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While the answer to this question is yes – not all stations are sharing in this growth.  For the period September 2009 – June 2010, Internet radio listening to the top 20 audio groups increased 27.2%.   Unfortunately terrestrial radio, including even the largest broadcasters for the most part, is not sharing in increased audience levels.  As you can see below, the one entity enjoying substantial growth is Pandora.  Since Ando Media, LLC commenced measuring Pandora’s audience (Sep 2009), Pandora has seen a 103.9% increase in its audience while the top 5 station groups (excluding Pandora) actually declined 14.8%. The top 5 radio groups include the large terrestrial broadcasters such as CBS (CBS includes Yahoo and AOL) and Clear Channel. [Please note all data analyzed herein was taken from the monthly audience information prepared and made publicly available by Ando Media, LLC based on 6 AM-8 PM Monday-Friday].

*effective December 2009 – mobile stats for Pandora are included

**June stats include both terrestrial & internet only stations

Measurement of Pandora commenced in September 2009 and at that time Pandora’s audience share was slightly smaller than that of CBS (note September results for Pandora did not include mobile measurement).  In the month of June 2010 Pandora represented 45.7% of all listening based on the top 20 Internet radio streaming entities as measured by Ando Media, LLC.  This percentage increased from their 28.5% share of the Top 20 in September 2009.

Since the above charts include those stations able to report listening only in the U.S., it does not include many leading Internet only stations.  Commencing in June Ando created a way for these stations to measure only their U.S. audience.  As a result Internet-only groups now rank as follows based on the June ranker:

#9 – Digitally Imported, Inc

#12 – 977Music.com

#17 – AccuRadio

#19 – 1.FM

From September 2009 – June 2010 these groups collective audience increased 19.36%

Internet only radio groups in the June ranker accounted for approximately 50% of all listening.

I can only conjecture as to why Pandora is enjoying audience success.  I believe there are two themes here (1) Pandora’s ability to customize a user’s listening experience – Terrestrial radio is taking the exact same programming from over the air and streaming that programming.  The presentation and interface need to be customized for the channel where it is being consumed. A Pandora listener can be active and create new channels based on multiple song/artist input or choose a format of music depending on mood.   (2) Ad Inventory – Terrestrial radio’s high number of ad units per hour cannot effectively compete for audience where a strong competitor is carrying 1/10 the amount of ad inventory.  This low inventory load is not only true of Pandora but for most internet only stations.  The type of ad inventory also matters.  For example, 60 second commercials drive listeners to other alternatives.  While it may be argued that the internet only stations low commercial load means they are not monetizing their streams today, where audience exists, advertising will follow.

Targeting – Given Pandora’s required registration and technology it is able to target advertising to specific listeners based on location, gender and age.  This makes the user experience more customized allowing relevant content to be served.  While many terrestrial streaming stations have the ability to target it is typically only based on geography as other listener data/registration is not required of listeners.

Pandora’s audience is almost 10 times the size of the largest terrestrial station’s off line audience.  Given Pandora’s audience size they will be successful in leveraging their way into mobile and in car devices). Terrestrial radio is fragmented and for the most part they cannot agree on a unified approach (as evidenced by the current controversy over the radio royalty proposal organized by the NAB).  Pandora has announced a local sales initiative which will result in them being a competitor for not only national advertising but also in a broadcaster’s backyard advertising market.

Terrestrial radio has a window of opportunity to capitalize on IP delivery of its content.  However, just continuing to stream their existing commercial laden content will not work in the new ecosystem.

Robert Maccini was a founder and previously served as the CEO of Ando Media, LLC the leading internet radio audience research firm.  He was also a founder of Net Radio Sales (which was sold to Katz Media), the leading internet radio rep firm.  Mr. Maccini can be reached at rmaccini@angelstreetcapital.com or 401-854-1850.  Angel Street Capital provides consulting and investment funding for digital media start up companies.