NEW YORK -(Dow Jones)- In Google Inc.'s (GOOG) latest foray into traditional advertising, the Internet giant will begin selling radio commercials on stations owned by Clear Channel Communications Inc. (CCU), the country's largest radio chain.
Under a multi-year partnership to be announced Monday, Clear Channel will set aside about 5% of the ad spots on more than 675 radio stations for Google to sell through its online-purchasing system.
The deal for the first time gives Google access to prime radio air time and popular major-market stations, marking an important step in Google's inroads into the $20 billion radio business. Beyond radio, the relationship also could be Google's most significant opportunity to date in its elusive efforts to extend online supremacy into traditional advertising markets.
For Clear Channel, the pact has the potential to tap thousands of Google's Internet ad partners who don't buy commercial airtime on radio. The relationship could be an important revenue source as traditional ad sales for over-the-air broadcasts stagnates amid competition for listener attention and marketing budgets.
The Google pact also adds a twist to Clear Channel's beleaguered private- equity buyout. The $19 billion sale is scheduled for a shareholder vote Thursday, giving Clear Channel investors just days to assess how the new relationship might affect the radio company's prospects.
Tens of thousands of advertisers already use Google's online-auction system to price, target and purchase ad sales across the Web, and the company has made no secret of its ambition to become a hub for advertising in newspapers, magazines, radio and television. Google last year started tests of ad sales on radio and in newspapers, and recently Google agreed to sell TV ad spots through satellite provider EchoStar Communications Corp. (DISH).
Early efforts have been mixed. Google has signed on prominent partners like the New York Times Co. (NYT) and has drawn new advertisers to existing media. Deals have been slow to deepen, however, as many media players remain unsure skeptical about Google's promises of driving up advertising rates and wary of a partner perceived to be eroding traditional media's foothold in advertising spending.
In one of Google's first offline targets, Google last December began a test program to create, target and sell radio ads using an automated-advertising platform. To supporters, Google has brought simplified ordering, lower costs and transparency to the arcane and clubby world of radio advertising.
So far, though, Google has been able to offer advertisers spots on roughly 900 of the 12,000 U.S. stations - too few to be a major player in radio sales. Most large radio companies, reluctant to undercut their own ad sales efforts or cede control over how advertising time is sold on their stations, also has given Google most "remnant" inventory, or commercial spots sold at the last minute at relatively low prices.
The deal with Clear Channel expands Google's push into radio. It nearly doubles the number of stations on which Google can sell ads, even as the radio giant is sheds about 450 of its current 1,100 radio stations. And, unlike Google's ongoing partnerships with radio chains such as Emmis Communications Corp. (EMMS), Clear Channel also has opened up ad slots at all times of day and across its stations in the country's biggest markets, including powerhouses such as KIIS-FM in Los Angeles and Z-100 in New York.
Drew Hilles, national director of audio sales for Google, acknowledged that media companies have been cautious about Google's "ambiguous" plans to spread into traditional advertising. He said, though, that the Mountain View, Calif., company wants to become a cherished supporter for media companies to draw more advertisers, and at the same time, provide Google's existing ad partners more venues to market their businesses. Hilles said he hopes eventually to open the Clear Channel partnership to Google's entire advertising base.
Clear Channel may be making a bigger leap than other radio companies, but it is still proceeding cautiously. The San Antonio company agreed to partner with Google only after several months of negotiations, and Clear Channel retains a broad measure of control over its ad sales. Google will focus primarily on advertisers who are new to radio, while Clear Channel's existing sales forces will maintain responsibility for the company's relationships with its most lucrative advertisers and complex ad packages.
Even with the tentative scope of the deal, John Hogan, president and chief executive of Clear Channel's radio operations, said he believes Google is key to broadening the advertiser base for radio, which should spur ad demand and in turn higher prices for commercials in an industry where ad rates largely have been stagnant.
"This is an opportunity to bring what we hope is a significant number of new advertisers to Clear Channel radio," Hogan said. "We feel we're putting the hottest sales organization in media today to work selling our radio stations."
Hogan is expected to join Google Chief Executive Eric Schmidt Monday at a National Association of Broadcasters conference to announce the partnership. The companies expect Google-brokered ad sales to start at the end of June.
Clear Channel and Google declined to detail financial terms of their relationship, including how they would split revenue from ads Google sells. Radio industry executives have said Google expects to keep half the revenue from its brokered radio ads, though Clear Channel likely received a more favorable split.
Once the program is running, advertisers will bid for 30-second commercial spots through Google's online ad-buying system, which will be made compatible with Clear Channel's advertising-sales technology. Bidders can design a commercial and then specify the time of day a commercial will air, the station format and part of the country where the ad will appear - all without a sales representative. Advertisers will be able to choose whether they want ads to air in New York or Cincinnati, for example, but won't be able to pick individual radio stations for their spots.
If the radio advertising sales prove successful, Clear Channel eventually could give Google a greater slice of its commercial inventory.
For Clear Channel, the Google deal could introduce new advertising revenue at a time when growth in the industry overall is flat or slow as a tide of entertainment and information options keep consumers from tuning into radio as much as they used to.
At Clear Channel, which derives roughly half its revenue from radio and the other half from billboard advertising, radio revenue grew 6% last year, outpacing the industry as the company cut back on the amount of commercial time to push up ad rates.
The drain on broadcasting revenue and the public market's dissatisfaction with the radio industry were reasons the San Antonio-based company agreed to a $19- billion buyout last November from Bain Capital Partners and Thomas H. Lee Partners L.P.
In recent months, key Clear Channel shareholders have derided the price of $ 37.60 a share as too low. For their part, the private-equity buyers have resisted raising the price because of concerns about the prospects of the radio industry.
It remains to be seen if the pact with Google can be a significant growth catalyst for Clear Channel's radio business, but the timing of the partnership could complicate the shareholder vote on the company's sale, which seems likely to be defeated at current terms. Hogan, though, said the Google deal was part of "business as usual" at the radio giant. "This is a partnership that has been in the work for a lot longer than the potential merger has been in the works," he said.
-By Shira Ovide, Dow Jones Newswires; 201-938-5287; shira.ovide@dowjones.com
Under a multi-year partnership to be announced Monday, Clear Channel will set aside about 5% of the ad spots on more than 675 radio stations for Google to sell through its online-purchasing system.
The deal for the first time gives Google access to prime radio air time and popular major-market stations, marking an important step in Google's inroads into the $20 billion radio business. Beyond radio, the relationship also could be Google's most significant opportunity to date in its elusive efforts to extend online supremacy into traditional advertising markets.
For Clear Channel, the pact has the potential to tap thousands of Google's Internet ad partners who don't buy commercial airtime on radio. The relationship could be an important revenue source as traditional ad sales for over-the-air broadcasts stagnates amid competition for listener attention and marketing budgets.
The Google pact also adds a twist to Clear Channel's beleaguered private- equity buyout. The $19 billion sale is scheduled for a shareholder vote Thursday, giving Clear Channel investors just days to assess how the new relationship might affect the radio company's prospects.
Tens of thousands of advertisers already use Google's online-auction system to price, target and purchase ad sales across the Web, and the company has made no secret of its ambition to become a hub for advertising in newspapers, magazines, radio and television. Google last year started tests of ad sales on radio and in newspapers, and recently Google agreed to sell TV ad spots through satellite provider EchoStar Communications Corp. (DISH).
Early efforts have been mixed. Google has signed on prominent partners like the New York Times Co. (NYT) and has drawn new advertisers to existing media. Deals have been slow to deepen, however, as many media players remain unsure skeptical about Google's promises of driving up advertising rates and wary of a partner perceived to be eroding traditional media's foothold in advertising spending.
In one of Google's first offline targets, Google last December began a test program to create, target and sell radio ads using an automated-advertising platform. To supporters, Google has brought simplified ordering, lower costs and transparency to the arcane and clubby world of radio advertising.
So far, though, Google has been able to offer advertisers spots on roughly 900 of the 12,000 U.S. stations - too few to be a major player in radio sales. Most large radio companies, reluctant to undercut their own ad sales efforts or cede control over how advertising time is sold on their stations, also has given Google most "remnant" inventory, or commercial spots sold at the last minute at relatively low prices.
The deal with Clear Channel expands Google's push into radio. It nearly doubles the number of stations on which Google can sell ads, even as the radio giant is sheds about 450 of its current 1,100 radio stations. And, unlike Google's ongoing partnerships with radio chains such as Emmis Communications Corp. (EMMS), Clear Channel also has opened up ad slots at all times of day and across its stations in the country's biggest markets, including powerhouses such as KIIS-FM in Los Angeles and Z-100 in New York.
Drew Hilles, national director of audio sales for Google, acknowledged that media companies have been cautious about Google's "ambiguous" plans to spread into traditional advertising. He said, though, that the Mountain View, Calif., company wants to become a cherished supporter for media companies to draw more advertisers, and at the same time, provide Google's existing ad partners more venues to market their businesses. Hilles said he hopes eventually to open the Clear Channel partnership to Google's entire advertising base.
Clear Channel may be making a bigger leap than other radio companies, but it is still proceeding cautiously. The San Antonio company agreed to partner with Google only after several months of negotiations, and Clear Channel retains a broad measure of control over its ad sales. Google will focus primarily on advertisers who are new to radio, while Clear Channel's existing sales forces will maintain responsibility for the company's relationships with its most lucrative advertisers and complex ad packages.
Even with the tentative scope of the deal, John Hogan, president and chief executive of Clear Channel's radio operations, said he believes Google is key to broadening the advertiser base for radio, which should spur ad demand and in turn higher prices for commercials in an industry where ad rates largely have been stagnant.
"This is an opportunity to bring what we hope is a significant number of new advertisers to Clear Channel radio," Hogan said. "We feel we're putting the hottest sales organization in media today to work selling our radio stations."
Hogan is expected to join Google Chief Executive Eric Schmidt Monday at a National Association of Broadcasters conference to announce the partnership. The companies expect Google-brokered ad sales to start at the end of June.
Clear Channel and Google declined to detail financial terms of their relationship, including how they would split revenue from ads Google sells. Radio industry executives have said Google expects to keep half the revenue from its brokered radio ads, though Clear Channel likely received a more favorable split.
Once the program is running, advertisers will bid for 30-second commercial spots through Google's online ad-buying system, which will be made compatible with Clear Channel's advertising-sales technology. Bidders can design a commercial and then specify the time of day a commercial will air, the station format and part of the country where the ad will appear - all without a sales representative. Advertisers will be able to choose whether they want ads to air in New York or Cincinnati, for example, but won't be able to pick individual radio stations for their spots.
If the radio advertising sales prove successful, Clear Channel eventually could give Google a greater slice of its commercial inventory.
For Clear Channel, the Google deal could introduce new advertising revenue at a time when growth in the industry overall is flat or slow as a tide of entertainment and information options keep consumers from tuning into radio as much as they used to.
At Clear Channel, which derives roughly half its revenue from radio and the other half from billboard advertising, radio revenue grew 6% last year, outpacing the industry as the company cut back on the amount of commercial time to push up ad rates.
The drain on broadcasting revenue and the public market's dissatisfaction with the radio industry were reasons the San Antonio-based company agreed to a $19- billion buyout last November from Bain Capital Partners and Thomas H. Lee Partners L.P.
In recent months, key Clear Channel shareholders have derided the price of $ 37.60 a share as too low. For their part, the private-equity buyers have resisted raising the price because of concerns about the prospects of the radio industry.
It remains to be seen if the pact with Google can be a significant growth catalyst for Clear Channel's radio business, but the timing of the partnership could complicate the shareholder vote on the company's sale, which seems likely to be defeated at current terms. Hogan, though, said the Google deal was part of "business as usual" at the radio giant. "This is a partnership that has been in the work for a lot longer than the potential merger has been in the works," he said.
-By Shira Ovide, Dow Jones Newswires; 201-938-5287; shira.ovide@dowjones.com
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