THE STAKES – INTERNET RADIO AUDIENCE MEASUREMENT

We have been watching the recent developments in Internet radio audience measurement.  Here are the stakes:
ARBITRON   is trying to develop new business and generate more revenue
PANDORA wants to have audience data to sell advertising and capture a portion of ad revenue going to radio
ANDO/TRITON wants ARBITRON to stay out of Internet audio measurement so it will not have a giant competitor
CLEAR CHANNEL et al don’t want Pandora to be able to compete for radio advertising.
What all parties need to consider is what advertisers want.  I have to chuckle at some of the points raised recently by Arbitron.  Does a moving people meter really mean someone is listening to radio?  If an audio source is present near a people meter did the listener actually initiate it?  Was it really their choice?  I have always believed that server side data is better than an estimate.  PPM methodology is an estimate based on a representative sample (many argue the sample is too small).  With server side data you have actual data – use it.  Ando Media currently uses server side data to prepare its Webcast Metrics Internet radio top 20 ranker.  Arbitron has announced that they are going to utilize server side data as well although many of the details are still forthcoming.  Arbitron is being held hostage by its existing terrestrial radio clients over measuring Internet radio only stations such as Pandora.  Of course terrestrial radio companies represent the bulk of Arbitron’s current revenue.
Audience data is utilized in Internet radio as a predictor of the number of ad impressions that can be generated.  Audience measurement data is not used to calculate ad impressions. When a listener starts a stream then most ad servers, including Ando, will then insert ads prior to the stream playing ( preroll) or then begin inserting audio on receiving an ad cue.  You do not have to be listening for any set period of time.  By its very nature, in Internet radio each impression is counted when a listener actually hears the ad.  Do advertisers care that different people hear different ads?  You bet but not why ARBITRON raises this issue.
Maybe what we need is an impression measurement validation firm.  In any event it’s going to take some time to sort out Internet radio measurement and it’s unfortunate that there is not a larger advertiser voice?  Some big dogs are in the fight.

RADIO – “CANNIBALIZE YOURSELF OR SOMEONE ELSE WILL”

As one of the founders of Ando Media I keenly follow developments in measuring Internet radio audience.  As can be seen in the following graph, terrestrial radio’s Internet radio audience has flatlined for some time, no pulse, no signs of life.

This data is taken from Triton Digital’s monthly audience ranker (formerly Ando Media).  The slight dip in July 2011 represents a summer seasonal decline as this same listening pattern happened in 2010.  Of course Pandora stands out on this graph.  The top 5 broadcasters include Clear Channel and CBS.  They have a long way to go to catch Pandora.  I am hopeful that Clear Channel will close at least some of the gap due to its elimination of all ads in its streams and new customization options announced 9/8/11.  The most recent Triton Digital ranker for September is too soon so reflect any impact these moves may have.

I have just read Steve Jobs biography.  He stated that “if you don’t cannibalize yourself, someone else will.”  This is the position the radio industry is in. Many broadcasters are afraid that promoting their stream will result in declines in their over the air audience.  Yes it may in the short term but long term it’s either offer the listener what they want or they will go elsewhere.  Where did all of that Pandora listening come from?

This is the position the radio industry is in.  All stations should cut back substantially on their ad units.  This is one tactic that stations can take immediately and increase their audience.  Sell two spots per hour make it a premium offering to advertisers.  These two advertisers get audio, preroll and display opportunities.  Make sure there are a number of different creatives for each ad type to avoid listener fatigue.  This is only step one in what terrestrial radio stations that are streaming need to accomplish.  Personalization and customization are next.

ANGEL STREET CAPITAL INVESTS IN GNAX

Angel Street Capital recently completed an investment in GNAX through BSCP GN Holdings, LLC.  With over 10 years as an industry leader in the southeast, Global Net Access (GNAX) operates two world-class data centers, AtlantaNAP and DallasNAP, offering mission-critical data center colocation and cloud services. GNAX provides superior technology solutions to a variety of organizations and industries worldwide.

Privately held with headquarters in Atlanta, GA, GNAX was founded in 1999 and has retained net income profitability since 2003.

INTERNET RADIO JUST BECAME EASIER TO USE IN-CAR

One of Apple’s new services announced for the iPhone 4S is Siri.  Siri is a built-in application that takes voice recognition to a whole new level.  Siri is going to be an incredible application to utilize in the car allowing you to be hands free.  While certainly there is a broad range of services Siri can perform, the one of course that I key in on is listening to radio and in particular internet radio.  I envision asking Siri to: “stream mvyradio.com”, “skip song”, “don’t play that artist”, “pause”, “raise volume”, “share this track with my friends”.  The possibilities are endless and the concern over accessing content while driving and navigating through listening options is going to disappear.  This also has some implications for terrestrial radio as skipping to another station just became a little easier.  I have already ordered my iPhone 4S and can’t wait to try it out in the car.

ANGEL STREET CAPITAL INVESTS IN PLACESTER

Angel Street Capital, LLC recently participated in Placester, Inc’s Series Seed Preferred equity raise.  Placester, located in Cambridge, MA, participated in the TechStars Boston 2011 program.  Placester is an Ad Network for the real estate industry and it’s platform provides value to both advertisers and publishers by enabling the ordering, serving, and fulfillment of ads in the real estate vertical.

For advertisers Placester’s platform serves as a hub to plan, purchase, and monitor advertising across multiple vertical-specific and traditional publishers offering increased ROI through access and analytics. For publishers the platform is a complete solution for order management and scheduling as well as ad serving. Placester’s technology allows publishers to reduce operation costs while improving pricing through data and access.

The founders of Placester are Frederick Townes, the CTO of Mashable, and Matt Barba, a real estate veteran.

WILL ARBITRON GET INTERNET RADIO AUDIENCE MEASUREMENT RIGHT THIS TIME?

Arbitron has recently made clear it’s intention to measure Internet radio’s audience. This will be Arbitron’s second attempt at measuring Internet radio. Arbitron purchased Measurecast at the end of 2002 and then shut it down in 2004. Measurecast utilized server side audience measurement similar to what we eventually utilized for Ando Media’s Webcast Metrics (we sold Ando Media to Triton Digital). When it shut down Measurecast, Arbitron believed that advertisers and agencies would rely on panel based estimates which had been Arbitron’s methodology for measuring the Internet in other areas. I have always been amazed that one could even think of using an estimate when actual data is available. This data is one of the factors that has driven the meteoric increase in Internet advertising including search. Arbitron would like to be able to combine terrestrial radio listening with Internet radio listening and produce one collective audience number. This may be difficult due to different methodologies. This is one reason they may resort to utilizing an estimate again.

Arbitron will either purchase Webcast Metrics or start their own Internet radio measurement service. Whichever path they choose let’s hope they get it right this time. Arbitron’s involvement may lead to added credibility for Internet radio. However given their terrestrial radio customer base their thinking may be weighted more toward what’s good for their terrestrial radio clients who are streaming, rather than the Internet radio only services such as Pandora, Accuradio and others.

ANGEL STREET CAPITAL INVESTS IN LIVIO RADIO

 

Angel Street Capital recently completed an investment in Livio Radio. Livio Radio, a Detroit-based team of auto infotainment and digital audio veterans, has established relationships with key content providers, automotive companies and retail players and has a validated, scalable business model that addresses a large, global market.
Specifically, with the car being the final frontier of the rapidly growing internet radio market, Livio Radio has developed a suite of hardware products & middleware/software solutions that enables full in-car audio experience via smartphone for nearly any car – new or old.  Put simply, Livio has enable Internet radio in the car.  I recently wrote a post on Livio which can be accessed here.


ANGEL STREET CAPITAL INVESTS IN iWEB

Angel Street Capital recently completed an investment in iWeb as part of a going private transaction.  iWeb had previously been traded on the Toronto Stock Exchange  (TSX-V: IWB).  iWeb has been providing hosting infrastructure with is shared web hosting, dedicated servers, managed hosting and colocation services for over a decade.

Founded by Martin Leclair and Eric Chouinard in October 1996 and headquartered in Montreal since 1998, the company has enjoyed steady growth since its inception, currently employing more that 170 hosting specialists and operating four data centers in the Montreal, Canada area.  Today iWeb is one of the largest web hosts and Internet hosting infrastructure providers in Canada. 

INTERNET RADIO IN THE CAR


In car listening is going to drive significant growth in Internet radio listening.  In car listening to terrestrial radio represents the largest percentage of total listening and I believe the same will be true for Internet radio.  Internet radio in-car listening is already occurring by connecting your mobile phone in various ways to your car’s stereo/entertainment system.  I have always thought that it would be the phone that ends up being the device that serves as the conduit for in-car Internet radio listening.  No one wants to set up yet another interface for listening and smart phones have now become practically ubiquitous.  The collection of wires, adapters, bluetooth devices all deal with what is termed the auto after market (making a system work given what is already installed in your car).

One of the companies focused on in-car Internet radio listening is Livio Radio.  Livio has many systems for making in-car Internet radio listening a possibility.  The one I like the best is called “The Kit” which works with Blue Tooth.  You download the Livio Radio app (which has 45,000 internet radio stations) and plug the nice looking compact device into your 12 volt lighter port.  Via bluetooth the Livio phone app starts and your choice of Internet radio station plays via your car speakers.   This approach works for the auto aftermarket but I would rather not have to insert the Livio device into the lighter port.  The after market solutions will continue to be utilized for several years given the millions of vehicles already on the road today.

Only major Internet radio brands such as Pandora will be able to integrate with car manufacturers so that they are built in.  There is a multi-year lead time and Pandora has been working on car company integration for some time.  Car companies will not deal with a multitude of Internet radio providers. However, Livio Radio will make it possible for all Internet radio brands to participate.  Livio has developed  an API  (think interface) that allows this seamless integration between internet radio stations and a cars entertainment system.  The ease of use which terrestrial radio has had in the car for decades has to be present for large scale consumer adoption.

Terrestrial radio has a hard time understanding that in the end the consumer will decide what, where and how they would like to consume audio content.  I believe consumers want Internet radio in their cars.

What Pandora Contrarians Don’t Understand

There are many who doubt Pandora’s ability to become a profitable entity like this article that appeared in Inside Radio on 6/9/11.  While it is true that music royalty costs will increase the larger Pandora’s audience grows, what is not understood is Pandora’s ability to generate revenue even given its existing audience.  Pandora had an AAS in the March 2011 Webcast Metrics 2011 Top 20 Ranker (Monday- Sunday 6 AM- Midnight) of 498,135.  Assuming Pandora ran 13 units per hour like terrestrial radio would result in gross revenue of $567,276,4138 (assuming a $10.00 CPM) compared to that reported for the 12 months ending January 31, 2001 of $119,333,000.  While I have assumed the same audience for 24 hours of the day and a $10.00 CPM what I have not taken into account is Pandora’s ability to generate revenue from video preroll advertising and display (both of which it is currently doing).  I would also argue that with Pandora’s ability to target ads CPM’s will be higher than the $10.00 I have assumed.  Consequently just from in-stream advertising the potential revenue is almost 5X that of what Pandora has recently reported.  Assuming a 20% sales cost would result in income  from operations of $334,000,000 rather than the slight loss actually incurred.  Pandora’s business model is not a suicide pact but one that is waiting to blossom and bear the fruit from many years of labor understanding what it’s customers/listeners want.
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