Reuters, via CNET, has published an interesting article about Google's latest moves into radio advertising. Google bought DMarc Broadcasting back in January, but hasn't integrated the radio ad service into their ad console to date although it sounds like they're getting close.

Google has turned into an advertising powerhouse by inserting themselves between publishers and advertisers in the online advertising space. The network effect of increasing access to online eyeballs together with an increasing client base trying to reach those eyeballs drives Google's growth. But will this translate into other media?

One huge thing that differentiates Google's online ad business today from offline opportunities (print, radio, TV) is control of inventory. Why does inventory matter? Network effect. In the online world, Google controlled a large enough portion of online ad impressions (or clicks) that advertisers had little choice but to flock to AdWords when it launched. As their client base grew, Google because well positioned to leverage that base of advertisers to cut in inventory deals (AOL, MySpace) or just buy up the inventory (Blogger, YouTube).

AdWords advertisers had access to a significant slice of the online ad inventory even when they had access to little more than Google.com. Over time, Google's in-house inventory has grown to include Groups, Gmail, Blogger, and now YouTube to name billions of impressions a month. Controlling such a huge volume of inventory allows Google to easily experiment on itself and figure what's effective for both advertisers and publishers before rolling out features to 3rd party sites. Which brings us to this interesting tidbit from the Reuters article about a rumored Google investment in Clear Channel:

Google's move into radio comes at a time when Clear Channel, the biggest radio station operator, is weighing a possible sale of the company.

Clear Channel, which controls an estimated 20 percent of local radio industry revenue, declined to comment on recent reports that Google could take a stake in the radio company, perhaps as part of a buyout led by private equity firms.

If Google launched a radio ad buying module for AdWords their biggest short-term problem would be a lack of Google sized ad inventory. Clear Channel has the inventory, and is big enough to make even large radio advertisers take Google's move into radio advertising seriously. Put another way: Advertisers follow eyeballs, or in this case, earballs.

Google gains access to a much larger slice of ad budgets if they become a gatekeeper for advertising on Clear Channel radio stations. Advertisers could see a drop in CPM rates for radio if Google brings efficiencies to the market. However, we could see CPM rates increase if more businesses decide to give radio advertising a shot for the first time using Google. For example, businesses comfortable with the analytics available through online advertising may find Google radio advertising pitch compelling compared to the stats provided by more traditional radio ad companies.

Google's pay per call service, currently being tested with online ads, is a natural fit for radio direct marketing. Competitor's to Google's radio offering, like Marketing Architects, Inc. with $100+ million in revenue, better be prepared to offer the analytics tools comparable to what Google will surely integrate into their system. According to MinnesotaBusiness' (paid subscription required) October 2006 profile of Marketing Architects, "the average radio advertiser spends more than $1 million per year with the firm." Perhaps Google's entry into thismarket legitimizes remnant radio advertising? Will Yahoo, MSN, or IAC snap up Marketing Architects? What's worth more: the client base or the technology?

Could a Google / Clear Channel partnership go further than just radio. For example, how hard would it be to integrate a Clear Channel billboard advertising module into the AdWords interface? When will I be able to buy an ad on a Times Square billboard through Google? How big a slice of your marketing budget goes to Google today. What about 3 years from now?