Posts filed under ‘Revenue Strategies’
Mobile Music Ad Dollars Are Growing
Mobile ad dollars are growing, according to eMarketer. As smartphone usage expands, revenues from the ad-supported component of mobile music, games and videos alone will grow 52.7% this year to $433.8 million.
Two things are driving the increase – one being the growing audience for mobile music, gaming and video content. The second reason is that more and more content providers are shifting to an ad based revenue model, stimulating marketplace spending. Spending on ads for mobile music, gaming and video content accounted for 20% of the revenue in the space last year but will increase to 30% by 2015, to nearly $3.59 billion. The remainder of the revenues will be paid by subscription and download fees.
There’s a strong tolerance for mobile ads if the apps are free – new study info from Nielsen showed both that free apps are preferred by consumers and 51% of consumers say they are okay with advertising on their devices if they can access the content for free.
Monetizing mobile content with ads is becoming increasingly important for services such as Pandora. With the most downloaded free music app in Apple and Google app stores, Pandora sees the majority of its audience on mobile devices.
Radio’s Online Revenues Up 15% This Year
Digital revenues will continue to be the bright spot in radio’s future, according to new projections issued by BIA/Kelsey. Radio’s online/digital revenues will grow to $479 million in 2011, up from $405 million in 2010. The five-year outlook indicates radio’s online/digital revenues will reach $758 million by 2015, representing a 13.4 percent compound annual growth rate (CAGR).
In particular, the report mentions the integration of digital and traditional assets, which is giving stations opportunities to attract advertisers through online, social media and mobile channels and drive on-air audiences online.
While radio revenues have seen sluggish growth of only 1.2% this year, the digital/online segment has grown 15% over last year and is projected to finish the year at $479 billion.
Pandora Reports First Profits
Pandora reported its first profits last week of $638,000 on revenues of $75 million for its third quarter of this year. This beats most analyst’s expectations and dashes last year’s losses for the same period of $1.77 million.
Pandora streamed 2.1 billion hours of programmimg -twice the numbers of last year same quarter. According to Chief Executive Officer Joe Kennedy, About half of Pandora’s $66 million in third-quarter advertising sales came from mobile users, a “triple-digit” increase from a year ago.
“Rapid growth of 104% year-over-year in listener hours and record Internet radio market share growth to 66% illustrates the strong demand for personalized radio,” stated Joe Kennedy, Chairman, President & CEO of Pandora. “Our growing scale and powerful, multi-product advertising platform is enabling Pandora to increasingly penetrate areas that were once solely served by terrestrial radio. Our momentum in transforming the radio industry is stronger than ever.”
For third quarter of fiscal 2012, total revenue was $75.0 million, a 99% year-over-year increase. Advertising revenue was $66.0 million, a 102% year-over-year increase. Subscription and other revenue was $9.0 million, an 80% year-over-year increase.
This news came a week after the Radio Advertising Bureau released third quarter revenues reporting $190 million in digital revenues for US based radio broadcasters in addition to modest growth in spot revenues.
Pandora Wants a Piece of the Political Ad Pie
Image via Wikipedia
In their typically savvy way, Pandora has implemented a strategy for taking political ad dollars. Taking the listener registration information that they already have on every listener, they have created a turnkey way for political candidates’ campaigns to deliver their messages to custom voter zones. The service also offers rich media attributes, enabling campaigns to utilize display and video components in addition to audio.
Once again, Pandora is aggressively going after broadcast radio dollars with this strategy. Chief Revenue Officer John Trimble said, “With the 2012 political campaign season in full swing, advertisers realize that personalized, internet radio is a powerful platform to reach a desired set of voters. Pandora’s new targeting features maximize effectiveness of ad spend that has historically been wasted reaching voters outside of election districts. Political, national and local advertisers all benefit from our scale, precision targeting and personalization to reach a passionate and engaged audience on Pandora.”
Pandora gathers zip code data at account registration and a back-end system maps that information into specific regions, making it easier for a campaign to maximize effectiveness. These new features add on to the previously available targeting parameters of age, gender, zip code, time of day, music genre, seeded artist, interaction, mobile and first impression.
Political ad spending has been climbing for years and – thanks to the elimination of campaign spending caps – will be higher than ever for 2012. In 2008, the last presidential election year, political ad spending was $2 billion, last year, without a presidential election it reached $2.3 billion.
While Pandora can offer a nicely targeted ad campaign within precise voter zones, one thing candidates will not get from Pandora is the FCC mandated political rate card. Radio broadcasters are required under FCC regulations to provide all political candidates with a fixed rate at the lowest available rate on their stations. Pandora and other Internet radio stations are not beholden to such rules.
SNL Kagan Sees A Billion Dollar Market For Internet Radio In Ten Years
SNL Kagan and Senior Analyst Robin Flynn have produced a 2011 report on the Economics of Internet Music and Radio that’s very comprehensive and insightful. Using existing data points from RAB’s quarterly revenue reports, publicly available financials on Pandora, and research from Triton Digital and Arbitron on audience, SNL Kagan provides an excellent summary of the marketplace and its players, both online only and radio broadcasters.
Digital/online ad revenue will become an increasingly important and larger portion of radio’s revenues. The report pegs annual revenue for 2011 attributable to digital/online, including website, streaming, hd, and other digital sources, at $713 million for 2011. That number will grow to $1.55 billion in 2021 and comprise 7% of radio’s overall revenues.
Internet only stations will grow revenue at a faster rate – coming from $293 million projected annual revenues in 2011, that number will be $365 million in 2012 but reach $1 billion in 2021. Those projections are based only on ad revenues and do not include revenue from subscription or song download sales.
Pandora’s IPO has provided insight to the business model for an Internet radio station, and it’s a challenging one thanks to the enormous share of revenues that are owed in royalties. SoundExchange takes 45% of Pandora’s revenues and leaves them still losing money after ten years. The report quotes several radio broadcast company CEOs discussing the expense of streaming thanks to those issues as well. But most agree it’s a channel that they can’t afford to ignore.
Internet radio’s audience is growing, and connected devices are expanding the audience and time spent listening. Optimizing cpms for targeted mobile ads is a critical piece for Pandora in overcoming the digital royalty expense. Interestingly, SNL Kagan has projected that Pandora will take 4% of 2011 mobile ad revenues in the US, ranking fifth behind Google, Apple, Yahoo and Twitter.
IAB’s Agency Day Was A Huge Success
I spent yesterday afternoon at the offices of the Interactive Advertising Bureau, where they were hosting a Streaming Audio for Agencies Day. This event was the culmination of lots of work by many folks in the industry who came together to produce an IAB Platform Status Report A Digital Audio Advertising Overview. For those of you in the business of streaming audio who may be struggling over the best way to introduce streaming audio as an option to advertisers, this piece is a must. It’s dense with research and information on the industry, compiled by folks who have been working hard in the business, and produced by the Interactive Advertising Bureau, an independent source that is highly regarded by advertisers and agencies.
I’ve been working with the IAB on the audio committee, this white paper and agency day, and was proud to host a panel discussion on streaming audio measurement yesterday. There were many agencies in attendance - Zenith, Carat, Mediavest, Hill Holiday, Group M, to name just a few. It was an outstanding, highly cooperative day with lots of great information, discussion and feedback.
We’ve come a long way baby.
Hats off to folks at the IAB – Michael Theodore and Luke Luckett, and Audio committee chairs Brian Benedik (Katz360) and Doug Sterne (Pandora) and the entire committee for the immensely cooperative effort behind the paper and event. Thanks to Triton Digital and TheMediaDash for recognizing the value and sponsoring the event. Cheers to the agencies that attended, participated and offered feedback.
It was more than a successful agency day. It was a sign of a thriving industry.
Study: Digital Ads Impact Affluent Americans
The Interactive Advertising Bureau and Ipsos Mendelsohn, an independent research firm have released a new study Affluent Consumers in a Digital World. The study focuses on the behavior of Affluent Americans - the 21% of U.S. households that have a minimum $100,000 annual income or the top fifth of the country. They represent 70% of U.S. consumer wealth.
It’s an interesting study that reveals that these Americans, with concentrated buying power and generally low consumption rates of traditional media, are the heaviest users of digital media. While Affluent Americans are less likely than the general population to watch TV or listen to radio, they are more likely to own a smartphone, use the Internet and spend more time online.
They also have higher recall of digital ads than the general population and are more likely to have increased awareness of a product or brand because of digital advertising. 
Digital ads have considerable impact on awareness of products and companies for many Americans, but Affluent Americans are more likely than others to say that they learned about new products or learned about companies they were not aware of before due to digital ads.
Interestingly, this group prefers ad supported websites and are willing to provide more information about themselves in order to receive ads that they find relevant.
According to the study, video, banner, email and search ads are the most effective sorts of digital ads with this group, but I saw no evidence that digital audio ads were even included in the study. The IAB has only recently begun to acknowledge audio as a digital ad type – it’s been about a year since the IAB formed an audio committee (which I participate on) and released A Digital Audio Overview. On September 19th they will host an agency day at their office in New York City and they are making a strong effort to become a good resource for educating the agency and ad communities on digital audio ad opportunities.
Digital Revenues Becoming More Important To Radio
Broadcasters saw relief from declining spot revenues by selling more digital in the second quarter, according to new figures reported by the Radio Advertising Bureau. Digital revenues, including activity generated by websites, Internet/web streaming and HD Radio including HD2 and HD3 stations, was up 18% over the previous year’s second quarter. Those digital revenues are up 19% over last year.
Overall, spot revenues meanwhile are down – by 1% versus second quarter 2010, and flat for the year. There’s a stronger decline in national spot sales, with national radio rep Katz reporting a decline of nearly 3% in second quarter sales over a year ago separately last week.
Meanwhile, Katz 360, the digital sales arm of the Katz Media Group, has launched Katz 360 Local Media, a new online display advertising vehicle that offers advertisers premium placements on radio, television and newspaper publisher sites. That division will sell an aggregated network of nearly 50 million unique monthly visitors and one billion page views, according to July’s Comscore report.
Putting more focus on digital in general and mobile in particular is exactly what Borrell Associates recommends. Their latest report projects mobile audio ad spending will reach $667 million by 2016 — up from $161 million in 2011, with the bulk of that spending coming from local advertisers. Borrell thinks that radio has been missing the boat when it comes to using their local market knowledge and sales forces to capitalize on digital and mobile ad sales opportunities.
Radioio’s Revenue Rises
IO World Media, the parent company of Radioio, has announced second quarter results that reflect revenue gains over a year ago. The company reports revenue of $473,321 in the second quarter of 2011 as compared to $191,544 for the same period in 2010, and a net loss of $197,774 as compared to $274,323 for the same period in 2010.
The company press release notes that the revenue growth is attributable to the very successful launch of RadioioLive and the Early Enlistment Program for the Bubba Army. This revenue will be recognized pro rata over the thirty-six month life of those subscriptions.
Early this year Bubba The Love Sponge joined Radioio after leaving Sirius XM last year. During an early campaign on his new station, many loyal listeners signed up for long term subscriptions, giving them access to both live and archived content as well as Radioio’s music channels.
The company’s stock, trading as IWDM, has ranged from $.05 to $.68 in the last 52 weeks and is currently at $.11.
A Digital Place to Buy and Sell Radio Ads
A new company with some not so new faces has launched a platform designed to enable advertisers and stations to easily buy and sell on-air and online ad inventory. Called The Media Dash™ Local (www.themediadashlocal.com), the digital platform provides an easy way for small- and mid-sized businesses to buy advertising on local radio stations.
Rob Williams and Drew Hilles launched The Media Dash, which is designed to help broadcasters sell premium on-air and streaming commercials to both new and repeat advertisers. It’s not their first adventure together, the two paired up as the team that launched Goom Radio in the US, but left not too long after that. Williams comes from a Clear Channel based background in broadcast management, while Hilles was with dMarc, a broadcast traffic platform company that was acquired by Google, where Hilles then spent a few years.
This project resembles attempts Google has made to make radio ad inventory buying and selling more digital. Google’s goal was to make it easy for local and smaller advertisers who were already spending ad dollars with Google on things like search and adwords to add audio to that mix. The plan failed when many broadcasters, wary of Google’s intrusion into their territory, refused to participate. Since then, a few other companies have tried it – Bid4spots is an auction based online marketplace for radio inventory. Targetspot offers a similar “self service advertising platform” that enables local advertisers to get an audio ad made and select a target area and budget.
“Due to limited resources, local radio stations typically focus their sales efforts on their largest customers, failing to address a broad market opportunity of under-served local advertisers,” said Drew Hilles, CEO of The Media Dash. “Our goal is to make it as easy to buy local radio as it is to place Internet advertising. The Media Dash Local is designed to bring new advertisers to radio and generate incremental revenues for stations.”
Targetability is the other key feature to being able to compete for digital dollars, and this system enables advertisers to select local markets where they want their ads to run. Available markets are limited, but will presumably increase. Ultimately, as Google learned, the service will have to be able to offer lots of inventory from lots of markets in order to succeed.
The platform also allows you to decide whether you want to run creative that you may have, or offers to produce audio ads for free, something that will no doubt add to the success of the plan as it tries to bring new digital advertisers into the radio marketplace. Watch the video below for more info.
