Google Strikes Ad Deal With XM

Google(GOOG Quote) has signed an agreement with XM Satellite Radio(XMSR Quote) to sell commercials on the No. 1 pay-radio provider's nonmusic channels.

"This partnership with XM Satellite Radio will provide a powerful marketing and distribution tool for Google advertisers," said Ryan Steelberg, the Internet company's head of radio operations. "By providing access to XM's premier satellite audience, Google advertisers will have an easy way to target, schedule, deliver and measure satellite radio campaigns in a timely and efficient manner."

Google entered the radio business this year by acquiring dMarc, a company that sells commercial time on behalf of stations. The deal also will allow Google customers to place terrestrial and satellite radio commercials when the dMarc is merged into the AdWords network later this year.

The search giant is eager to grab a bigger slice of the advertising market as it looks to expand its revenue base beyond search. So far, Google's efforts in radio have gotten a "mixed reception,'' says UBS analyst Benjamin Schachter in a note to clients Wednesday.

For its part, XM is fending off competition from rival Sirius(SIRI Quote), which has lately been gaining subscribers at its expense. "While the deal is encouraging, it is unlikely to move numbers in the near term,'' writes Schachter, who has a neutral rating on Google. "We think that radio ads offer potential for upside and diversification of revenue away from sponsored text links, but visibility is uncertain.''

Shares of Google rose 37 cents to $375.88, and XM added 30 cents to $12.49.