Updated from 9:46 a.m. EST
agreed to acquire closely held dMarc Broadcasting of Newport Beach, Calif., for $102 million in cash, expanding its advertising reach into radio.
As Google attracts more business from major advertisers, it wants to offer them additional services beyond search, according to Wall Street analysts. Google is making moves into magazine and newspaper advertising, and media reports have speculated that the company may move into television advertising sales.
"They want to serve as an advertising aggregator where they can offer a multimedia advertising package to their customers that might otherwise go to an ad agency," says Tim Ghriskey, chief investment officer of Solaris Capital in Bedford Hills, N.Y., which owns Google shares among its $800 million in assets under management.
The stakes for Google and rivals
continue to rise in the battle for the online advertising dollar. Companies are shifting money away from traditional media such as radio and onto the Web. During the first nine months of 2005, local radio spending rose 1.8%, while Internet sales excluding search gained 11.5%, according to TNS Media Intelligence. Radio's woes are heightened by the growing popularity of the
satellite radio services.
Still, some watchers caution that Google's track record is hardly unblemished.
"The magazine initiative hasn't been successful as of yet," says Leland Westerfield, an analyst with Harris Nesbitt who rates Google shares peer perform with a $550 price target. "In radio, Google may be more successful because dMarc already wholesales radio time."
As part of the acquisition, Google may make additional contingent cash payments of up to $1.14 billion over three years, based on product integration, net revenue and advertising inventory targets. "Actual payments may be substantially lower," Google said, adding that it expects the deal to close in the first quarter.
dMarc connects advertisers directly to radio stations through its automated advertising platform. The platform simplifies the sales process, scheduling, delivery and reporting of radio advertising, enabling advertisers to more efficiently purchase and track their campaigns. For broadcasters, dMarc's technology automatically schedules and places advertising, helping to increase revenue and decrease the costs associated with processing advertisements.
Shares of Mountain View, Calif.-based Google rose $1.51 to $467.76.