There’s been a lot of talk lately about declining results of display banners for advertisers (see wsj.com here). Technically speaking, advertisers and agencies are concerned about their ctr’s – click through rates – or the number of times someone clicks on their banner as a percentage of the number of impressions that banner showed. Returns on banners are dropping. Advertisers and agencies are looking for ways to boost the effectiveness of their campaigns with new media.
This is a great opportunity for Internet radio. But in order to perform under scrutiny, the creative message must suit the medium. Internet radio ads should not utilize the same creative as broadcast radio campaigns. The audience is entirely different. Internet radio’s audience is online, and 80% of them are at work. Ads should exploit the online aspect of the audience, emphasizing an online call to action, driving traffic to a website, or asking the listener to click on a banner on the player. Ads that encourage the listener to call an 800 number, or drive to a certain store location, are targeting a broadcast listener and are not going to satisfy the advertiser’s expectations for ROI. Advertisers must be encouraged to create impactful audio messages for Internet radio.
An excellent real life example of this strategy was summarized in a case study by AdWeek on a USPS Priority Mail campaign. USPS had decided to dedicate 3% of its ad budget to emerging media, and tested Internet radio as part of that budget. They used spots that specifically referred to the banner on the media player that accompanied the audio spot. The return on the campaign in the number of banner clicks was much more than they expected. You can read the AdWeek article here.
Internet radio measures up
Internet radio is a lot more than banners, and there’s a lot more to consider when evaluating the success of an Internet radio campaign than a number of clicks generated. However, it’s also important to note that when forced to measure up to strict ROI standards and meet certain expectations in terms of clicks, Internet radio can perform.
According to the iPhone apps store, 3 mobile streaming music applications rank in the top ten free music apps downloaded – Pandora, Flycast and AOL Radio. This is great news for Internet radio! iPhone is the first widespread portable streaming device to offer easy access to streaming radio. Apple will sell more than 10 million iPhones this year, and certainly help to build the online radio audience along with its own brand.
Pandora reports that 1.1 million people have downloaded their application to stream on the iPhone since July when it became available. There are hundreds of apps available in the iPhone app store, and Pandora ranks in the top ten free apps overall and first in the music apps column. Flycast, another streaming radio application that offers access to Internet radio streams including AccuRadio, Radioio, lots of other online radio brands and broadcast radio streams, is another popular iPhone app. According to Joe Monastiero, Co-Founder of Flycast, there have been “hundreds of thousands” of downloads of the Flytunes application.
According to M:Metrics, a company that studies mobile usage, 74.1 percent of iPhone users listen to music on their iTunes-equipped devices. Only 27.9 percent of smartphone users listen to music on their phones and 6.7 percent of the overall mobile-phone-toting public listens to music on their mobile devices. Concludes M:Metrics, “iPhone’s Internet centric interface combined with AT&T’s unlimited data offering have made it easy for listeners to access web content.” Other popular activities include search engines, video, and news and information.
More good news for Internet radio – mobile streaming is beginning to monetize. Pandora recently announced that Best Buy will be the first advertiser on their iPhone mobile streaming platform, followed by Becks Beer. Each will be the exclusive iPhone/Pandora advertiser for a month. I checked it out today – downloaded the Pandora app on my phone and entered my Pandora username and password, and there it was, the Best Buy logo at the bottom of the screen, right below the album artwork. It’s great to see advertisers spending on mobile streaming.
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The Radio Advertising Bureau has launched an impressive effort this week with WADV Radio – an Internet radio station broadcasting live this week in NYC for Advertising Week. Ad Week, in its 5th year this year, is a huge event that encompasses many conferences and seminars – some paid, many free to those who register. According to the website, it’s meant to provide a positive face for the Ad Industry and showcase excellence.
WADV Radio’s website shows a list of interviews that they have conducted, which are streamed live and offered for download. It’s good content — interviews with The New York Times, Facebook, Ad Age, Canoe, Saatchi and Saatchi, McCann Erickson and more.
WADV Radio is hosted by Triton Media, and produced by the Radio Advertising Bureau. It’s a great showcase for the Radio Industry – and Internet Radio! The site offers live streaming, podcasts, twitter updates, and even photo sharing on Flikr. Kudos to the RAB for this brilliant showcase of Radio’s digital relevance to the Ad Industry!
As discussed yesterday, PPM data is available on AM/FM stations that are encoding and meeting certain standards. Arbitron will measure AM/FM Streaming stations in either one of two ways – if the station is simulcasting 100% of the content, including commercials, then the data measured can be combined with broadcast station numbers as one audience. PPM measures in-market listening, so it makes sense that stations that are completely simulcasting on the internet should get credit for the streaming portion of that audience.
If the station is not simulcasting 100% of its audience – and is instead inserting different commercials on the stream (or different content for that matter) – then its stream is measured as a standalone station and must meet the minimum reporting standard of .495 for a weekly cume rating in order to show up in the report.
Should stations simulcast their streams?
This raises an interesting dilemna for broadcasters who are streaming. Should they simulcast their streams to earn additional credit in their Arbitron market report, or sell and insert different commercials on the stream? Some broadcasters are choosing to simulcast, hoping that credit for their online audience will lessen the ratings drop they’ll see as a result of PPM measurement. Knowledgeable sources such as RAIN’s Kurt Hanson agree – it’s unlikely that any station’s online audience will at this point significantly increase its market share.
What’s best for advertisers?
More importantly, Internet radio’s best asset is that the audience is online – and can react to an online call to action in an ad, while traditional radio commercials – often reaching people in cars – mention phone numbers or physical addresses or even texting as a call to action. Accountability and Return on Investment are so critical to advertisers these days. Broadcasters of AM/FM stations should develop a streaming business model that encourages advertisers to create ads for online listeners.
Arbitron recently released a report on PPM measurement results for August which includes some measurement of AM/FM stations’ streaming audiences. In order to be eligible for measurement, stations have to be encoding the stream for their measurement standards which include certain sample and bit rates. According to this report, 395 AM/FM streaming stations were ready for reporting. Of those, 11 made the .495 weekly Cume Rating minimum reporting requirement.
So what does this mean? First, it’s not surprising that so few stations meet that minimum reporting requirement since the internet radio audience in general is vastly smaller than the broadcast radio audience. Good evaluation of an internet radio station can only compare it to other internet radio stations. In this report, stations are compared to broadcast stations. What this actually demonstrates is that PPM, diary, or otherwise, sample sizes are not going to be sufficient means of quantifying individual internet radio station audiences because the samples are designed to capture the audiences of much larger stations. You’d need a MUCH larger sample if you were designing a survey specifically to measure Internet radio stations.
This report also released some very general information profiling Internet radio listeners. Internet streaming skews 25-54, and is a work day, work week oriented audience. Listeners are well educated. All things that have already been defined about the audience. Of all 25-54 panelists, 9.4% listened to encoded streams of AM/FM stations. That number does not include listening to Internet only stations, podcasts, non-encoded stations, and out of market stations which are not included in the surveys.
Wifi in cars is widely discussed as the promised land for Internet radio, but what will it take and how much will it cost the consumer? Chrysler started selling cars with in-car wifi access and therefore in-car internet radio access in August. But anyone can purchase the router for their car and subscribe to the service directly from Autonet Mobile. The cost is $499 for the router and a $29 per month ISP subscription fee. Once installed, your car is its own wifi hotspot.
These costs are about twice the cost of putting a satellite radio in your car and paying that monthly subscription fee. My guess is that this spells more bad news for satellite radio, as I assume that consumers will choose internet access in their car, which allows browsing, gaming (for kids, not drivers), directions, and internet radio as well as other things. But it’s worth noting that satellite radio’s limited success is often attributed to the cost of dedicated hardware and subscription fees.
Internet radio in cars will not be free. To listen, you can buy a Jeep or other Chrysler car, add on the hotspot service, which Chrysler calls Mopar, but is also known as Autonet Mobile, or get the router installed and bring along your laptop to stream your favorite station. Great – but maybe a little involved, costly, and cumbersome at this stage.
In-car wifi may be a tipping point for internet radio, but it will have to come with greater ease of use than the current technology. We can see it with binoculars on the horizon, but we’re not there yet.
There’s some debate as to whether podcasting – that is, the consumption of podcasts, is a significantly growing area worth investment of time by producers of audio content. Read Kurt Hanson’s summary of the debate here. I’d like to weigh in with some thoughts from a business perspective.
The appealing thing about podcasts is that they provide audio content that the listener controls. In order for a listener to want control over audio content it has to be good. It has to be good enough for me to want to download, sync, and carry along for times when I can’t listen live OR it has to be good enough for me to want to listen to it instead of what I can listen to live.
We live in an age where pursuit of and control over content is desirable. Podcasts are not mass marketing tools. But they are by nature highly engaging. The fact that I go to the effort to find, download and sync several podcasts on a weekly basis demonstrates that I am engaged with that content. Actively, not passively. Advertisers are looking for of engagement. So, podcasts are an opportunity for content producers to increase the effectiveness of a campaign.
Where’s the Money?
So what’s the revenue model? Audio ads must be embedded or stitched into the content. The Wall Street Journal podcasts open with a tease or headline after which the audio ad runs. This is ideal for the advertiser because they are within the actual content. There is some debate about whether a downloaded podcast equals a listen – since once it’s on my ipod no one actually can verify delivery of the ad impression. BUT ITunes cleans off podcasts I have listened to every time I sync. So if I subscribe but don’t listen, I do not continue to receive that podcast and count toward more and more impressions.
Podcasts are valuable for the degree of engagement that they have with the listener. It’s not about the number of listeners who are reached, but how they are reached. The business model for podcasts relies on understanding and selling through that value at higher cpms, either as standalone campaigns or blended with other station offerings. This gives advertisers exposure to the audience in a highly engaged format and can increase a campaign’s ROI. Which is of course the bottom line.
Blackberry chose Slacker, Best Buy picked Napster – recently there has been some interesting movement with major brands preparing to offer dedicated music services with their devices.
Blackberry devices will have a Slacker player and access to Slacker’s services. Slacker offers 100 channels of programmed internet radio, along with the ability to personalize your experience by rating songs. They’ve been portable for a while with their own device, but this agreement with Blackberry will greatly expand the service. It’s unclear whether Blackberry shares ad revenue with Slacker in this deal, but I suspect they get something for handing over all those listeners.
Best Buy announced this week that they plan to purchase Napster with plans to offer the service, with music downloads and Internet radio, along with all the portable devices that they sell. Napster’s a questionable partner, the name once belonged to the very popular illegal music download site, and was reborn when Roxio bought the name and created a legal service. According to the LATimes, Napster recently posted a quarterly loss and said its subscriber base shrank to 703,000 from 760,000. Revenue fell 6% to $30.3 million. So Best Buy pays $121 million for a familiar but tarnished name that’s losing money. The upside for Best Buy is that they already sell LOTS of portable devices, so why not channel the use of those devices into traffic they can benefit from.
Portable devices are a promised land for Internet radio, and the folks who make and sell those devices see that. With Blackberry and Best Buy pushing audience to Internet radio, awareness of the medium will grow, audience will grow. Listeners may start out listening within the walled garden that their devices put up, but they’ll also discover how to listen to other online services.
The about to launch MySpace Music will offer ad-sponsored unlimited live streaming of content. Sounds like Internet radio! With record companies Sony BMG, Universal and Warner as so-called partners…
MySpace Music has announced Ad deals with several major advertisers and according to some reports (CNET, here) Jeff Berman, MySpace’s president of sales of marketing, said that “the premium advertisers paid big money, some even plunked down eight-figure sums.” He said “advertising on MySpace Music will go deeper and be much more creative than just posting some banner ads.”According to Adweek, “McDonald’s will sponsor free music downloads and have a presence among the customized tools on the MySpace Personal Music Player. State Farm’s brand will be visible throughout the site, gracing the music player and various playlists. The insurer will probably integrate its MySpace Music affiliation with its own content offering, NowWhat.com…. Toyota plans to sponsor “Toyota Tuesdays,” supporting free music downloads and rotating its ads on the music player for the next year.”
How will this impact Internet radio? One positive is that this launch will include advertising from the beginning, thus contributing to building a business model for Internet radio. I tend to think that stations that amass audience without running ads are creating an unfair playing field for the rest. I’m also an advocate of audio ads as a more effective use of the medium, and it’s unclear whether MySpace Music will run audio ads. This is something to keep an eye on since recently SoundExchange head Jon Simson said Pandora could only survive if they started running audio ads between songs. (Wired, here) So will the record companies new joint venture with MySpace follow their own advice?
In general I think the fact that a huge site like MySpace, with 120 million users, is going to offer music streams with an ad supported model is good for Internet radio. More listeners, more ads. The fact that they have already gone out and gotten some high profile advertisers is a good thing. It will be interesting to watch where they go from here.