Google Makes Ad Deal with XM Satellite Radio

In what looks like its biggest offline advertising deal to date, Google has struck a deal with XM Satellite Holdings to automatically insert adds on the service’s nonmusic channels.

According to a statement, Google will serve the ads via dMarc’s media network on XM stations. XM has about 7 million paid subscribers. The deal will potentially allow XM to increase revenue with advertisers while decreasing the cost to serve those ads.

Google has said it will be integrating the dMarc platform into AdWords by the fourth quarter of this year. AdWord’s customers will then be able to place satellite and terrestrial spots on the air.

Google CEO Eric Schmidt said during the company’s second-quarter earnings call that DMarc’s staff was completely integrated with Google’s, and that Google was testing radio ads nationally as well as internationally.

XM leads the satellite radio market and reported a 56 percent increase in customers over the last year. According to the company’s 2Q06 results, XM increased its revenue year over year, but it also increased its net losses, in part due to the increased cost of acquiring customers.

XM’s main competition in the satellite market is Sirius, which has less than five million subscribers and revenues of $150 million.

Google has experimented with offline advertising before. Its first experiment, brokering ad pages for magazines, has not fared well. Google has also been making inroads into the auto market, where satellite radio is also popular.