Now that small businesses are getting strong signals of an improving economy, they’re starting to turn up their radio buys.

That’s big news for Bid4Spots Inc., an Encino company that links small companies with radio ad spots sold at bargain-basement prices.

Bid4Spots founder and Chief Executive Dave Newmark said he expects to double revenue to about $1.5 million this year.

“We’re growing exponentially,” Newmark said. “The small to medium-sized national businesses were crushed by the recession. They did not want to advertise much at all. After the fiscal cliff and other issues, they started to come out of the woodwork.”

But many of them still don’t want to spend a lot of money.

Bid4Spots’ specialty is connecting those budget-minded advertisers with last-minute buys of unsold radio ad inventory. It’s a common but often unspoken practice in the radio world.

An example: the Center for Surrogate Parenting Inc. The Encino surrogacy agency only has about $5,000 a week to buy radio spots around the country and only has the budget to buy them for half the year.

“I end up (advertising on) way more air time than I ever would if I went through radio stations directly or a broker to buy time,” said Karen Synesiou, chief executive at the surrogacy agency.

The auctions take place online every week. Here’s how they work: Advertisers work with Bid4Spots on what part of the day they want their ads to air in addition to what demographic and geographic market they’d like to reach.

Each Wednesday, Bid4Spots invites radio stations that match the descriptions to participate in a four-hour auction the next day. Stations must price their spots lower than the competition if they want to unload the unbooked air time. Newmark said the discounts can run as high as 90 percent.

It’s not the proudest moment for stations, which don’t want to appear to devalue their air time. Bid4Spots claims to have sold spots for 38 stations in the L.A. market, although those contacted for this story were not forthcoming about any possible involvement.

Greg Ashlock, president and market manager for Clear Channel Media + Entertainment in Burbank, which operates eight stations in the L.A. market, would only say in an email that he “doesn’t do much” with Bid4Spots.

Saul Levine, owner of three L.A. radio stations including “Go Country” KKGO-FM (105.1), said he doesn’t use Bid4Spots at all, calling it a “desperate way to do business.”

Nonetheless, Bid4Spots has become a way for small-budget advertisers to get on the air, often in smaller, less-competitive markets than Los Angeles, where there could be a higher amount of unsold ads.

For example, the surrogacy agency’s ads have run on stations in the High Desert, such as adult contemporary KZXY-FM (102.3) and country KATJ-FM (100.7), as well as stations in Illinois, Maryland and other states.

Reverse auction

Newmark, who also runs ad agency Newmark Advertising from the same office, started Bid4Spots in 2005 after talking with an advertiser client that was having trouble buying unsold inventory from stations. The problem was that stations didn’t want to make fire-sale deals that could undermine the value of their other spots.

Online radio ad auction businesses are not a new idea. Many came and failed during the dot-com bubble and more came later. Google Inc. even tried its hand in 2006, but left the market in 2009. For the most part, the auctions were set up to let advertisers bid up the prices for coveted spots.

Newmark decided to flip the dynamic and create a reverse auction to make stations bid lower prices to offload unsold air time.

Newmark said Bid4Spots, which has a dozen employees, sells air time on two-thirds of the radio stations in the country that are rated by Arbitron Inc. It has worked with 10,000 advertisers and takes the industry-standard 15 percent commission on spots.

As recently as last year, Bid4Spots was struggling. But Newmark said advertising by small and midsize business clients has come back. Among the company’s other advertisers are dating service It’s Just Lunch in Hallandale, Fla., and Dana Point beverage brand Rushmore Essentials.

One drawback to the service is that the advertisers can’t target a specific station with their buys. Instead, the ads run on the station that bids the lowest. Still, Newmark emphasized that the stations are preselected and invited to the auctions to suit client needs.

Many of the advertisers don’t have the budget to buy ads at market rates. The surrogacy agency – which was founded by KFI-AM (640) on-air host Bill Handel – found spots on that station too pricey, Synesiou said.

Bid4Spots is tapping into a major trend in radio, said Jerry Del Colliano, publisher of trade newsletter Inside Music Media in Scottsdale, Ariz.

Just as many disc jockeys have been replaced by syndicated shows in many markets, he said automation is also becoming a larger part of the ad sales business to save money.

“The movement is towards nonsalesperson selling,” he said. “If they can move their inventory, they’ll do it however they can.”