technology creates an automated platform that lets advertisers more easily schedule and deliver ads over radio and keep track of when they air. On the broadcaster side, the dMarc technology automatically schedules and places such advertising, helping stations minimize costs.

Google’s inability to diversify has left the company dependent on Internet advertising, which accounted for virtually all of its $21.8 billion in revenue last year. Even so, the company remains well positioned to grow for years to come because advertisers are expected to steadily increase their online spending to connect with customers migrating to the Internet from print publications, radio and TV.

June 4, 2010: 4:46 pm

You lost me, buddy. I mean, I suppose I get what youre saying. I understand what you are saying, but you just seem to have forgotten that there are some other people in the world who view this issue for what it really is and may not agree with you. You may be turning away alot of people who might have been fans of your blog.

August 6, 2009: 1:49 pm

ON2 and Youtube will be googles biggest strength in cominf years … especially after MS and Yahoo deal.

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