Ad targeting in Internet radio does not deliver for advertisers at the local level. No it is not rooted in a problem with technology. As recent announcements from Triton Digital and Abacast make clear, the technology exists. However, since most station’s audiences are small and a significant amount is out of market listening (often over 40%) targeting will not yield impressions needed to generate significant revenue. As a result targeting at the station level makes little sense other than possibly to guarantee to an advertiser an ad won’t be heard out of the metro. Targeting is useful on a national basis as a combination of stations on a network can deliver results as long as the target is not too narrowly defined. Pandora is probably the only service that can target locally without aggregation due to the size of its network.
Most radio stations do not collect listener data for their streams so the only targeting that can be done is geographic based off of an IP address. Listeners will give up this data for something they value if it cannot be obtained from other sources, e.g. Facebook. Some targeting is done based on station format, e.g. an AC station’s audience is primarily 25-54. This is not always accurate. IP addresses are not always correct as well which can result in lack of delivery of the campaign.
Mobile targeting is perhaps the holy grail as you can reach consumers closer to the point of purchase. As with targeting to desktops the problem of scale is even a greater issue in mobile. We have heard that Pandora is having difficulty monetizing its mobile audience which is 70% of their total audience. I don’t quite understand this as I would argue that engagement is greater with a mobile phone than on a desktop (you may leave your desk but typically you don’t leave your phone). I believe that longer term we will see premium CPM’s for mobile. Effective ad creative and proper delivery will help.
Tunein is perhaps one of the largest directories of Internet radio stations with over 50,000 stations listed with most available to be streamed. The company has been signing up stations to be part of their directory although we do not know the business terms of these deals. I think it is safe to assume that they are not exclusive. Tunein was created by the merger of RadioTime (on line station guide) and TuneIn (mobile Internet radio app). While Tunein provides information about radio programs and can stream your favorite station, for many years they allowed users to connect to a station’s stream through their guide without having the station’s explicit approval. Some radio station companies such as CBS have asked Tunein not to carry their streams. Although obtaining a $6 Million investment from Sequoia, they struggled for many years on how to monetize the service. Since they did not have a relationship with the underlying station they had no way to insert audio ads. The revenue component could only come from preroll ads (audio or video), display ads, and featured listings. Even preroll ads are questionable as many stations insert preroll video so Tunein would have to insert a preroll video ad in front of another preroll video ad, something that would not make for a great user experience. They appear to be running only ad network display ads. There were preroll videos in front of some streams but again these are most likely the ones inserted by the stations themselves.
While no public data exists on the size of the Tunein network in a press release dated 3/22/12 announcing the carriage of The Wall Street Journal Radio Network, Tunein claimed to have 30 million listeners and be in the top five in Apple’s App Store’s music category. It would be great if Tunein would release more audience metrics but I can only surmise that they need to develop their business model first by entering into an agreement with stations whereby they can obtain part of the ad inventory or solidify premium placement for accessing streams. Any measurement would a duplicate of that also measured at the individual station level but at least we would have a better feeling for the use of the Tunein platform. Tunein is a great service and one that we watched the founder, Bill Moore, develop and where we came close to investing on several occasions. Whether we made the right decision or not remains to be seen.
I have received numerous comments about the post I wrote last week entitled “What do Broadcasters’s see in iHeartRadio”. My post has been interpreted in a number of different ways. Let me first state that iHeartRadio is a great service and one that I have loaded on my iPhone. Clear Channel has markedly improved the user experience, especially on a mobile device. In order for terrestrial radio to continue to be successful I believe these elements are key:
1) Reduction in number and length of ad breaks – iHeartRadio’s decision to run no ads was a great decision. When ads are introduced hopefully the spot load will be low.
2) Customization – With its newly designed customized listening experience iHeartRadio is on the same playing field with other services such as Pandora and Spotify for the first time.
I would like to highlight one reader’s excellent point. For smaller stations that can’t afford to invest in a mobile platform iHeartRadio is a way to for their listener’s to access their streams on mobile devices. Also integration with Facebook may be beyond smaller broadcasters capabilities. Further, due to its larger scale, iHeartRadio’s potential access to in-car systems would give smaller stations in-car presence.
My intention with last week’s post was to have readers take away that stations looking for monetization should not rely on iHeartRadio’s platform to deliver meaningful revenue.
Is it extension of their brands? Is it increased advertising revenue? A new distribution platform? A number of broadcasters have agreed to have their internet streams added to Clear Channel’s iHeartRadio platform. Even though I believe in added distribution channels, there simply is very little benefit for stations to join and distribute their programming via this platform. Being added just means that you are one of more and more stations/channels on this increasingly fragmented platform. While stations may get to keep their in-stream audio ad revenue I’m sure Clear Channel is keeping all pre-roll and display revenue. Will this platform result in some added ad impressions and therefore revenue? Yes but not enough to buy a cup of coffee. Of the five featured stations today, all were owned by Clear Channel.
For Clear Channel this is a beautiful thing. They get content for free to add to the offerings on their platform to the consumer and take advantage of the effects of “the long tail” (No one broadcaster will benefit dramatically but Clear Channel may in the aggregate).
It appears that this is more a feel good strategy that terrestrial radio is doing something in digital. As I have noted before, Clear Channel is tiny compared with Pandora’s audience (about 15%). Based on Triton Digital December 2011 Internet Audio ranker, even if you added all of the top 20 terrestrial stations’ audience including Clear Channel it would still only be 42% of Pandora’s audience . What’s more, Pandora’s audience is increasing rapidly while the terrestrial stations audience has not increased over time.
For the most part there is nothing compelling on radio station websites. The primary reason that most people visit is to start the station’s stream or find information about what a station is playing. In a just released survey by The Media Audit, visits to station websites declined YOY from 17.7% of U.S. adults to 17.6%. As more and more options exist for listening to a station’s stream off website (through mobile app, Facebook, etc.) traffic will continue to decline. Most stations don’t promote their website because there is no original content and when the station’s website is mentioned it’s usually due to a contest which in my view artificially drives traffic to a site. Tweets and posts show up in a listener’s stream in many cases so no need to access the website. So how can radio develop unique content? Without investing a considerable amount of funds I don’t think there is much that can be done. However, I do believe there are other opportunities to create content and develop other brands. For example, one company I am working with Inner City, has for many years put on a weekend event in New York City called Circle of Sisters where over 40,000 people attended. There is an opportunity to further develop this well known brand apart from the radio station.
At Angel Street Capital we have invested in a local news site called GoLocal Providence (www.golocalprov.net) and they are in the process of rolling this same platform out to Worcester, MA. The site has been incredibly successful in challenging the local newspaper. Initially GoLocal launched in Providence with a local radio station partner. This opportunity exists for radio companies but I would suggest partnering rather than trying to develop it internally. Radio stations have a giant megaphone to launch other brands as they have been doing for their advertisers for many years. It’s time to use this megaphone themselves to develop brands they have an equity stake in.