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Radio Flop Reveals Google's Vulnerability
Posted by Daniel Flamberg on May 21, 2009 at 08:00 AM PDT
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 just 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 of the companies whose inventory they sought to sell.
So
what do dies 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.
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