Google scraps broadcast radio ad business

People ride their bikes past the Google headquarters in Mountain View, California, May 8, 2008.

SAN FRANCISCO (Reuters) - Google Inc has abandoned its efforts to sell advertising for broadcast radio stations, acknowledging that the three-year project has failed.

The leading Web search company said on Thursday that it plans to sell its Radio Automation business, which created software to automate broadcast radio programing, and phase out its Audio Ads service. The move will likely result in up to 40 people being laid off, Google said.

Google has been re-appraising initiatives intended to expand its income beyond Internet advertising, which accounts for more than 90 percent of total revenue.

In January, the company threw in the towel on a similar business to place advertisements in newspapers and other print media.

"We have always accepted that if you take risks not all of them will pay off," Google's vice president of product management, Susan Wojcicki, wrote on the company's blog on Thursday.

Advertisers will continue to be able to use Audio Ads until May 31, the company said.

Google -- which had 20,222 full-time employees as of December 31 -- would instead focus its efforts on placing ads on streaming audio over the Internet, according to Wojcicki.

JMP Securities analyst Sameet Sinha said that while diversifying is important for Google, the company should stick to efforts that are more closely related to its strength in the online market.

"The offline media business is going through significant turmoil anyway," he said. "To come in with a new business model, even if it makes things more efficient, is a difficult pitch at this point."

Sinha cited display advertising and ads on Web-connected mobile devices as areas where Google might have a better shot.

Google continues to invest in certain projects, despite the tough economy. Earlier this month, it unveiled Google Ocean, which charts Earth's bodies of water, and broadly expanded the breadth of its online map of the world.

Shares of Google rose 1.4 percent to $363.05.

(Reporting by Alexei Oreskovic, editing by Leslie Gevirtz and Carol Bishopric)