Yesterday Investment publication Motley Fool named Sirius XM one of their 10 worst stocks for 2009 – meaning, in their words, “likely to go to zero.” Satellite radio, says The Fool (as they affectionately call themselves), is “just not necessary” given the explosion of Apple iPod and iPhone, and the newer trend of automotive mobile devices such as Ford’s Sync and other in-car routers that can stream free Internet radio.
I’ve predicted the demise of satellite radio before. It’s a business model that counted on lots of listeners willing to spend several hundred dollars for hardware and then another several hundred dollars a year for subscriptions to listen. Clearly, the thinkers behind that strategy did not see Internet radio as the disruptive technology that it’s rapidly becoming.
In the meantime, Sirius XM has apparently readied an iPhone streaming app which will launch soon (source here). At the same time, they’ve announced that they will charge their existing subscribers an additional fee to listen online. Way to go – when the ship is sinking, make sure you fasten your seatbelt rather than climb in the liferaft….
Internet radio revenues are looking good despite the tough economic climate. This week I checked in with the heads of the two largest Internet radio ad networks and while neither would get specific, both reported that business looks good.
Brian Benedik of Katz Online Digital Audio Network (formerly Katz Net Radio Sales) says “2009 will be a tipping point for ad supported Internet radio.” He says his network has added many new audio publishers and is “opening up new doors everyday with agencies who are discovering the benefits of Digital Audio…Expecting to grow exponentially this year”.
Doug Perlson of Targetspot, a network of Internet radio stations, says that demand is very strong for 2009, thanks to buzz created by iPhone and other mobile devices, and newsmakers like CBSRadio and Pandora. He says the size of their network gives them the critical mass that advertisers want and “the result is that more advertisers are buying and the buys are larger.”
Demand is up, the networks are growing, and advertisers are interested in spending money. It does indeed sound like 2009 will be a very good year for Internet radio.
I read an interesting article at MinOnline, an online publication dedicated to magazines, which declares Internet radio to be the “Next Big Thing” that arrived with little notice alongside social networking and video sites. The article says that streaming audio invites a range of publisher partnerships such as channels branded to a particular publication or editorial selection. Sharing audio content online is a popular social activity on sites like Facebook and MySpace, why not add an audio channel as a soundtrack to enhance a publication’s brand and appeal. It’s a web trend that publishers should not “take lightly”.
Creating online channels to suit consumer tastes and enhance a brand’s identity is a great idea. It’s a natural for publications – Paste Magazine, an independant music publication, has had a branded channel available for several years, and the New York Times website features classical music station WQXR (conveniently also owned by the Times).
Internet radio station AccuRadio has been producing audio channels for branded content use for several years for consumer products as varied as Silk Vodka and Puerto Rico Tourism. “It’s a very appealing product to advertisers and agencies because it’s an immersive branding experience,” says owner Kurt Hanson. “Last year we launched Slipstream Radio which is dedicated to creating and selling these branded channels.” Ideas for these types of relationships are endless – my personal favorite is a coffee channel featuring 400 songs (we checked) about coffee and branded for Dunkin Donuts, Starbucks, or Folgers.
Whether it’s a cross promotion relationship between an online station and a publication, or a branded channel provided to an advertiser, online audio content is a hot commodity.
Last week when I read that Google had decided to abandon its newspaper ad sales platform, I wondered if their attempts at selling broadcast radio inventory would be next. While I was mulling this over I received a call from Kate Kaye at Clickz, who had the same thoughts and wanted to know what I thought. Thanks to Kaye for sorting through some of the history on this, you can read her article here.
Google purchased dMarc Broadcasting early in 2008 as a way to enter the terrestrial broadcasting marketplace with dMarc’s broadcast traffic automation platform. Their thinking was that they would apply a similar business model to their AdWords program, which allows smaller advertisers to purchase highly targeted ads. From the beginning they encountered problems – many broadcasters simply did not want to work with Google and would not sign over any inventory. Without inventory, the were hard pressed to say they had targetability on a local level. They did eventually get a deal with Clear Channel, and then with Emmis, and their site now says they have 1600 stations.
Stations tend to use the program to sell off remnant inventory, and as I told Clickz, there’s plenty of remnant inventory in this economic climate, which might make it easier for them to make inroads with stations.
Google has yet to enter the Internet radio market, but a company that has a similar business model in that space is Targetspot. Targetspot sells targeted ad campaigns to small businesses and sells inventory for Entercom, CBSRadio and other broadcasters. Last fall, they added a national sales strategy to their approach when they purchased National Internet Radio Rep Firm RL Radio. Recently, they’ve added more and more stations to their network. It would appear that their two pronged strategy of selling directly to local advertisers as well as using sales pros on a national level is working. They’ve succeeded in aggregating a substantial national network of inventory.
Apparently Google is staying in the broadcast radio ad sales game. Which makes me wonder whether they have begun to eye the Internet radio space as a source of inventory. In this economy, they may find a few more broadcasters interested in hearing what they have to offer.
According to tech blog Techcrunch, Pandora has begun to air audio ads on its stream. This is great for Internet radio. Pandora is the darling of the Internet radio industry — they’re probably the best known Internet radio station, and certainly the best known streaming audio app on the iPhone. They get lots of positive press which brings lots of new listeners to Internet radio.
The decision to run audio ads signifies that Pandora will contribute to developing a successful business model for Internet radio that includes audio messaging as a key component. Audio commercials streamed within the content are a much better way for advertisers to reach an Internet radio station’s audience than display ads for obvious reasons – if you’re listening, you’re not necessarily watching the website.
This could also help in the ongoing royalty negotiations between the record companies and Internet radio companies. One of the objections that the record companies argued when Pandora claimed they could not afford the rate was that Pandora was not attempting to monetize audio ads.
Pandora has said they plan to air audio ads infrequently, which will benefit both advertisers and listeners. Most importantly, this will benefit the evolving Internet radio industry, as one of its best known players gets serious about contributing to the development of a successful business model for commercial Internet radio.
Arbitron recently posted October and November audience reports for seven online radio networks on its website. In November, Arbitron reports that the cume of the entities that they measure is close to 8.5 million on a weekly, Monday to Sunday, 6am to midnight daypart.
The Targetspot Internet Radio Network is the largest measured network on the report with a weekly cume of 5.5 million and nearly 450,000 AQH. That network includes 4 of the other, smaller networks on the report: CBSRadio, Yahoo/Launchcast, Live365, and a small RL Select sub-network. CBSRadio ranks second on the report as a standalone – including the AOLRadio audience which was absorbed into that network during 2008. A newcomer to this report, ReplaceAds, takes third place on this ranker, with a cume of 2.2 million, and Clear Channel’s Online Music and Radio network has a cume of close to 1.6 million.
Arbitron’s online audience measurement is obtained from web research company’s comScore’s panel data, which Arbitron licenses, utilizes and rebrands as its online radio product. The service measures only subscribing entities, which makes it impossible to draw any conclusions about the total Internet radio listening universe.
Interest in listening to podcasts is growing, according to research by Pew Internet and American Life Project. Nearly one out of every five adults (19%) have downloaded and listened to a podcast, and that number is up from 12% in 2006. Podcast listeners are more likely to be men, and experienced Internet users. They’re also more likely to be under 50 years old – in fact, the percentage of younger generations downloading podcasts has nearly doubled since 2006. Not surprisingly, people with a broadband connection at home are much more likely to download podcasts.
The amount of podcast content, both audio and video, available for download has also grown significantly – according to the study, Podcast Alley, a podcast directory website, cataloged more than 26,000 podcasts with more than 1 million episodes in Nov. 2006. That number has nearly doubled to some 43,000 podcasts and more than 2 million episodes today.
Itunes is largely responsible for the increase in podcast popularity – the Itunes store heavily promotes its podcast content, and makes it relatively simple to subscribe to a podcast and receive regular episodes on your computer. Other forces driving increased podcast listening include broadband penetration, a proliferation of mp3 devices, and more and better content available.
It’s relatively simple to subscribe and listen to audio podcasts. Itunes lists many podcasts categorized in various popular categories such as technology, news, politics, comedy, fiction, and more. Once a listener selects a podcast they can choose to subscribe, which means that each time a new episode of that podcast show is available, it will be downloaded into Itunes on their computer for easy transfer to their ipod or other device.
The process requires action on the part of the listener. This makes podcast content an appealing place for advertisers who are looking for a greater degree of engagement with a listener. The key to monetizing podcasts is not in selling a high number of impressions, but rather in finding the right advertiser to fit the content, and featuring that advertiser with targeted messaging before, after and perhaps within the download. If desired, advertisers can include incentives to return the listener to a website with a code in order to gauge return on their investment.
United Airlines will offer in-flight internet access on certain flights from New York’s JFK to California’s two largest airports – LAX and San Francisco International starting sometime in second quarter, according to tech blog GigaOm. United flights will become wifi hotspots with the new service provided by Aircell’s Gogo service.
And so Internet radio is available in the sky as well. Other airlines launched partnerships with Aircell in 2008, including Virgin, American and Delta, and reportedly most major airlines are in “advanced discussions” with the provider.
While this is not likely to be a huge source of new listening, it’s more evidence of the coming ubiquity of Internet radio.
Said Jack Blumenstein, Aircell president & CEO. “Passengers love Gogo Inflight Internet service and the freedom it gives them to be productive, connected and entertained. Forward-thinking airlines like United are putting the power of Gogo in their passengers’ hands and reaping the revenue and customer loyalty benefits that it brings.”
Direct response advertising will be popular in 2009 as advertisers focus on results and more inventory is available. According to AdAge, these are good days for direct response marketers, who are seeing better deals for inventory than they have in the past.
Most interactive ad dollars are performance driven, often with payouts that are based on a cost per click or cost per acquisition basis. With proper audio messaging and banners or codes, Internet radio can compete for these dollars effectively. This recent chart of cost per click data on various advertiser industry segments shows that some industry payouts – insurance in particular – can be fairly high. CPC’s are calculated based on closing ratios and average sales. Higher closing ratios and average sales net higher payouts.
More good facts – Nielson recently reported which sites do best in converting their site traffic to purchases. Proflowers, an online retailer who has used Internet radio consistently for years, converts close to one out of every three visitors to purchases. A list of the other successful online marketers is here.
Digital media can be purchased on a CPM basis and then analyzed on a cost per click or cost per aquisition basis as well. A savvy buyer can purchase digital media using a cost per thousand, and then analyze results using return based metrics. A savvy seller should ask and understand what the buyer’s expectations are upfront for the campaign and monitor results. Digital media buyers expect to be asked for this information and provide it weekly and sometimes more often. They also expect to be able to cancel campaigns that are not delivering for them — another reason to stay in touch with the results.
Performance driven campaigns are an opportunity for Internet radio. Sellers who get to know the turf can reap the rewards.
Internet radios certainly made the hot topic list at this year’s CES held last week in Las Vegas. Everyone was talking about new devices that allow listeners to stream their favorite station. Lots of companies introduced new streaming devices: Philips, Acoustic Research, RCA/Audiovox, and VTECH. Chumby‘s tiny Internet radio/Alarm Clock was even featured as part of Sony Chairman Howard Stringer’s keynote address. Sony will produce a next generation Dream Machine alarm clock in partnership with Chumby. According to sources including the blog Paid Content, Stringer said that in two years 90% of Sony devices will have connectivity.
In addition to streaming table top and stereo devices, Blaupunkt and miRoamer made news and a few “best of show” lists with an announcement of an in-dash Internet car radio – gaining kudos from industry blog Venture Beat and Popular Mechanics award for innovation. And mobile streaming platform Flycast was featured by PC World as one of the best products at the show as well.
Thanks to Internet radio, technology and electronics are taking a second glance at radio. During his speech, Consumer Electronics Association CEO Gary Shapiro said Radio is deeply ingrained in the U.S. culture. According to website mysanantonio.com, Shapiro said, “Radio in the 1930s lifted the economy out of the Great Depression.” People listened to news and entertainment and drew hope and inspiration from the broadcasts, he said. Today, radio continues to play an important role in the consumer electronics industry, which generated $1 trillion in economic activity globally last year, Shapiro said.
I’m not sure if Internet radio will lift the economy out of our current misery, but it sure is looking more and more like it might be one of the few bright spots in 2009 and that’s a very good prospect.