Madison Avenue has been keeping an eye on Google (NASDAQ:GOOG) for a few years now. What started out as a simple model to monetize its popular search engine with targeted advertising has evolved into a multimedia beast. Last year, the company experimented with print ads. Now, it wants the airwaves.
This morning's announcement that Google will begin serving up ads on non-music XM Satellite Radio (NASDAQ:XMSR) stations is just the next step in Google's plan to reign supreme as the ad enabler of all trades. Google already has a growing fleet of AdWords sponsors moving beyond text-based ads to offer richer media spots; now it will be able to offer them XM's celestial megaphone.
It's a good step for XM, too. Save for the four channels that Clear Channel (NYSE:CCU) watches over for XM, the provider's music channels are free of ads. That's an important advantage that XM and rival Sirius (NASDAQ:SIRI) have over terrestrial radio, and it isn't going away. Google will be filling the available inventory on XM's talk-based channels that already have ads, which works out perfectly. If you spend any time streaming XM or Sirius, you'll quickly grow bored with the repetitive nature of the few advertisers.
XM can use the boost more than Sirius at this point. This past quarter, XM generated ad revenue that amounted to just $0.45 a month per subscriber, while Sirius tallied a healthier $0.62.
Ad revenue will never overtake meaty subscription revenues, but Google should help monetize XM's airplay more efficiently. At the very least, it doesn't hurt a beaten-down stock like XM to have its name tossed into the same headline with a crisper Google. Rumors of deeper alliances may follow. They may be photographed having dinner together. Eat your heart out, Madison Avenue -- and pay some respect.
XM is an active recommendation in the Rule Breakers newsletter service, though the stock is trading significantly lower since it got the nod. You're welcome to read the original buy report and participate in the active subscriber-only XM discussion board, where Rick and his fellow Fools hang out, with a free 30-day all-access pass.
Longtime Fool contributor Rick Munarriz has been a Sirius satellite subscriber since 2004 and an XM subscriber since this spring. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
