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Internet Radio Advertising


Overview

The radio was commercialized in the early 1900’s, taking 38 years to reach 50 million people. The Internet was opened for commercial use in 1988, taking a mere 4 years to reach 50 million people (Social Media Revolution, 2009). What does this say about the two together? With the radio and Internet combining forces, they’re making way for a whole new medium, Internet radio advertising. Internet radio advertising is one of the fastest growing mediums in the world of advertising, growing a rapid 26% in 2008 (“Internet Ad Sales,” 2008).

Audience qualities

This rate of growth can be attributed to the increase in Internet radio listeners. In 2005 only 8% of Americans aged 12+ listened compared to the 17%, equivalent to 42 million people that are currently listening (Heine, 2009b, p. 2). With this channel growing at such a fast pace, advertisers are responding. It’s no wonder Internet radio is seeing such a large increase, the average consumer spends 15% of their time on the Internet while 9% of ad budgets are on the web (“Internet Ad Sales,” 2008).

Costs

Internet radio has grown to become very popular, and while advertising has been slower to catch up, there’s no stopping it now. With over 54 million listeners a day, according to Bridge Ratings Radio Research Firm, advertisers can’t afford to lag behind. Advertisers are expected to spend over $25 billion on online ads all together and over $500 million on Internet Radio ads alone, according to cMarketer (Miller, 2008, p. 8). With this high usage of the Internet and Internet radio numbers climbing, there comes the need for Internet radio advertising, and plenty of room to grow. Advertisers can develop a 30 second ad that will run for 3 months at $300 a month, having their ad viewed over 120,000 times (TargetSpot.com). It’s tools such as these that are pushing the medium forward.
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Responsiveness

This new medium is changing the face of typical radio ads. According to the Radio Advertising Bureau, the total digital revenue jumped 13% in the first-quarter of 2009. This jump was equal to $101 million with a bulk of that money share based on advertising featured on radio station websites (Heine, 2009).

Limitations

While this is a growing media channel, some marketers don’t yet see Internet radio advertising as a stand-alone medium. Marketers have some hesitation when it comes to Internet radio advertising because they feel they need a better measurement. They’re looking for a measurement that will allow them to compare how an audience listens to online versus on-air, according to MediaVest (Heine, 2009a). Some feel the medium has yet to prove itself worthy. Internet radio advertising seems to be great for national campaigns, having the ability to generate numbers based on international listeners. However, it’s the local advertising that some feel is making no significant progress (Heine, 2009a).

Reasons for using this media

There is a ray of light in what seems to be a disadvantage for this growing channel, Ando Media’s Webcast Metrics. Ando Media is viewed as Internet radio’s primary audience measurement service. Ando Media is able to provide audience quantification through server-side metrics obtained directly from the station or its bandwidth provider. Through this process they can obtain data by region, station group, and station (Heine, 2009b, p. 4). One of the biggest advantages of Internet radio advertising would be the ability to quantify web radio audiences with far more precision than terrestrial radio (Heine, 2009). It’s Ando Media that is helping perfect this precision marketing and allow for better local advertising.

Successful advertisers

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Who exactly is using this new idea in the world of advertising? There are many larger Internet Radio websites that stream music, including Pandora, Slacker, and Rhapsody. Pandoraaverages four minutes of ads per hour compared to terrestrial radio that averages ten minutes per hour (Bruno, 2008). Along with these larger companies, smaller radio stations now stream music, offering both local and national ad opportunities. One of the things a larger website has the ability to do is figure out which ads to target at which people. Pandora requires that new members provide their gender and birth date, giving them access to demographics immediately. Having this information allows them to precisely position ads at marketer’s target audiences (Pandora.com). CEO Tim Westergren reports that Pandora limits itself to display ads on its web pages, bringing in $20 million at the end of the year (Bruno, 2008). There are many companies that have warmed up to the idea of Internet radio advertising, including Sears, Dell, Wal-Mart, ProActiv, JCPenny, ProFlowers, and even Navy. This new media channel is able to reach more than 17 million people, allowing companies access that they weren’t able to reach before (TargetSpot.com).

Interesting qualities

The two biggest agencies helping to push Internet radio advertising forward are two that have a well-established foundation. Both TargetSpot Internet Radio Advertising Company and Katz Media Group are helping advertisers get their message on streaming radio websites. TargetSpot was formed in March of 2007 by Doug Pearlson. It was founded with money from CBS, with other backers including Union Square Ventures, Bain Capital Ventures, and Milestone Venture Partners (Miller, 2008, p. 8). TargetSpot then acquired Ronning Lipset Radio, an advertising representation firm. Ronning Lipset was a large ad sales force and had strong relationships with many big brands. They sold ads for Internet radio such as Yahoo, Live365, AOL, and CBS. With the two joining, TargetSpot created the largest online radio-advertising network. At one time these were the only two businesses offering this type of service. They’ve now come together to become the leader in the space (Miller, 2008, p.8).

Scheduling

Although TargetSpot Advertising is thought to be the leader, Katz Media Group also offers and helps develop online radio ads. The two operate by allowing advertisers to log on to their websites and buy both audio and visual ad space for more than 600 online radio sites (Miller, 2008, p. 8).

Reach and Frequency

Streaming now accounts for 10-15% of total listening for terrestrial radio stations (Heine, 2009a). Ad revenues from streaming radio has risen 25% in the last year (Heine, 2009b, p. 3). It is with percentages like these that have advertisers spending money on Internet radio advertising. Spending on Internet radio advertising will surpass terrestrial radio with 9.5% of ad budgets worldwide going towards online media (“Internet Ad Sales,” 2008).

Impact

There’s no mistaking that Internet Radio Advertising is here to stay, it’s a matter of where it’s going. Its inherent advantages give it a bright future and there is a lot of potential for this newly found medium (Heine, 2009b, p. 4). Web radio has a growing audience. However, in order for this media channel to reach its full potential, proven ways to zero in on local markets must be offered. This medium has started off being nationally sound, but it now needs to geo-target (Heine, 2009a). According to Horizon Media VP/Director, Maja Mijatovic, Internet radio advertising is going to lead the whole industry towards this new and exciting media outlet.

Pandora Radio (notice ads)

Rhapsody (notice ads)

References

Bachman, K. (2008). TargetSpot's radio buy extends its online reach. MediaWeek, 18(37), 6-6. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=34954350&site=ehost-live
Bruno, A. (2008, November 22). Nothing But Net. Billboard.
Bruno, A. (2008, May 24). Radio Waves. Billboard.
Cahill, A. (2009, March 28). Pocket Streams. Billboard.
Heine, P. (2009a, August 8). Ears are not enough. Billboard.
Heine, P. (2009b, July 19). Streaming It Like You Mean It. Adweek.Com, pp. 1-4.
Internet ad sales to pass radio's ; search-related spending drives a 26 per cent gain. (2008, June 26). The Toronto Star, pp. B03.
Kang, C., & Writer, W. P. S. (2008, March 8). AOL, CBS Team Up for Radio , advertising. The Washington Post, pp. D01.
Miller, C. C. (2008, October 20). Emerging force In Internet Radio. The New York Times, pp. 8.
Morrissey, B. (2009, February 12). Google Quits Radio Business. Adweek.Com.

Pandora.Com.
Social Media Revolution. (2009, September 7). YouTube.Com.
TargetSpot.Com.