Recently more and more national advertisers have begun naming Interactive Ad Agencies as their agency of record and putting them in charge of either running or coordinating their entire marketing effort. This is noteworthy for several reasons. Obviously, the Agency of Record for an account controls the relationship with the advertiser as well as the strategic spending.
In a recent article, Ad Age gave several examples: “last spring IMC2 was tapped to handle all creative, media and strategy for Mars Direct, which makes personalized M&M’s and Dove chocolates; and AKQA is getting ready to roll out TV and web campaigns for Flip, the sub-$100 digital video camera that has created amateur cinematographers out of the YouTube masses, as part of its agency-of-record duties.”
The implications of this shift for the radio industry are significant. Radio sales firms are heavily staffed with sellers who are aquainted with single focused expertise. For example, radio sellers are great at selling :30s and :60s and discussing the ins and outs of Arbitron, but are like fish out of water in a conversation about impressions, cpm, cpp, ctr, and Comscore.
The fact that digital shops are so focused on those metrics is precisely why advertisers are choosing them as AOR. According to Ad Age, “Late last year, Forrester completed a study of several interactive agencies. The report’s author, Brian Haven, argued that interactive shops are closer to the consumer, in a better place to mine the rich insights and data available via the web, and in the right place at the right time to capture consumer behavior changes.”
Advertisers have been calling for more accountability and evidence of return on their expenditures for a while now. Unfortunately, large sales firms have allowed themselves to remain distracted by the “bird in hand” rather than retraining significant portions of their staff to sell to digital shops. Rep firms are now beginning to sell digital assets on behalf of their clients, but they need to focus on selling those assets to digital shops, rather than trying to educate and convince traditional buyers to buy mobile, streaming, and website assets.
The industry is changing. The question is, how can the current system of buying and selling radio on a national level adapt? (An especially good question given that last week Interep announced that it has filed for Chapter 7, spelling the end of one of the two major radio rep firms.)
Broadcasters should work now to develop or adopt a digital system that allows them to deposit their inventory and allows buyers to easily purchase inventory. Rather than dedicated reps selling spots on certain stations in certain markets and competing against other reps and stations for higher rates and shares, a team of national sellers should spend their time bringing more national advertisers to radio, and leading them to this digital marketplace where units are bought and sold. Everyone in the industry should focus on growing the pie, and making radio in all its forms more available and accountable on a national scale. Can it work? I’m wondering how much more there is to lose by trying.
News and Talk stations are seeing the benefits of offering streams and podcasts of their content. A recent survey conducted by News Generation, a public relations company with an expertise in radio, showed that of top news and talk radio stations surveyed in the top-25 markets, 100% of the 25 stations stream their content online, and all but one offer their content as podcasts as well.
News and Talk broadcasters have realized that the original content that they produce has lots of value – and distributing it on different platforms makes sense. The survey went on to provide specifics on four stations in particular: WCBS-AM in New York, WBZ-AM in Boston, KTRH-AM in Houston, KXL-AM in Portland, and KMOX-AM in St. Louis. The stations said they offer between 75 and 100 percent of their audio content as podcasts. WCBS sees 700-800,000 downloads a month and significant revenue from its podcast content.
By offering their content online, stations are expanding their audience. CBSRadio’s news stations across the country saw a huge jump in listenership during their live streaming coverage of the Vice Presidential Debate, and CBS-AM in New York got a 200% lift out of streaming the final Presidential debate live. Stations can expand their offerings online with alternative programming or in-depth reporting, or simply rebroadcast their on-air programming online. Either way, streams and podcasts are a great way to grow audience.
iHeart Radio, Clear Channels streaming application for iPhone, is currently ranked in the top ten free apps being downloaded by iPhone users. iHeart Radio is the second streaming radio application to hit the top ten in the app store, about a month ago Pandora was in there for a while. Both iHeart Radio and Pandora, as well as AOLRadio and Flycast are all in the top ten free downloads in the category of Music applications.
Regardless of the scorecard, this is great news for Internet radio. iPhone has broken the ice for Internet radio on mobile devices. With its massive popularity, more and more people are being introduced to streaming radio everyday. In an article in Ad Age, Evan Harrison, exec VP of Clear Channel’s online music and radio unit, said the app has also grown the stations’ cumulative streaming audience by 3% to 5% in its first two weeks. Harrison goes on to discuss their plan to use this platform to introduce listeners to other products that they have available for online listening.
Last week Flycast also announced a new partnership with Blackberry that will put its streaming portal and application on those devices. Earlier, Slacker had announced similar plans for its own dedicated product but with Flycast, which is essentially a portal for limitless numbers of stations, many more stations will be able to offer streams to Blackberry users.
Increased mobility is a key factor to increased growth for Internet radio – to grow the audience further Internet radio needs to move away from PCs and into pockets. iPhone and Blackberry are the two most popular wireless pda devices – and for the last quarter Apple iPhone beat Blackberry for the first time. The fact that both devices are actively pursuing and promoting streaming radio applications is a meaningful indication that they understand that their listeners want to use their devices to access online music.
In the midst of all the talk about the downturn in the economy, I have read several articles recently that discuss possible scenarios for online businesses during the recession. The good news is that digital media will still grow next year, as it continues to take more and more out of traditional media expenditures. Especially interesting is the trend within digital media itself for spending growth in new forms, while banner/display spending declines. Even within digital media the traditional forms will suffer. This sounds like an opportunity for Internet radio and podcasting.
A second, new debate has begun to surface which I find extremely relevant. Given the endless numbers of new sites and innovative ad opportunities, will there be enough ad revenue to go around? In other words, can you assume that if you develop a large enough audience (since we’re actually talking digital audio here), will ad revenue follow? The answer to this question is not necessarily. Expect this recession to be a game of survival of the fittest. Winners will not be the ones with the biggest audience or the largest traffic, they’ll be the ones that have the best ability to monetize – through ads or other means.
Advertisers will be spending, but experimenting less than they might have during better times. They’ll be scrutinizing their return, and looking for ways to quantify their spending. That can be a great opportunity for Internet radio. Internet radio can provide a strong return to advertisers when executed with good creative and understanding of the metrics required for proper analysis. Sellers who understand that will build better relationships with advertisers. Learn to speak the language of interactive buyers. Focus on returning results against dollars invested. Do that, and watch your revenue grow, recession or not, next year.
Because podcasts are downloaded onto a personal device before being listened to, the actual delivery of the commercial can’t be confirmed. This creates a challenge in a world where buyers are looking for actual delivery measurement, as they are with interactive media in general.
Volomedia has just launched a product that works with iTunes and appears to be able to deliver and confirm delivery of the podcast content beyond the download to the actual opening of the file. Assumably, once the file has been opened, the audio commercial has been delivered. This makes sense and seems acceptable.
The fact that the Volomedia plug-in will interface with iTunes is great news. ITunes is the main gateway to podcast content, generating the vast majority of the podcast download traffic that any content provider receives. But it’s been a struggle for those content providers to confirm that traffic and quantify delivery to advertisers – and therefore monetize their podcast content.
According to Volomedia, besides enhancing podcast advertising and audience measurement, the product has been built to enhance the podcast experience for consumers. Now, podcasts that contain the VoloMedia plug-in will feature three clickable buttons, identified as “Share,” “Bookmark” and “More” – which allow users to automatically spread podcast content much like they do with video content that is played via the Web. Since awareness of podcasting is still relatively low, this viral function could boost audience as well.
The revenue model for podcast content is different than that of Internet radio – we’re talking about a smaller but highly engaged audience. Fewer impressions, more targeted and more valuable. For more info on this read my post Podcasts Are Engaging. Volomedia’s ability to confirm delivery of the content and commercials should help publishers to monetize their podcast content.
The four major record labels have launched another lame attempt to control the way listeners listen to music with SlotMusic. SlotMusic is DRM free music sold on a microSD card, that can fit into a SlotMusic player, or other devices such as mobile phones. Reportedly, these cards will sell for $15-20 bucks for high quality sounding music from your favorite artist. Just like CDs, or cassette tapes, records, or 8tracks.
According to SanDisk’s press release, “The effortless player doesn’t require a PC, Internet or any time spent managing music. Consumers simply choose their slotMusic or music-filled microSD card, pop it into the device and will be enjoying their favorite tunes in seconds…”With no need for computers or cords, the Sansa slotMusic Player gives consumers more time to play, and less time to worry about managing or downloading their music,” said Daniel Schreiber, senior vice president and general manager for SanDisk.
Are they kidding? I saw a full page ad in the New York Times newspaper this week for SlotMusic which claims that this will revolutionize the industry. Memo to Sandisk, EMI Music, SONY BMG MUSIC ENTERTAINMENT, Universal Music Group, and Warner Music Group: It’s over! There is not a way to go back to the days when listeners purchased their music on albums packaged in large or small disks or rectangles. Internet radio and mp3 players have changed all of that forever. Stop throwing money away on new file formats and full page ads for them. Instead, how about focusing on the platforms listeners like – such as Internet radio. Why are you so interested in partnering with a bad idea like SlotMusic, and are doing everything you can to stymie the growth of Internet radio stations?
It would be great if the record companies would join us in the year 2008 and spend their time thinking of ways to let digital music flourish rather than trying to repair and build higher fences around their products.
Last week Mel Karmazin of the newly merged Sirius XM was quoted in several publications on the bright future of his company. He made several particularly interesting statements during the interview.
According to Mediaweek, he stated that 96% of his company’s revenue will come from subscriptions. Translated, I would say that means he’s pretty much rejecting the ad model. This is a new direction for XM and Sirius – they have been actively pursuing ad dollars, however successfully, at the network radio level. It makes sense – I never thought you could run ads on a service after charging subscribers a monthly fee and get away with it with your listeners.
So this means Sirius XM is a subscription based service, and largely takes them out of play for ad dollars. Relying on subscribers to pay a monthly fee as well as purchase dedicated hardware is a losing plan, when today’s consumer is surrounded by more and more choices everyday of ways to listen to great, deep channel programming such as Pandora, and great devices like IPhones to listen with.
Studies have shown that listeners are quite willing to trade listening to an audio commercial for free content, it’s the minority that will pay a premium for commercial free content. As commercials become more targeted and more relevant to the listener, the willingness of consumers to tolerate those commercials will increase.
According to Karmazin, satellite radio’s audience stands at 19.5 million. According to Arbitron’s Infinite Dial Study, awareness of Satellite Radio has been flat for three consecutive years. The biggest source of new customers for satellite radio comes from new cars being sold – so this recession is doubly bad news. I’d be willing to bet that satellite radio has peaked, and the future is flat, if not slipping.
A Bigger Pie
Internet radio’s audience is 54 million and growing. The number of devices that can stream Internet radio is also growing rapidly, and accessibility is increasing as well. Both XM and Sirius stream their programming online for subscribers. But they should do more to convert listeners to online listeners and start making radios that can access internet radio. And while they’re at it, how about letting listeners choose between an ad-supported model or an ad free subscription model? Sounds like a better formula to me…
This has not been a good year for automotive sales, and domestic car dealers are doing particularly badly. A recent study released by Autobytel surveyed hundreds of auto dealers to find out how the recession is affecting them and what they are doing about it. While the news is bad all around, domestic car dealers in particular are feeling the downturn, with 73% reporting lower sales this year than last.
According to this survey, one of the main strategies to deal with the lagging sales is to increase the amount of their budget spent on Internet marketing. 69% of the dealers surveyed reported that they will increase their spending online, contributing to a 91% that will either spend the same or more than they did last year on Internet marketing. Interestingly, the brands surveyed reporting the strongest sales gains in 2008 — Honda, Hyundai and Nissan — also ranked as the top three brands with the highest percentage of dealers increasing their Internet marketing spend. Read more about the survey here.
This is a great opportunity for Internet radio to show local dealers that it can drive local sales online. Local Auto Dealers have long been a strong category for local radio stations. Extending these relationships into a campaign on the streaming side makes a lot of sense. Local broadcasters should package website banners, streaming audio, and maybe even video gateways to create online campaigns that can deliver results and show local auto dealers that they’re an excellent online option for their ad dollars.
Today Targetspot announced that it has purchased RLRadio for an undisclosed amount. Ronning Lipset Radio was the largest independant Internet radio ad sales network, with a list of stations that included CBSRadio’s group of streaming stations, AOLRadio (now operated by CBSRadio), Yahoo’s Launchcast, Live365, and some other smaller online stations. Co-Founders Ronning and Lipset will remain in place as Co-Presidents.
Targetspot’s advantage in the Internet radio marketplace is an ad insertion technology that enables them to identify and target deliver streaming audio commercials by geographic location and demographic for stations that register listeners for that information. They do business with Entercom, CBSRadio, and many other groups. CBSRadio also has an investment in Targetspot. It’s possible that CBSRadio provided the common ground for these two entities to consider a merger or buyout of one by another.
In July of 2007 Katz Radio Group acquired the other large independent Internet radio ad sales network, Net Radio Sales.That company represents many large broadcast companies including Cox, Entercom, Cumulus, CMP, and many others as well as many large independant Internet brands such as Digitally Imported, AccuRadio, 1.FM, Club977 and Radioio. Recently, they have also been exploring some joint selling opportunities with Clear Channel’s group of streaming stations. Katz also has a strong relationship with technical partner AndoMedia, who provides some tech and audience measurement advantages to that network.
The new partnership gives Ronning Lipset some new technical features that will add value to their relationships with their stations and advertisers.It also gives them access to additional funds that – according to industry buzz – they had been seeking. One interesting note is that in March Targetspot received funding from Bain Capital Ventures. Bain was one of two private equity firms involved in the recently completed buyout of Clear Channel, who owns Katz Radio Group (and Net Radio Sales).
New people are discovering Internet radio everyday. But right now people have to think about how to connect, where to connect, or what to connect to in order to listen. When wireless access becomes easy and ubiquitous, Internet radio’s audience growth will really snowball and it will become a utility of everyday life – as broadcast radio is today.
A few recent announcements indicate that time is getting closer. Last week Sprint launched XOHM, their WiMax mobile broadband service, enabling people in Baltimore to have one internet connection that provides broadband service to their at-home modem as well as their laptop, pda, or whatever, wherever they are in the city. It’s like combining your cable or dsl account with a 3G broadband account.
Besides the fact that it’s more reliable than some other wifi networks, Sprint’s XOHM is revolutionary because it will not require dedicated equipment, as Verizon and AT&T do. According to ZDNet, “While the WiMAX network is very similar to the cellular network in its physical infrastructure, it was conceived from the ground up to be a pure IP network, built on open standards, and designed to be as open as the Internet itself. In that sense, WiMAX is simply a wireless on-ramp to the Internet.”
This is the kind of platform that will bring Internet radio to life. While it’s exciting that Pandora, Clear Channel, and lots of others are available now on IPhone, that’s still one device and AT&T customers only. XOHM opens that up to all devices, and provides a platform for invention of endless additional ways to use a ubiquitous broadband connection.
Right now it’s only in Baltimore, but next up are DC and Chicago. Sprint is merging XOHM with Clearwire to create a new WiMAX company, with backing from Intel, Google, Comcast. Philadelphia, Dallas/Fort Worth, Boston, and Providence, Portland, Atlanta, Las Vegas, and Grand Rapids are on the list of markets to roll out.