Google's Radio Gaffe Reveals Their Vulnerability

Google's decision to quit radio after investing north of $100 million and 3 years of effort reveals a great deal about the organization and its vulnerabilities. Keep in mind that Google isn't half as benign as it wants you to believe. They didn't become a colossus by being everyone's BFF.

In this case they started out with a good strategic idea -- marry their price-bid auction technology to an existing radio distribution tool and then disinter-mediate media-buying firms, bring down prices and dominate the $19 billion radio advertising market. But as Jessica Vascellaro documented in her comprehensive Wall Street Journal article on May 12th, getting from a big idea to an agile execution wasn't in the cards.

Google purchased dMarc Broadscasting in 2006 and figured it would roll-up into their overall strategy to apply their auction-bid tools systematically to other media markets. They would amortize the R&D costs of the technology, slaughter the existing players in those markets and become the buying conduit of choice across online and offline media. After all, if you're Google you might as well thing big -- really big. 

They got some initial traction and engaged with some of the leading radio firms like Emmis, Clear Channel, Saga and Greater Media. But they underestimated the power of inertia and conventional wisdom in the radio business and basically ignored the concerns and profits of the companies whose inventory they sought to sell.

So what do does this reveal for those of us eager to handicap Google's current and future state?

1. Google is a large hungry bureaucracy. With shifting priorities and plenty of cash to burn on not-so-hot executions, they can afford to try and fail where others can't. They skimped on the due diligence in vetting dMarc's owners as partners. They didn't talk to many radio guys at the outset and they didn't take the time to listen. But in the end flushing $100 million is just a rounding error for Google which allows them to retreat without feeling the pain and probably without absorbing the lessons.

2. Google believes its own press. The bias toward doing it their way, their hubris about how things should be engineered and their complete unwillingness to listen to willing allies, adopt to market norms and nuances or sell the way buyers buy set them up for failure. The radio ad market was a de facto auction long before they showed up, but they refused to see it. This kind of "we know better" attitude is not unique in Silicon Valley or among high tech giants. But it suggests that in some cases they can't get out of their own mindset or out of their own way.

3. Technology Uber Alles. They built and bought the component parts but they could get them to work together nor could they measure and report on sell-thru or the impact of the ads. Their belief in technology as the universal cure blinded them to the marketplace realities and deafened them to course corrections that could have produced an alternative outcome. 

Comments

[Engago Team]

Google is vulnerable.
Google has proved to be a one trick pony.