The Agency Party is Coming to an End

So according to this story in Ad Age, Google is offering a small, select group of advertisers the opportunity to buy radio ad inventory through AdWords. The service is called Google Audio. There is certainly some wisdom to this in that it expands the size of the market for radio advertising thereby driving up competition for necessarily scarce audio ad impressions. Economics 101. From Google's perspective, the more AdWords becomes a full-service platform offering advertisers the opportunity to bid on ad inventory across multiple channels (Web, print, radio, TV (anyone know if Spot Runner and Google are talking these days?)). By combining a low cost of entry auction model with inventory across multiple channels, Google can become the first and last place advertisers need to go for campaign management and reach. Smart, savvy, and entirely within the realm of possibility. A question this raises is what, if any, impact this new, more integrated, and more dynamic pricing and sales model will have on the radio industry in general. By exposing the true market-value of radio ad inventory to advertisers, will Google Audio have the counter-intuitive effect of putting downward pressure on advertising radio rates in general? Competition in the "long-tail" of radio ad inventory will certainly increase and drive up effective prices for those spots, but what about the drive-time spots? Will advertisers continue to spend as much as they have given the additional visibility they'll have into what's happening in the market for similar kinds of ad impressions? When you add the two together (tougher to sell ads at "premium" rates, easier to sell ads at off hours etc) do publishers stand to gain or lose? It is truly fascinating to see how the Web in general and companies like Google in particular are driving a new level of competition and transparency in markets that have been closed since inception. By offering market-driven, dynamic pricing and virtually real-time performance data, the likes of Google and others are creating a vastly larger and more efficient market for advertising. While the promise of more transparency and accountability from publishers to advertisers makes for exciting times if you're a marketer (or a performance-oriented marketing services firm like ours at Spring Creek Group), it no doubt makes traditional advertising and "traditional" full-service marketing agencies more than a little nervous. Afterall, a lack of transparency is what created the opportunity to charge a hefty percent of spend with little-to-zero accountability for the end result. As the market becomes more efficient, the longstanding revenue model for the established ad agencies looks more and more like its history.

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