Google took another step towards dominating another aspect of advertising sales, when it took over selling portions of US radio giant Clear Channel’s advertising inventory.
The deal allows for Google to sell a guaranteed amount of 30-second adverts across 675 of its radio stations, much of it will be premium advertising, and not just unsaleable excess inventory.
Google has been experimenting with radio advertising for over a year, since it bought dMarc Broadcasting, a specialist radio advertising operation for $102 million up front and up to $1.24 billion in total based on its performance. It reckons that it can bring new advertising customers to radio. In the past Google had already begun selling adverts for Clear Channel but only on its radio station web sites.
Google has also made overtures to selling advertising in newspapers and on TV stations, and recently cut a deal with EchoStar to sell TV adverts on its Dish network channels.
Google told reporters in the US that it has already signed up around 800 radio stations in smaller markets around the US and even sells targeted advertising on XM Satellite Radio’s non-music channels.
This is perhaps the most successful step by Google so far to get down into markets that are primarily driven by local advertisers, rather than the major brands that drive internet and TV advertising.
dMarc was integrated into Google’s AdSense system which was broadened for Audio sales, whereby advertisers bid for advertising on radio sites.
Meanwhile the private equity groups that are in the process of bidding for Clear Channel are saying they will raise their offer. It already stands at a substantial premium to Clear Channel’s stock market value prior to the discussions starting, and values the business at around $26 billion, if you include its debt.
The story was leaked in the US press by showing a letter which detailed various possible improvements to the offer, which US papers are rounding up by around $1.50 more per share than the current offer.
The bidders are Bain Capital and Thomas H Lee Partners and the increase, which is not yet an official offer, is being considered because there is resistance to the terms currently on offer by both management and investors and many plan to vote against the deal.
US radio assets, which form the bulk of Clear Channel, along with a live entertainment business and huge outdoor advertising market share in the US, have been written down dramatically in the past few years. Radio stations are threatened on the one hand by the national footprint satellite radio stations which have siphoned off some 14 million radio listeners, and by the rise in internet advertising and the potential for it to be turned into local advertising.
Whatever the value of Clear Channel in the minds of the investors, in the long term, against this backdrop, its value is down, not up and they’d do well to take the money. Potentially the Google deal was only agreed to as a way of bolstering the share price to make Clear Channel look like it is worth more than it really is.