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Google's Deal With XM: What Does It Mean? 
By: Mr. Frog 2006-08-07 Googles not-so-secret plan to become the central clearinghouse for auction-based media became a reality on Wednesday, when it was announced that it will begin serving ads to XM Satellite Radio, a 7 million subscriber network.
As the press release notes, Google's technology automatically schedules and inserts advertising across XMs non-music commercial channels, helping to increase revenue with a wealth of new advertisers, while decreasing the costs previously associated with processing advertisements. The deal is great news for XM, which lost more than $200 million in the second quarter of 2006 (due to high customer acquisition costs), but whose advertising revenues have been growing markedly during the same period. By opening up its unbooked inventory to a wider circle of potential advertisers, XM stands likely to strengthen its revenues at very low incremental costs (one of the most attractive benefits of Googles system being that it eliminates manual tasks and human-mediated negotiation from the radio buying process). The deal is good news for Google too, because being able to add a new distribution channel to its popular Adwords ad platform will help it distinguish itself from its main competitors, Yahoo and MSN, each of which hopes to jump ahead of Google by providing advanced targeting capabilities designed to provide more value to advertisers. But the real beneficiaries will be Adwords marketers and consumers, because the combination of Adwords with Satellite Radio offers incredible possibilities for an entirely new species of smart advertising. Some of these possibilities were recently hinted at by Googles CEO at a conference of publishers in New York, when he alluded to a scenario in which a driver of a Satellite Radio and GPS-equipped car would be served with radio ads which automatically responded to the drivers location. Personalization in radio advertising can become a reality. Not only does XM know where you are, they know who you are. Your receiver is owed by and registered to you. Accomplishing this kind of thing seems very sci-fi, but whats perhaps more amazing is that the technology to achieve it has been with us for quite some time, and is a foundational element in both the world of Satellite Radio and of Cable TV. Because both of these media have the ability to know their customers in ways that broadcast media cant. Broadcast media have from their inception relied upon panel-based metering from vendors such as AC Neilsen and Arbitron using small, (hopefully) representative samplings of users to extrapolate audience size in order to set ad rates. But Cable TV and Satellite Radio networks dont have to rely on such mushy data to assign the value of a given advertising buy. These networks have intimate and highly granular data on their subscribers, which makes them inherently better equipped to support next-generation advertising systems. All the demographic and behavioral data that needs to be present to provide this marketplace is already present in each system: all thats needed is the software sophisticated enough to perform all the realtime mathematics to match the right ad with the right user at any given point in time or space. Much of the initial coverage of Googles plans for dMarc has focused on the notion that this new system is about booking remnant advertising for which the stations have been unable to find a buyer, but focusing on cost-cutting is only one half of the story. While its true that Googles system will be effective in terms of monetizing tough-to-sell media inventory, and will bring down the cost of managing and selling advertising by eliminating manual insertion orders and inefficient negotiations, its real value lies in making advertising " the targeted, intelligent kind " more valuable. This, not selling remnant inventory to the lowest bidder, is the multibillion dollar opportunity that Eric Schmidt alluded to in his talk in New York, and its where the whole advertising industry is going. Auction-media is so efficient and (when combined with targeting) so valuable for marketers that it clearly has the potential to completely transform the way media is bought, sold, and consumed. Of course, Google isnt the only search player working to meld smart ad-serving platforms with smart networks. As has been widely reported, technology provided by online auction powerhouse eBay is currently supporting an experimental ad exchange system created by a consortium of advertisers including Wal-Mart, HP, Microsoft, Lexus, and Philips. This pilot program, funded with $50 million raised under the aegis of the Association of National Advertisers and the American Association of Advertising Agencies, launched a site last week at admarketpilot.com and reportedly plans to have its service live in early 2007. Are you excited by the ability to add radio campaigns to Adwords? You wont have to wait long (Google plans to add this functionality to the Adwords control panel by the 4th quarter of 2006). Before jumping into the wonderful world of radio advertising, make sure that youve got all the tools you need to spend smartly. Make sure that your inhouse team or agency has the ability to manage the kind of sophisticated multichannel campaign youll need to wage to win big in the brave world of mass personalization. Tag: Google, XM, AdWords Add to  Del.icio.us |  Digg |  Yahoo! My Web |  Furl
Have a bookmark! -  About the Author: Mr. Frog is a leading Search industry visionary. Mr. Frog is a member of the Did-it Search Marketing team which accompanies him to most major marketing conferences. |
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