Google Entering Radio Business Rumors?

Web search leader Google Inc. (GOOG) is hiring radio sales people for its US radio venture. The company is spending a lot in a bid to expand its position in the $20-billion radio industry. According to Michael Mayzel, Google spokesperson, the company will begin a public test of Google Audio Ads by the end of the year. Advertisers will be able to go online and sign up for targeted radio ads by using the same AdWords system that they use to buy Web search ads.

Google is testing its capability to move into offline media, saying it would help customers buy advertisements in 50 US newspapers. It made an apparent move into radio in January by paying more than $1 billion for dMarc Broadcasting, which connects advertisers to radio stations through an automated advertising system. Google CEO Eric Schmidt said that investment in radio advertising could grow over time to include up to 1,000 Google employees. The company had 9,378 employees in September.

According to Bill Figenshu, chief operating officer of Software Media Exchange, Google is hiring sales people in major markets. “They’re hiring sales people to sell radio and paying about 50% more than a typical radio sales person might make,” he said. Figenshu added three people he had spoken to believe Google was in discussions to buy about $1 billion in radio advertising inventory from Clear Channel Communications. Clear Channel is the biggest radio station operator and controls an estimated 20% of local radio industry revenues. Google’s move into radio comes at a time when Clear Channel is weighing a possible sale of the company. Clear Channel has declined to comment on the reports that Google could take a stake in the radio company, perhaps as part of a buyout led by private equity firms.

RBC Capital Markets analyst David Bank says he is perplexed by Google’s hirings as they are being made before Google has significant radio advertising inventory to sell. “While there are other possibilities, we believe there’s a reasonable chance Google Audio is establishing critical mass in anticipation of a major acquisition of prime inventory”, he said. Bank added Clear Channel’s size and potential sale make it a likely source of inventory for Google. According to him, Google may take a modest investment in a leveraged buyout or take a stake in the company’s current incarnation.