An article in the Wall Street Journal yesterday points out that while Internet radio’s audience is growing, ad dollars are not growing at the same rate. Gordon Borrell, a local media consultant, points out that radio has been slowest of the traditional media to shift to online sales – taking only 2.4% of its overall revenue in online dollars, while television and newspapers see higher percentages (3.4% and 7%).
The reasons, according to the article, are that radio stations have been unable to charge enough for web commercials – advertisers are paying about half as much as they do for broadcast on a cost per thousand basis. That’s if they pay for it at all – according to the article many advertisers just see it as a sweetener to the broadcast deal.
I checked in with Tim Murphy, General Manager of Entercom’s successful WEEI.com who says it’s all about educating the buyers. “At Entercom Boston, and specifically WEEI, we have discovered that consumers will find world-class content through the distribution platform that is most convenient to them. Our focus, both for programming and sales, is to educate the media buyer that they can actually increase their reach & frequency against a hyper-engaged consumer by leveraging both streams as part of their advertising strategy.”
The WSJ article goes on to say that there is one exception to “how low can you go” pricing for streaming ads, and that’s Pandora, which one buyer said was actually 20% more expensive than broadcast radio spots in Los Angeles.
Let’s consider the value proposition that spots on Pandora, targeted to listeners in LA, offer an advertiser versus the same spots on a broadcast station’s stream in that market. On Pandora, the advertiser’s audio message will run between songs, not in a stopset with 2,3 or 4 other spots. It will be delivered to a registered listener – Pandora knows whether that listener is male or female, where they live and how old they are, so 100% of the advertisers impressions will be precisely in the advertiser’s demographic.
On the LA broadcast station or its stream, the advertiser’s message will run or be inserted over a broadcast spot, within a stopset with several other commercials. Demographic targeting will be based on format selection – but since all of those listeners are hearing the same programming, the commercials are delivered to everyone, not just the listeners in the target demographic.
There’s a much greater value proposition for advertisers on a station like Pandora and other online stations that control the number of commercials they air and offer targeting and other enhancements. If broadcast stations want to see pricing improve on their streams, they’ll need to start creating unique online programming and offering advertisers features such as targeting, interactive access to listeners and other cross platform enhancements.