Why Can't Google Sell Premium Radio Ads?
by Erik Sass, Wednesday, Feb 14, 2007 8:30 AM ET
WITH THE DEPARTURE OF DMARC founders Chad and Ryan Steelberg last week, industry observers are buzzing about Google's ongoing attempt to penetrate the radio market with low-cost online ad sales and placement. One of the key issues is the quality of radio inventory Google can offer through dMarc's automated interface. Here, Google finds itself in a Catch-22.
Before it was acquired by Google, dMarc trafficked in remnant inventory--the "leftover" air time that stations sell at low prices at the last minute. To make dMarc's system attractive to advertisers, Google has to demonstrate that it's also effective in selling premium inventory. But they face a couple of major obstacles.
Foremost, Google doesn't allow advertisers to choose specific stations where their ads will run because they're selling remnant inventory. Station managers fear that identifying their station as the source of remnant inventory would undercut the price of their premium inventory. In short, advertisers might just wait until the station is desperate before buying.
According to the marketing materials Google sends to participating stations: "To protect your local [rate] card, we do not allow our advertisers to buy/target specific stations." This, in itself, is sufficient to deter most existing radio advertisers.
Conversely, station managers have their own reasons to be leery about turning over inventory--premium or remnant--to Google. dMarc's digital system begins selling remnant inventory automatically at the end of every business day, with no oversight from station employees. Managers don't know which ads will be broadcast the next morning. Although Google offers the option of reviewing and rejecting ads before they air, the "just-in-time" nature of the service makes this difficult in practice.
In addition, it costs about $75,000 to install dMarc. That's a pricey system, even for big radio stations that sell remnant inventory. Although Google offers a barter deal, installing the system for free in exchange for a certain quantity of remnant inventory, this involves charging a 50% commission on remnant ad sales over a period of several years--effectively removing any near-term incentive for station managers to participate.
Finally, radio stations in desirable markets employ sales teams to move their premium inventory, and station managers chafe at the idea of paying Google's commission on top of salaries (or agency fees). Sales executives also fear that cooperating with Google will undercut their sales teams.
In recent months, Google was reported to be negotiating with CBS Radio to buy more than $1 billion of premium inventory. But to offset the commission costs and the risk of sales "cannibalization," big radio groups like CBS will probably charge top dollar for their premium inventory.
Such an investment would constitute a risky gamble for Google--especially to fuel a system that hasn't yet attracted significant advertiser interest.
Investors have maintained unrelenting pressure on Google to keep share prices up, and they may find the high price tag of a big inventory deal excessive. Plus, Google's inability to offer premium inventory, in turn, means that demand will stay sluggish. Constrained by risk-averse shareholders, it will be difficult for Google to break out of this cycle of low demand and insufficient supply.
Adding to Google's woes, dMarc faces competition from other automated radio sales firms, like SoftWave Media Exchange. SoftWave allows marketers to choose stations and schedule their campaigns well ahead of time, while station managers can set prices and review campaigns before they run.
These capabilities have helped SoftWave build a network of stations in the top 50 markets that reach about 11 million listeners on an average quarter-hour basis, compared to just 947,000 for dMarc. Most importantly, station managers are comfortable selling premium inventory through SoftWave, with about 70% of its traffic falling in this category.
Meanwhile, Bid4Spots, a Los Angeles-based digital clearinghouse, employs a reverse-auction model in which multiple stations compete to sell their remnant inventory to a single buyer during weekly online auctions. Because stations have nothing to lose when unloading unwanted inventory, they drive prices down during the auctions, benefiting the buyers. More than 2,300 stations around the country are participating in the Bid4Spots system.
Wednesday, February 14, 2007
Monday, February 12, 2007
Second City Stats
State of the Virtual World – Key Metrics, January 2007
Friday, February 9th, 2007 at 5:50 AM PST by: Zee Linden
In December I posted a number of key metrics for the first time. As part of our effort to drive toward complete transparency and openness, Logan Linden and I have upgraded some of our internal systems to create the Excel Workbook posted here. (If you need a viewer, click here, check back later for a PDF). Please consider this a preliminary version of the report. With feedback from the community we will continue to improve the data, the explanations and – most importantly, continue to add more data over time. As you can imagine we have more data to analyze than we have time and people - so thanks for your patience as we roll out more and more of the statistics you are asking for.
The Size of the Virtual World - January was another record month for Second Life in many ways. The size of the world, as measured by the virtual square kilometers of simulation, expanded 23% over December to 361 square kilometers. In fact, continued brisk sales have left us with roughly a two-week backlog for new Island order delivery. (Thanks to everyone for their patience on this.) The backlog has also affected our ability to expand the mainland sufficiently to meet. demand. As a result, the average price for mainland auctions is up higher than I think anyone would like to see it. Over the next several weeks, we hope to rectify both situations with a greater volume of server delivery from our supplier. With a recent release of more than 40 regions of mainland, the addition of a new mainland continent & and doubling of the daily release of new mainland regions I would hope that we will satisfy the seemingly insatiable demand and stabilize the mainland auction market to a more sustainable price.
The Virtual Economy - The virtual economy, as measured by LindeX volume and user to user transactions, grew faster than the land mass in January. User to user transactions in-world increased 37% to 6.1 billion consistent with the 47% increase in user hours from December. On the other hand, Linden Lab sold fewer L$ than we sold in December - primarily driven by January having 25% fewer weekend days than December causing the supply of L$ to increase at a slower rate of 18%.
What is the Linden Dollar? Technically, the L$ is a limited license right to participate in and use certain features of Second Life. The value of the L$, as reflected on the exchange, is based on the demand for a limited supply of L$. “Sources” – such as stipends to premium users and direct L$ sales on the exchange - are the ways in which Linden Lab put L$ into the virtual economy. “Sinks” – such as the L$ fee that we charge to post classified ads or upload images – represent ways that the L$ are taken out of circulation.
How does the LindeX work? The LindeX is the Linden Dollar exchange market. Linden Lab operates the exchange as a peer-to-peer trading platform in which users can buy and sell Linden Dollars from and to other residents. Just like in a real economy, there are consumers (the buyers of L$) and producers (the sellers of L$). The ratio of buyers to sellers is approximately 10 to 1. The number os sellers is consistent with the number of in-world business owners with “Positive Monthly Linden Flow“. In January, buyers and sellers traded just under USD $5 million– up more than 29% from December. That’s an average daily volume of USD $158,000. To be sure, this is still a very tiny economy relative to countries, states, cities or even towns in the real world, but it’s probably not hyperbole to surmise that it’s the fastest growing economy on the planet (up more than 9x in the last 12 months!). A handful of the largest buyers on the exchange are reselling them in local currencies, languages & payments systems - such as the Dutch Exchange here. Third party exchanges agree to use the Exchange Risk API to to identify sellers who’s historical behavior doesn’t match the amount of Linden Dollars they are selling.
How is the exchange rate determined? In the face of this growth, the floating exchange rate continued to hold steady throughout the month as Lawrence Linden has done an amazing job managing the exchange rate by managing the supply of L$ in-world balancing the “sources” and “sinks” of L$ in world. Our strategy is to keep the L$ sinks to Linden Lab high enough such that the only lever we need to balance supply and demand on the LindeX is to expand the supply by selling new L$ - something that we can do in real time in response to the vagaries of the market.
Resident Population vs Unique Users vs Log Ins vs Active Users. With this report, I’ve released some more detailed population information including a comparison of total resident population to unique residents who have logged in - both grew approximately 38% over December. Residents with Premium Accounts increased 16% to more than 57.7 thousand. There has been a lot of controversy regarding the Total Residents number on SecondLife.com (A Resident is a uniquely named avatar with the right to log into Second Life, trade Linden Dollars and visit the Community pages). Unique users represent approximately 63% of Total Residents.
Approximately 10% of unique users have logged in for 40 hours or more. Committed usage at this stage of Second Life’s growth requires a great deal of effort. Mitch Kapor has said that giving away Second Life for free to everyone is comparable to if we were giving out Apple ][+ computers for free to everyone in 1980. Clearly not everyone is going to find relevance, and be able to build on a technology at this early stage. Interestingly, it appears that blogging has a similar ratio of committed users to registrations as indicated by Live Journal.
Usage by country and gender. The top five countries are the US, France, Germany, the UK, and the Netherlands. I’ve also included the percentage breakdown of unique residents by self-reported age and self-reported gender.
Thanks again. That wraps up the update for January. I am committed to continually improving the data that we provide about the metrics within the virtual world and I look forward to reading your critical and constructive feedback and questions each month. I’ll try to incorporate more of them into the metrics and this analysis that I’ll publish each month.
Friday, February 9th, 2007 at 5:50 AM PST by: Zee Linden
In December I posted a number of key metrics for the first time. As part of our effort to drive toward complete transparency and openness, Logan Linden and I have upgraded some of our internal systems to create the Excel Workbook posted here. (If you need a viewer, click here, check back later for a PDF). Please consider this a preliminary version of the report. With feedback from the community we will continue to improve the data, the explanations and – most importantly, continue to add more data over time. As you can imagine we have more data to analyze than we have time and people - so thanks for your patience as we roll out more and more of the statistics you are asking for.
The Size of the Virtual World - January was another record month for Second Life in many ways. The size of the world, as measured by the virtual square kilometers of simulation, expanded 23% over December to 361 square kilometers. In fact, continued brisk sales have left us with roughly a two-week backlog for new Island order delivery. (Thanks to everyone for their patience on this.) The backlog has also affected our ability to expand the mainland sufficiently to meet. demand. As a result, the average price for mainland auctions is up higher than I think anyone would like to see it. Over the next several weeks, we hope to rectify both situations with a greater volume of server delivery from our supplier. With a recent release of more than 40 regions of mainland, the addition of a new mainland continent & and doubling of the daily release of new mainland regions I would hope that we will satisfy the seemingly insatiable demand and stabilize the mainland auction market to a more sustainable price.
The Virtual Economy - The virtual economy, as measured by LindeX volume and user to user transactions, grew faster than the land mass in January. User to user transactions in-world increased 37% to 6.1 billion consistent with the 47% increase in user hours from December. On the other hand, Linden Lab sold fewer L$ than we sold in December - primarily driven by January having 25% fewer weekend days than December causing the supply of L$ to increase at a slower rate of 18%.
What is the Linden Dollar? Technically, the L$ is a limited license right to participate in and use certain features of Second Life. The value of the L$, as reflected on the exchange, is based on the demand for a limited supply of L$. “Sources” – such as stipends to premium users and direct L$ sales on the exchange - are the ways in which Linden Lab put L$ into the virtual economy. “Sinks” – such as the L$ fee that we charge to post classified ads or upload images – represent ways that the L$ are taken out of circulation.
How does the LindeX work? The LindeX is the Linden Dollar exchange market. Linden Lab operates the exchange as a peer-to-peer trading platform in which users can buy and sell Linden Dollars from and to other residents. Just like in a real economy, there are consumers (the buyers of L$) and producers (the sellers of L$). The ratio of buyers to sellers is approximately 10 to 1. The number os sellers is consistent with the number of in-world business owners with “Positive Monthly Linden Flow“. In January, buyers and sellers traded just under USD $5 million– up more than 29% from December. That’s an average daily volume of USD $158,000. To be sure, this is still a very tiny economy relative to countries, states, cities or even towns in the real world, but it’s probably not hyperbole to surmise that it’s the fastest growing economy on the planet (up more than 9x in the last 12 months!). A handful of the largest buyers on the exchange are reselling them in local currencies, languages & payments systems - such as the Dutch Exchange here. Third party exchanges agree to use the Exchange Risk API to to identify sellers who’s historical behavior doesn’t match the amount of Linden Dollars they are selling.
How is the exchange rate determined? In the face of this growth, the floating exchange rate continued to hold steady throughout the month as Lawrence Linden has done an amazing job managing the exchange rate by managing the supply of L$ in-world balancing the “sources” and “sinks” of L$ in world. Our strategy is to keep the L$ sinks to Linden Lab high enough such that the only lever we need to balance supply and demand on the LindeX is to expand the supply by selling new L$ - something that we can do in real time in response to the vagaries of the market.
Resident Population vs Unique Users vs Log Ins vs Active Users. With this report, I’ve released some more detailed population information including a comparison of total resident population to unique residents who have logged in - both grew approximately 38% over December. Residents with Premium Accounts increased 16% to more than 57.7 thousand. There has been a lot of controversy regarding the Total Residents number on SecondLife.com (A Resident is a uniquely named avatar with the right to log into Second Life, trade Linden Dollars and visit the Community pages). Unique users represent approximately 63% of Total Residents.
Approximately 10% of unique users have logged in for 40 hours or more. Committed usage at this stage of Second Life’s growth requires a great deal of effort. Mitch Kapor has said that giving away Second Life for free to everyone is comparable to if we were giving out Apple ][+ computers for free to everyone in 1980. Clearly not everyone is going to find relevance, and be able to build on a technology at this early stage. Interestingly, it appears that blogging has a similar ratio of committed users to registrations as indicated by Live Journal.
Usage by country and gender. The top five countries are the US, France, Germany, the UK, and the Netherlands. I’ve also included the percentage breakdown of unique residents by self-reported age and self-reported gender.
Thanks again. That wraps up the update for January. I am committed to continually improving the data that we provide about the metrics within the virtual world and I look forward to reading your critical and constructive feedback and questions each month. I’ll try to incorporate more of them into the metrics and this analysis that I’ll publish each month.
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