BY KURT HANSON
Here's a phenomenon that I don't believe anyone's noticed yet, perhaps because no one's ever done the math: Despite all you've heard about the low CPMs that websites are getting for banner ads, those seemingly-ineffective little banners are going for about the same CPMs as 60-second-long radio spots -- and, perhaps even more amazingly, the audio spots being sold by Internet-only broadcasters are going for a signficant multiple of that price!

Certainly I'm guilty of having never done the math before. The reason that perhaps no one else has either may be because advertising agencies have trained radio people to think in terms of CPP (cost per point) and not CPM (cost per thousand).

(This is a clever technique on the part of media buyers to keep stations on the defensive when negotiating rates, since comparisons across different buys and markets become much more difficult to do. And radio, lacking leadership on this particular issue, has just gone right along with it.)

So here's the math: A successful radio station in a desirable demo (e.g., P25-54) in a major market (e.g., Los Angeles) is, I believe, currently getting a rate of about $750 to $1,000 per spot in prime dayparts. During such dayparts, the station might have an AQH audience size of around 50,000 people. That works out to a CPM of about $15 to $20 -- i.e., $15 to $20 for each thousand people who hear the spot once.

As a double-check, let's look at average spot rates from not too long ago for several of Milwaukee's more successful radio stations:

The double-check shown above suggests that a $15-20 CPM for radio spots may be, if anything, perhaps a bit high.

Meanwhile, we've all heard that websites are trying to sell banner ads for a $30-50 CPM and are often getting at least a $10-20 CPM.

What do you think?
Is it conceivably possible that those annoying little 468x60 pixel banner ads, glimpsed briefly and probably not clicked on, could be as effective an advertising vehicle as a well-crafted sixty-second radio commercial? So much so that the banner ad's brief exposure might be worth the same or even twice as much as the :60 radio spot?

Now let's go a step further and consider audio spots on the Internet-only radio webcasters.

According to the contacts I've been developing in that business, audio spots on those low-spot-load, extremely-niched music channels can sell for, depending on the perceived desirablity of the channel's listeners, as high as a $100 CPM! All right, I admit it's possible they're worth several times more than a banner ad; I can understand that comparison. But five to ten times as much as a broadcast spot?

And here's the kicker: Internet-only radio stations aren't selling :60s as their standard unit...

                           [Insert dramatic pause here.]

...they're selling :15s!

As Paul Harvey would say, that's the rest of the story.

Could my math be wrong?
Frankly, this is another of those occasions when it seems like my math must be incorrect. This just doesn't seem possible! I've been on the road for a week, so maybe I'm just worn out and I'm making a mistake somewhere. If I'm using inaccurate pricing estimates, or dividing where I should be multiplying or something, please e-mail me here.

But if I'm correct, then it seems to me that pricing is misaligned somewhere.

One possible conclusion might be that radio spots are worth a lot more than radio stations are getting for them. I have felt that for years.

But if this misalignment continues, it suggests to me that this is a clarion call for radio stations to start using ad insertion techniques on their streamed webcasts.

In other words, it's a strong argument for stations to replace the local broadcast spots on their streamed audio with Internet-only spots, given their far-more-lucrative CPMs. And several Internet companies currently offer stations the ability to do so, including RadioWave at the server (i.e., station) level and Hiwire at the client (i.e., listener) level.

Although what are you going to do -- cover up a set of six :60's with a set of twenty-four :15's? (That's an article for next week.)

Do you have any opinions on this topic? We can discuss them at the RAB later this week in Denver...or you can contribute your feedback for publication in RAIN here.

Department of Viral Marketing: If you have friends or colleagues that you believe might enjoy reading this newsletter, please click here and we'll help you them about us. Thanks!

If you're streaming music on the Web, you're probably in violation of federal law -- the Digital Millenium Copyright Act of 1998.

The rules of the DMCA, which was designed to help protect the music industry in light of the fact that copies of digitized music are perfect copies, are many. As I understand it, they include the following: (1) On your webcast (even if it's an exact duplicate of your broadcast signal), you can't play four consecutive songs by the same artist or more than two in a row from the same album. (2) You can't play the same artist -- or songs from the same boxed set -- more than four times in any three-hour period. (3) As of October of last year, you must identify title and artist information for every song. (4) You can't reveal which specific songs are coming up next (or soon).

However, the recently-announced agreement between Internet-only Webcaster WWW.com and the RIAA may change the rules of the game. According to WWW.com's VP/Marketing, Mike Romano, the firm's recent agreement with the RIAA gives his company a release from many of those rules...

More details tomorrow in RAIN.

Former AMFM Los Angeles market manager for Bob Visotcky has joined Silicon Valley-based Internet startup Sonicbox, the firm will announce later this week.

Vicotsky has been hired as the firm's VP/Sales & Operations, based in a new office he opened last week in Burbank. He'll be working with the firm's CEO/Founder, Niko Bolas, to introduce a software/hardware combination that allows consumers to listen to Internet radio stations through their home stereos (via an in-home FM transmission from the PC to the stereo). Sonicbox also plans to offer a wireless remote control to allow users to switch stations when they're not near their PCs.

Prior to his most recent position as Los Angeles market manager, Visotcky was AMFM's first-ever market manager (in Denver). Before that, he was the VP/GM who introduced the firm's successful Jammin' Oldies format (on KCMG/Los Angeles), and a GM at KYLD/San Francisco, KSFO-KYA/San Francisco, KRFX/Denver, and elsewhere.

Vicotsky is one of the top radio execs yet to join an Internet startup. He joins a group that includes Feed The Monster's Dave Kendrick, RadioWave's Jim Smith, First Internet's Norman Feuer, BuyMedia's Mike Jackson, StreamAudio's Bob Case, BroadcastSpots.com's Jeff Trumper, John Cravens, Judy Carlough, and Linda Waldman, MP3Radio's Gregg Lindahl, Riffage's Scott Fey, Magnitude Network's Rich Rieman, Everstream's Lee Zapis, MP3Player.com's Bob Bellin, and others.

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