Purchase of radio ad firm could cost more than $1 billion over 3 years
Google Inc. of late announced it has agreed to acquire dMarc Broadcasting, Inc., a Newport Beach, Calif.-based digital solutions provider for the radio broadcast industry. dMarc connects advertisers directly to radio stations through its automated advertising platform. The platform simplifies the sales process, scheduling, delivery and reporting of radio advertising, enabling advertisers to more efficiently purchase and track their campaigns.
Google’s biggest acquisition to date as it branched out into radio advertising with a deal that could cost it as much as $1.24 billion.
The initial purchase price for dMarc Broadcasting, a U.S. private company, will be $102 million in cash.
The purchase takes the search engine company into the broadcast field for the first time, and signals its ambition to extend the reach of its internet-based advertising network as digital distribution takes hold across a wider range of media.
Under the deal, Google said it would pay up to $1.136 billion more over the next three years if dMarc hits targets that have been set for product integration, net revenues and advertising inventory levels.
The up-front cash payment will make only a small dent in Google’s reserves. Through September, Google had $7.6 billion in cash and marketable securities, though it has since committed to making a $1 billion investment in Time Warner’s America Online unit.
In the future, Google plans to integrate dMarc technology into the Google AdWords platform, creating a new radio ad distribution channel for Google advertisers.
The network could eventually reach what Chad Steelberg, chief executive officer of dMarc, said were "thousands" of radio stations around the world that use the company’s studio automation systems to manage their inventory of advertising space.
Google is committed to exploring new ways to extend targeted, measurable advertising to other forms of media, said Tim Armstrong, vice president of Advertising Sales, Google. We anticipate that this acquisition will bring new ad dollars and accountability to radio by combining Google’s expansive network of advertisers with dMarc’s talented team and innovative radio advertising technology. We look forward to working together to continue to grow and improve the ecosystem of the radio industry.
dMarc runs an automated network through which radio stations sell and schedule advertisements. As with Google’s internet advertising network, the system opens up the medium to many smaller advertisers whom radio stations would not otherwise be able to reach efficiently, said Armstrong.
Armstrong refused to say whether Google had similar ambitions to open up the Adwords network for video as well as audio advertising. However, he said Google planned to continue expanding its reach into new advertising markets and was conducting research and development in other markets.
We are excited to be joining one of the most innovative companies in the world, said Steelberg. We are bringing together complementary visions of simplicity, efficiency, and accountability to the radio advertising process. He added that since the network was launched early last year, 500 stations in the US have signed up.
Already, Google has bought advertising in print publications such as tech magazines and resold chunks of the space to its online advertisers.
Transaction and Financial Information
Under the terms of the merger agreement, Google will acquire all of the outstanding equity interests in dMarc, a privately held company, for total up-front consideration of $102 million in cash. In addition, Google will be obligated to make additional contingent cash payments from time to time if certain product integration, net revenue and advertising inventory targets are met over the next three years. The maximum amount of potential contingent payments is $1.136 billion over the next three years. Since these contingent payments are based on the achievement of performance targets, actual payments may be substantially lower. The acquisition is subject to customary closing conditions. Google anticipates that the acquisition will close in the first quarter 2006. Substantially all of the payments will be accounted for as part of the purchase price for the transaction.
The similarity between the dMarc and Google advertising philosophies prompted Google to buy the company rather than try to build its own radio advertising network, said Armstrong. "If we were to draw out a radio plan, they were already doing it."