Since there’s a lot of gloomy news these days, I thought I’d reprint a post I recently read in GigaOM, a tech blog that I subscribe to. It’s written by Rags Gupta, who was at Live365 when I was busy launching Net Radio Sales. His retelling of how hard it was starting an Internet radio station back then, before many people knew what Internet radio was, lends some perspective to keep in mind.
With all the doom and gloom of the past few months and all signs pointing to hard times ahead, I’ve been thinking back to earlier in the decade, during the dotcom bust.
I was at Live365, the Internet radio network, and we had burned through millions of dollars with no appreciable revenues nor a business model. Our CEO/founder had left, and I found myself promoted to the management team well short of my 30th birthday and with no management experience to speak of. Our investors, having lost faith in the prior management team, had the Company on a very tight leash. So tight that we depended on a wire transfer every two weeks to meet payroll and other obligations.
At one point, our ISP shut us off, and we had no Internet access at the office. I had to get an employee to drive a check over so that they would turn us back on. Even worse, our site went down when the people we bought bandwidth from got shut off themselves. It wasn’t our fault, but we were still down, and the worst part was that we didn’t have enough cash to migrate to another bandwidth provider. I’ll never forget one of our employees offering to make the Company a personal loan. I couldn’t accept it because I wasn’t sure if we’d be able to pay him back.
Amazingly, our users didn’t give up on us. They set up alternate forums to discuss what was going on, sent pizza to our offices and, most importantly, gave us moral support. I won’t go through the litany of hardship we faced but, suffice to say we almost went under a few times. We were able to survive through sheer will, the dedication of our employees and users and a lot of luck. There were so many lessons learned, but, in particular:
1. Be as transparent with your employees and other stakeholders as you can be. At one point, we had to tell everyone in the company that coming to work was optional and that the next payroll was in doubt because of our cash issues. Even though it was bad news, they appreciated the transparency. In hindsight, I would have been much more communicative than I had been.
2. Cultivate a trusted adviser or mentor outside of the workplace. I think people should do this anyway but it helped me a great deal to have someone I could talk to about the issues I was facing and dispassionately help me evaluate the scenarios and available options.
3. Remember whom you work for and where your fiduciary duties lie. Yes, you ultimately work for yourself. But, as a founder or management team member, you may have fiduciary duties to shareholders, both common and preferred, to employees, creditors and customers. Their interests can diverge even in the best of times and especially so when things start going pear-shaped. I made some painful decisions that ruined a friendship but were for the ultimate good of the company and satisfied my fiduciary and ethical obligations – and, to reiterate No. 2 above, I’m glad I had a trusted adviser to help me make sense of things during such an emotionally fraught period.
4. Accelerate non-advertising revenue models. This is a more practical recommendation. Even if your usage and advertising metrics are growing nicely, now is the time to accelerate development of non ad-based models and prioritize the other revenue streams more highly. Your investors and poptential investors and acquirers will appreciate this. Not only that but they are likely to discount your ad-based revenues anyway, so any momentum you can show outside of ads will bolster your story.
5. What doesn’t kill you will only make you stronger. Easy to say, hard to live through. But just keep telling yourself this when things really, really suck.
6. Pray! Seriously, luck plays a big role. Do whatever you can to make your own luck.
While it’s going to be a bumpy road ahead that will involve a lot of pain for many people, I think it actually will be better this time around: The Internet, the web and mobile are real media with real users, real revenues and real business models. Add to that the fact that it’s orders of magnitude cheaper to develop and go-to-market than it was then, and I don’t think the downturn in our general field will be as drastic as it was back in the day.
Imeem, a trendy social streaming music service, was named to AdWeek’s Top Ten Digital Hot Sites list earlier this year (see my post here ). Now they’re hot for another reason – they just announced that they’ve nabbed Kia Motors as inaugural sponsor of their mobile application for Android, Google’s mobile phone platform, with exposure across Imeem’s entire web based platform as well.
Reportedly, the ability to connect with consumers within a streaming social music experience that extends to portable devices drew Kia to the sponsorship. “imeem has created a way for advertisers to live at the center of consumers’ social music experience,” said Jason Meil, executive vice president and director of Innovations at Initiative, Kia Motors’ media, marketing and digital company. “Working with imeem will enable Kia Motors to meaningfully tap into an engaged community where millions of people express themselves with music and media on a daily basis.”
This makes so much sense for an auto dealer that wants to reach a younger consumer, establish a hip and trendy connection, and smash the traditional auto manufacturer advertising mold. Kia will be featuring the all new Kia Soul in this advertising.
It’s apparent that Imeem got creative with packaging elements that extend the brand across mobile and web based platforms that satisfied the advertiser’s needs. No doubt, the ability to be first advertiser to fully sponsor the platform is appealing as well. Earlier this fall, Pandora announced that Becks Beer and Best Buy had signed on as ad partners for their mobile iphone platform (read about that here). Despite the poor economy, Internet radio brands and their mobile applications are attracting new ad dollars.
Online retail sales will grow again this year, although at a smaller rate than in previous years. According to new information from Nielson Online, the challenge for most online retailers is not how to get the consumers to shop online – nearly 80% of online adults made a purchase online in the past six months – but how to differentiate their brand.
This is an opportunity for Internet radio, which combines the ability to deliver an online audience, with the unique ability to deliver an audio message to call attention to the retailer and drive traffic to a website.
Convenience is the main reason that consumers prefer shopping online – roughly 3/4 of those surveyed said they liked the fact that they could shop anytime they wanted, or that shopping online saved time.
Categories that traditionally do well online continue to be big winners, but new categories are emerging as well – consumers expect to buy more books and toys online than they did last year. The three biggest retailers mentioned in the survey were Amazon, Walmart, and Barnes and Noble.
While the news for this holiday season is not good for anyone, it’s better for online media and online retail than offline. Develop solutions that can help retailers capture online revenue, offer value, emphasize return. Those are the things that matter to consumers and retailers this year.
The news that Nielson will begin measuring broadcast radio listening in 50 smaller markets and has contracts with Cumulus and Clear Channel is good for the industry. Arbitron’s stronghold as the sole player in terms of radio ratings has choked the industry with mediocre measurement standards and poor accountability.
They have hoped to do the same with Internet radio. Six years ago Arbitron purchased a company called Measurecast that was the leader in server based measurement of Internet radio. Their press release stated their intent to create the standard for streaming measurement. About 18 months later they shuttered the service and replaced it with ratings gleaned from Comscore’s website traffic panel.
At that time I had recently launched a new company which intended to rely on station by station server based measurement from Arbitron’s Measurecast service. Our plan was to aggregate audience and sell the network to radio and interactive agencies. The high degree of accountability that server based measurement provides was an important element in our new media pitch: yes, it was new, but every impression could be accurately projected and accounted for.
I met with Arbitron to discuss my concern that they were eliminating server based measurement. Their explanation was that server based measurement was too expensive, and that estimates had sufficed for 40 years in broadcast and with the Arbitron name, they would be able to make that the standard in Internet radio as well. My point is this: for too long, Arbitron has not sought to create the best possible ratings service for the industry, rather, they have done as little as they thought they could get away with, and relied on their name and monopoly. Broadcasters have realized this, and have taken steps to bring another major player into the game. This will only serve to improve the quality of the research and benefit the industry.
Apparently Nielson’s initial plans will not include rating Internet radio listening by station. They will credit Internet radio listening and satellite radio listening to a PUR category (people using radio) – but not credit individual stations. So the listening will contribute to the universe, which would make it easy to add that measurement later.
To read more about Internet radio audience measurement services, check out my post here.
Most people don’t mind ad-supported business models for their digital content offerings, according to a new study by IBM’s Center for Business Value. In fact, 70% of the respondents said they prefer ads, and that’s great news for online content providers. A new media world has arrived and begun to impact traditional media business. To survive, media companies must develop new business models that distribute their content through online digital platforms.
Doing nothing, the study advises, is not an option. Examples of industries that refused to develop a solid digital strategy include newspapers and the music industry, which the study estimates lost $90 billion by ignoring growing discontent and new digital distribution innovations, causing them to alienate their customers and lose control of their media to Napster and other peer to peer platforms.
In the new media world, content is often user-created and accessed through open platforms. There’s an impending clash between content providers, who seek ways to protect and control use of their content, and aggregators, whose interest is to drive audience to content. Equally interesting is the fact that content providers are not seeing more of the revenue split than aggregators in these new digital content partnerships.
One excellent example of user generated content in an open platform is Wikipedia. The online encyclopedia contains more than 4 million entries, is entirely user-generated (and the content is user policed as well), and is one of the top 20 most visited sites in the world. Take that, Encyclopedia Britannica.
So while we’re focused on the user and giving them control over the content, why don’t we give them control over the ads and let them choose which ads they want and when they want them. Or let the users create their own ads. I bet the first time they said they were going to build a user generated encyclopedia people laughed too…
Arbitron recently released PPM data for October that contains some interesting information on streaming. Arbitron’s PPM measurement in ten markets picked up listening of at least one average quarter hour for 233 encoded stations. Here’s a breakdown of that – PPM measures AM/FM/HD stations (only) that are encoding their streams for such measurement. In the ten markets that they are currently measuring with PPM technology, a total of 233 stations were eligible for measurement because they logged at least one AQH.
That info is about the same as the info Arbitron released on PPM measurement of streaming stations last month. But this month they provide some additional info which begins to show some useful and interesting trends. For example, this chart from Arbitron’s site shows the share of PPM measured listening that is attributed to listening to streams. It’s important to note that these shares only recognize listening to AM/FM/HD encoded streams, and do not include listening to web-only streams, or streams that are not encoding for PPM pickup.
In several markets, PPM measured streaming is accounting for 1% or slightly more of the total listening that they are measuring.
Arbitron’s noted some other interesting information from their research as well: 74% of listening to PPM measured streaming occurs away from home; most listeners are employed full time, most listeners are 25-54, and listeners are likely to be college graduates. Again, this reinforces what we already know from earlier Arbitron studies and elsewhere.
Format related information provided shows that 15.8% of their measured listening in this period was to Adult Contemporary formats, followed closely by 14.9% to News Talk Formats – again underscoring the adult nature of the audience. It will be interesting to see if the dominance of those formats, News/Talk in particular, continues post-election.
While this info is limited to broadcasters streams, it’s great to have additional information that helps provide a clearer snapshot of online radio listeners and the penetration of listening in the top markets that are currently being measured.
Yesterday I wrote an article that said it’s time for Internet radio to have an independent association focused on bringing the industry together with the goal of increasing ad dollars. Putting the focus on ad revenue puts a bunch of topics on the table such as audience metrics, creative elements, campaign evaluation and best business practices.
Develop uniformity in the industry
An independent association for Internet radio could work to develop standards in terms of audience and campaign measurement. There are currently two viable audience research sources – Ando Media’s Webcast Metrics and Arbitron. This is acceptable – in website audience measurement there are several players (comScore, Nielsen) as well. But standards should be agreed to and metrics should be assimilated as much as possible.
The same association could work to educate interactive agencies and advertisers on best practices in terms of creative. Many interactive agencies have never produced an effective audio commercial – that’s obviously a stumbling block for the industry that could be overcome by an association that provided some coaching, gave some examples of successful campaigns, and provided a list of production resources (maybe including stations). And how about an independent group tasked with educating advertisers and agencies on Internet radio?
Currently, the agency buying world is divided into two types – traditional agencies that plan and purchase media using gross rating points, and interactive agencies that purchase impressions against cost per thousand pricing and analysis. It’s not difficult to convert campaigns from one type to the other, or present every campaign in both ways. The Internet radio association should develop a tool that works with both sets of data and allows agencies to make this conversion. Once buyers understand the metrics, they’ll be more willing to invest.
Next, establish best practices in reporting and invoicing that lend to transparency and accountability, and build trust with advertisers. The success of interactive advertising relies on delivering a higher level of accountability, and online radio needs to meet those expectations.
At the same time, stations need to be educated. The interactive ad world is a highly measureable and accountable one. Stations need to understand more about ROI calculations, click through rates, and other measurement factors that will be used to evaluate the success of a campaign. Streaming broadcasters in particular are not interactively savvy enough yet. Similarly, many online brands’ sellers are not familiar with the world of the traditional broadcast radio buyer, and need a resource to help them speak that language.
Increase Ad Revenue
There are many players in the Internet radio world, including streaming broadcasters, independent online brands, and very large stand alone brands such as Pandora, Yahoo Launchcast, and even MySpace Music. There’s bound to be things that can’t be agreed on and are better left off the agenda. Focus on the common ground – the desire to promote the flow of dollars for Internet radio. The rest can take shape as the conversation progresses.
Last week the Interactive Advertising Bureau (IAB) announced several major initiatives designed to standardize many elements of working with interactive ad campaigns and publishers. The initiatives encompass everything from standardizing and automating the exchange of business orders to issuing workflow and ad serving best practices to reduce discrepancies and increase advertiser/agency satisfaction. The goals of the initiatives are impressive because they focus on making the medium easier to use and more reliable for the customer.
According to Mediapost, one of the issues prompting these major steps was that a 2006 review by the American Association of Advertising Agencies found that online was the medium least capable of trading electronically, and the one generating the highest discrepancy rates for agencies and advertisers. Whether that’s true or not, these initiatives aim to cure that. The E-Business standards outlined cover everything from the RFP, proposal and insertion order, to invoices and real time reporting, all handled through one electronic data exchange platform.
Again, according to Mediapost, these E-business standards will be integrated into companies’ order management, ad-serving and billing software and undergo beta-testing through next year with partners including Donovan Data Systems, Turner Broadcasting, DoubleClick, Atlas, CBS Interactive and Yahoo.
This is the kind of system that will encourage more dollars to flow to interactive. It promises a high degree of accountability, uniformity, and ease of use. It’s the kind of system that agencies have been trying to get radio to build for a long time. And it’s being built by the IAB, an independant association, for the benefit of the industry.
There’s no doubt in my mind, when I read something like this, that Internet radio needs to find a voice, establish an association, and begin looking forward. The buzz around Internet radio right now is significant, and the promise is huge. The broadcast radio industry does not have the futuristic outlook it is going to take to create major opportunities within the interactive world for online radio. It’s critical for the Internet radio industry – both streaming broadcasters and online brands – to come together, create its own independant association, and design its future as an interactive medium by focusing on the best way to promote growth through accountability, uniformity, and ease of use.
Last week the Wall Street Journal’s Sarah McBride wrote an article questioning the future of HD Radio. While the tone of the article is not very optimistic for HD, it does point out that Internet radio may well be the bright spot for all the broadcasters who are developing additional channels of programming for HD, because they can easily also stream those additional channels and amass streaming audience, which is growing at a much faster rate.
HD Radio is a touchy subject with many broadcasters. Many of the larger broadcasters are financially invested in HD. There’s also a lot of wishful thinking with HD – broadcasters would really like to believe that HD technology is going to reinvent radio – as FM reinvigorated AM radio. This, argue the folks at iBiquity, is not a quick process, so it’s not surprising that it is taking a while to catch on.
I understand the comparison to early FM, when folks did not have radios that could tune in the FM band and the market had to wait for the hardware to get distributed within the population. The problem with that comparison this time around is that there are too many easily available alternatives to compete with HD. The HD Radio Alliance says that according to their research 3 out of 4 persons are aware of HD technology. Arbitron Edison found that number to be closer to 1 in 4. My own casual, non-scientific research among non-radio people makes me think the Arbitron Edison number is optimistic. I don’t know anyone who has purchased an HD Radio or plans to.
With the announcement last week that Delphi, a major manufacturer of auto radios and stereos, will be partnering with a company to produce automotive wifi devices, is an example of the kind of technology that will sideline HD Radio. Why would anyone want an HD Radio in their car when they could have a radio that can access the internet? Car manufacturers want to install devices that will help them sell cars and I just don’t think anyone is going to get excited about a radio that can get HD. To be fair, I think satellite radio is done for as well – see my post here about that.
The WSJ article does point out that HD channels that are streaming on the internet are making headway. So while HD technology is a distraction for broadcasters in terms of the investment they have made or are making in equipment to broadcast in HD, their investment in developing programming for those channels will not be wasted as long as they grab the opportunity to distribute and monetize those channels online as well.
Have you seen the tv ad for iPhone that calls it a game changer? A few months ago when Pandora announced that they were launching an application that would allow iPhone users to listen, I went and bought an iPhone because I knew that this would make a difference for Internet radio.
Four years ago I gave my husband a Roku Soundbridge that wirelessly connects iTunes on our computer with our stereo system so we can stream radio throughout our house. We use it all the time, and seldom listen to our cds anymore.
Can you stream radio from your phone? I had a blackberry I tried streaming radio on that (didn’t hold the stream very well), and I’ve tried to do it with my daughter’s phone as well (unsuccessfully).
I’ve played with tabletop wifi radios, and I need to get one. (I think the Chumby is pretty funny, so I may try that).
Sign me up now for a Delphi/Autonet radio for my car (see my post here for more on that). I’ll be first in line when they roll those out.
My point is this: if you’re in the radio business, and you’re not investigating Internet radio in these new forms, you should begin immediately. Give tabletop Internet radios away to buyers for Christmas. Give them to your sales department too. Make sure everyone who works for you knows how to listen to your stream on a computer – many probably don’t. In fact, some companies in the business even tell their employees NOT to stream radio on their computer. Um. I think that’s sending the wrong message.
The Internet radio train is boarding now. Find your seat…