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Google made its biggest acquisition to date on Tuesday as it branched out into radio advertising with a deal that could cost it as much as $1.24bn.
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.
The initial purchase price for dMarc Broadcasting, a US private company, will be $102m in cash. Google said it would pay up to $1.136bn more over the next three years if dMarc hits targets that have been set for product integration, net revenues and advertising inventory levels.
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 Tim Armstrong, Google’s head of advertising sales.
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.
He added that since the network was launched early last year, 500 stations in the US have signed up.
Google said it planned to plug its Adwords internet advertising network into the dMarc radio advertising network, raising the prospect that existing Google advertisers will one day be able to bid in an online auction for access to individual radio slots, much as they bid for the keywords in internet searches today.
For radio stations, meanwhile, linking with Adwords could bring access to a much wider group of advertisers, said Mr Armstrong. “Both sides get higher scale from this,” he said.
Mr 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.
It recently started experimenting with placing adverts on behalf of its Adwords customers in print publications.
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 Mr Armstrong. “If we were to draw out a radio plan, they were already doing it.”
Google shares closed up 86 cents to $467.11 in New York on Tuesday.