San Francisco— Search engine titan Google Inc., on Thursday announced plans to ditch its three-year-old affair with radio-advertising business and hacks as many as 40 jobs, saying the investment did not reaped enough of a payoff.
The announcement illustrates Google’s failure to maneuver its dominance in Internet-search ads into offline media, as the company abandons the two-year-old program intended to put the California firm’s online expertise to work auctioning off space on newspaper pages to bargain-seeking advertisers.
“They are attempting to enter in to a media that is really old and institutionalized,” said Sameet Sinha, an analyst with JMP Securities LLC in San Francisco. He recommends buying Google’s shares, which he does not own. “It was in such a circular tailspin that even Google could not go in and do anything. Tough times bring discipline.”
Google in 2006, entered into the marked with Google Audio Ads and Google Radio Automation after acquireing DMarc Broadcasting, Inc. for $102 million, is now searching a buyer for software that arranges ads on radio programs. Google will discontinue selling radio ads by May 31 and focus instead on online streaming audio, according to a blog posting today.
Google thought that all in all the move would transform how radio ads are bought, aiming to streamline the entire process. “We have always accepted that if you take risks not all of them will payoff,” Google’s vice president of product management, Susan Wojcicki, wrote on the company’s blog Thursday.
“While we have devoted considerable resources to developing these products and learned a lot along the way, we have not had the impact we hoped for,” Wojcicki wrote on the blog. “So, we have decided to discontinue the broadcast radio business and focus our efforts in online streaming audio."
The company said these plans, however, “have not had the impact we hoped for.”
Ross Sandler, an analyst at RBC Capital Markets, said the termination of Google’s radio presence will have very little impact on the company. He said Google, like other companies striving to navigate the current economic downturn, is deciding what businesses it wants to keep and what unprofitable ones it wants to get rid of.
“I’m surprised it took them this long,” he said of Google’s exit from radio advertising. “They sunk a lot of money into this, and there was potential that never happened.”
Nevertheless, Sandler said, the radio ad market was not ready for Google.
“They made a good initial effort at digitizing this medium but it was not ready to happen yet.”
Google — which had 20,222 full-time employees as of December 31 — would instead focus its energy on placing ads on streaming audio over the Internet, according to Wojcicki. Google said the cancellation of its radio operations will results in layoffs of up to 40 people. Google last announced layoffs of 100 employees in early January.
Google has been cutting costs in the face of a declining economy that has slowed even the online advertising king’s money-making machine.
Nevertheless, Google plans to keep on investing in its television ad business. Earlier this month, it launched Google Ocean, which charts Earth’s bodies of water, and broadly expanded the breadth of its online map of the world.
“We will use our technology to create Internet-based solutions that will deliver relevant ads for online streaming audio,” Wojcicki said. “We are dedicating a team of people at Google to explore how we can best add value for advertisers, broadcasters and listeners in this emerging advertising space.”
Google’s shares ended regular-hours trading up $5.01, or 1.4%, to $363.05. One year ago, the company’s stock was 29.9% higher, trading around $534.