Google’s getting out of the newspaper advertising business. Many of you probably didn’t know Google was ever in this business, which is probably because they weren’t seeing much success with it so never ramped it up.
My theory on why this didn’t work is this: Google tried to bring rational pricing to newspapers. Historically, newspapers ad costs have not been rational in terms of measuring the performance of specific ads. Put those two together and you’ll run into problems. Advertisers don’t want to pay much. Google takes a slice. And newspapers wonder what’s left for them. Well, there is probably less to start with when ads are placed based on performance.
Online advertising such as pay per click through Google AdWords is rational. At least, it’s more rational. There are still many irrational decisions made by advertisers but the measurability of online advertising corrects for mistakes faster.
Google’s radio advertising option is an interesting animal. As far as I can tell, the cost of ad time is so cheap that advertisers may start asking why they should ever buy direct. If that’s the case, more and more inventory may end up in Google’s hands where it’s subject to rational market conditions where advertisers pay rational market rates rather than what top salespeople can sell the ads for. If this happens, it will be interesting to see whether radio as it exists today will be sustainable. Radio advertising works at the right price. Does that price have enough margins to pay for radio talent?