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"The Future of
Radio" series
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 BY
KURT HANSON
In yesterday's issue of RAIN (here),
I noted that the current size of the Internet radio audience
during workday hours (9AM CT through 5PM PT on weekdays) is roughly
equivalent in size to the 15th-largest
radio market in the U.S.
In other words, the medium has about the same size AQH audience
as the total radio AQH audience in a city the size of Seattle, Phoenix,
Minneapolis-St. Paul, or San Diego.
Yet while any of those markets has hundreds
of radio spot schedules running on them (local, national spot, and
network), Internet radio currently has virtually no
significant spot schedules running on it!
This is despite the fact that Internet radio — by which
I mean both (A) the simulcast streams of broadcast radio stations
and (B) the various Internet-only offerings — offers several
significant benefits that should logically appeal to
most national and network advertisers.
My conclusion yesterday was, "THIS
SITUATION IS RIDICULOUS! So let's do something about
it."
Six reasons for few spot schedules
Today, let's spend a few paragraphs taking a look at why
Internet radio is in this current situation. (Please note that several
RAIN readers have contributed their opinions as well, which
follow lower on the page under "RAIN Reader Feedback.")
Here are some of the impediments that I believe have probably
gotten in the way of getting spot schedules on our new medium:
- Audience size
Perhaps the most obvious reason is that, until now at least,
Internet radio's audience size hasn't
been big enough to be significant to a national radio
advertiser. While I believe the medium has a midday AQH of 500,000
people (and I'll describe my thinking behind that number before
this week is over), any individual
webcaster has only a fraction of that total audience.
Let me give you a colorful example: The webcaster that
I believe is the #10 webcaster in the US could go
into an agency pitch and make a big deal about his "5 million
hours of monthly TTSL." But if the agency does the math,
they'll find that's a Mon-Sun 6A-6A AQH audience size of only
6,830 listeners — about the size of a popular rock station
in Greenville-New Bern, NC (market #84).
National radio buyers don't have time to take individual
station pitches from single stations in market #84! If they did,
they'd have to take hundreds upon hundreds of such single-station
pitches!
Yes, I believe that the medium as
a whole is big enough to warrant an advertiser or agency
taking a meeting — but even that
wasn't probably true a year ago!
- Rep firms on
sidelines
Radio rep firms — i.e., Interep,
Katz,
MediaAmerica,
etc. — have the staff, the experience, and the contacts to
sell
spot schedules on Internet radio. Unfortunately, almost every
one of those firms tried to get into the business in 2000, spent
a lot of money, and met with almost total failure.
The problem is that they got in too
early. Unfortunately, here's a truism of life: "Once
bitten, twice shy."
Furthermore, all of those firms have multi-, multi-million
revenue targets to hit in 2003. Participating in the sale of Internet
radio spot schedules in 2003 is not going to have a meaningful
impact on the achievement of their goals. Thus, while some rep
firm AEs are being very helpful to webcasters, it's not reasonable
to expect the firms themselves to devote major resources to this
area at this time.
- Salespeople
without relationships
Meanwhile, the firms who have
tried to step up to the plate to try to sell some national spot
schedules across multiple webcasters have been the ad insertion
companies —
i.e., Hiwire,
Lightningcast,
and AdSertion.
They of course have had the motivation to do so. (After all,
what good is an ad insertion company if there are no
ads to insert?!)
 Unfortunately,
they typically came at the problem from the engineering /
technology side and their hiring choices typically reflected that.
Except in a couple of rare cases (e.g., Hiwire's hiring of KLSX/Los
Angeles's Rick Flores in 2000-01),
they typically hired salespeople from the Internet side of the
business.
Such sales execs typically lacked experience and contacts
and relationships in the world of national spot and network radio
sales.
Internet radio is a tough enough sell even for someone with experience
and contacts (see bullet points above and below this one).
The tech firms should be commended for their efforts, but
for their salespeople to go in to see buyers without the benefit
of experience, contacts, relationships,
etc., is to go in with 2.75 strikes against you.
- Agency organization
Then, in addition, Internet radio falls
between the cracks in regard to the organization of
an advertising agency.
The division of the agency responsible for buying broadcast
media (i.e., radio and TV) has not been given authority
by
anyone to buy Internet radio... and even if they had such authority,
webcasters might ask for a 468x60-pixel banner ad to accompany
the radio commercial, and that division doesn't have banner ads
and doesn't know how to commission banner ads.
Meanwhile, the "interactive" side of the agency
is buying buttons and banners and tiles and sponsorships of websites...
but they don't have access
to radio creative — i.e., a 30-second piece of audio!
Until someone at a level of the agency higher up than either
of these two divisions (or the client) makes an edict, this impasse
is unlikely to be resolved.
- Advertising recession
September 11th didn't help. Just as the medium was starting
to get rolling — even the ad insertion firms' salespeople
were selling some "trial" buys! — those terrorist
attacks triggered the worst advertising recession since World
War II.
In a time of an advertising recession, buyers were scaling
back existing buys. That wasn't a logical or good time
to get them interested in exploring a new medium.
- Inappropriately-high
standards
Finally, Internet radio risks being held to much
higher standards than broadcast radio.
This is a common problem through the world of Internet
advertising sales (not just the Internet radio portion). Because
the medium was promoted as being "accountable" —
one can measure every click and track the follow-on behavior of
the consumer who makes the click — now advertisers don't
give the medium credit for the branding
work it does.
Broadcast radio spots aren't expected to lead to an immediate
purchase each time they play. Neither are TV spots, billboards,
or magazine ads. They accomplish many purposes, including imaging,
positioning, and branding.
Internet radio spots should be held to the same standard!
The truth is, they're EXACTLY
like broadcast radio spots in their power and effectiveness. (Although
the audience is probably somewhat more upscale and the medium
is less cluttered with competing spots.)
Tomorrow: Potential solutions!
Those are my "big six" reasons that I believe that
a market for Internet radio spot schedules has not yet developed.
As I mentioned, you'll read some more thoughts from RAIN
readers later in this issue. (Also, if you'd like to contribute
your own thoughts, please use the form below or e-mail me at kurt@kurthanson.com).
Tomorrow, let's quit talking about the problems. Using today's
observations as hopefully helpful background, let's start talking
about potential solutions.
TO BE CONTINUED...
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From today's Wall Street Journal: "Dozens of companies,
hoping to become the locale of choice for laptop luggers,
are now installing wireless networks everywhere from hotel lobbies
to coffee shops. The problem: Lots of people
still don't know how to get logged in...
"The growth of Wi-Fi -- the number
of hot spots world-wide is projected to jump to 132,486 in 2004,
up from 14,753 in 2002, according to Gartner Inc. -- has been one
of the few bright spots for the beleaguered tech industry.
"But going wireless in public is more
complicated than setting up Wi-Fi at home. While the only
equipment you need is an easy-to-install $50 wireless card for your
laptop, public Wi-Fi coverage is still a
patchwork.
Consumers who want to tote around their computer will confront a maze
of multiple subscriptions from different Wi-Fi providers, each with
its own set of pricing plans...
 "First,
you need a wireless card and some software for your laptop. The
software is included in the $50 cost of the card... Unlike in-home
Wi-Fi use, consumers don't need to buy a
base station, which transmits the wireless
Internet signal, since those are supplied in hot spots by the Wi-Fi
service provider.
"There are currently four big commercial Wi-Fi providers
in the US: T-Mobile
USA, Wayport,
Boingo,
and AT&T Wireless
Services Inc. A subscription to Boingo -- which basically
bundles together Wi-Fi services -- gives you access to 1,300 locations
that are run by 36 providers. T-Mobile and AT&T Wireless are large
cellphone operators, and Wayport
is a smaller Wi-Fi service provider...
"The uneven Wi-Fi coverage is reminiscent
of the cellphone industry in the mid-1980s. 'It's like
the early days of cellular: You fly into a new city and your phone
doesn't work,' says Sky Dayton, chief executive of Boingo, Santa Monica,
Calif. 'It won't really take off until there's seamless roaming between
all the
different networks.'"
Read this entire article in today's Wall Street Journal,
or online here
(subscription required).
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As we've said before, we believe
stories of the development of public Wi-Fi are significant to
RAIN readers because we believe this technology may be
the key to successfully untethering Internet radio from the
PC, and making it as portable as satellite and even AM/FM radio.
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Here's feedback on Part
1 of our series on Internet radio and ad sales, yesterday in RAIN
(here)...
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"We
allowed technology to dictate our ad pitches..."
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Couldn't agree with you more Kurt. The whole current lack of
advertising support on Internet radio is completely absurd!
I believe that one of the reasons that advertising is scarce
on Internet radio today is because early Internet radio advertising
firms shot themselves in the foot by making claims of guaranteed high
click-through rates when ads were accompanied by a "call to action"
banner or pop-up. We all know that banner advertising results in low
"click-throughs," and now advertisers don't understand how
to effectively monitor Internet radio advertising performance.
The fact that we have that "call to action" capability
is a plus but should not be the
definitive result barometer. I really never understood revenues generated
from "click-throughs" anyway. Traditionally, when you heard
an ad on terrestrial radio, the advertiser simply paid for a schedule
of spots run, not for the amount of people that actually went to that
car dealership and bought a car as a result of hearing the ad.
The other problem is that we allowed our advanced technology
to dictate our ad pitches. The fact that we could geo- or gender-target
ads was great, except Internet radio as a whole was too infantile
in its audience size to capitalize on the fact that it could actually
target in these areas. It made the fact that we could do it fairly
moot.
We need to come up with an effective method of proving performance.
I hope to see this issue covered in your upcoming article series on
Internet Radio Advertising.
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Val Starr, President
GotRadio.com |
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"We...
too have wondered about the lack of spots on Internet radio..."
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 Good
morning Kurt:
TDGA -- The Traffic Directors Guild of America requests your
permission to reprint your entire 5-part series in our monthly newsletter
on www.tdga.org,
beginning in our August 1st Newsletter.
We appreciate your efforts and, too, have wondered about the
lack of spots on Internet Radio.
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Carol Anderson
Larry Keene
TDGA-Traffic Directors Guild of America |
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"I
don't think I could do my job successfully listening to music..."
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 Hi...
I enjoyed the article. I am wondering, however, about these people
listening to music, etc., during work... are they listening only and
not looking at the pop-ups or the screen? I am in radio sales and
don't think I could do my job successfully if I was on the computer
all day, listening to music being streamed. What type of job(s) could
be done and done well while the employee is listening to music on
the Web and watching the images on the screen? Thanks for your input.
I am interested in hearing more...
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From CTV.ca: "For years Canadians have satisfied their
musical cravings with a trip to the record shop, but the Internet
-- where
free music downloads rule -- has changed the rules for a new generation
of wired music lovers. And the music industry doesn't want to be
left out of the action.
"But for the time being, Canadian record companies have
been holding out, hoping new online services designed to keep them
in the revenue stream will change consumer
behaviour.
"Already, proof of the concept has been heralded in
the US, where Apple Computer's online music
store iTunes
[screenshot above] has achieved instant success selling site visitors
songs they can download and keep for 99 cents US each...
"But if you're a Canadian eager to download some music
legally, you're out of luck. Apple's iTunes is not
open to Canadian visitors -- and there are no similar online services
currently in operation.
"In the fall, Toronto based company Moontaxi
hopes to fill that void when it launches its new service PureTracks.
Modeled on Apple's online music store, PureTracks will allow users
to buy and download licensed digital music -- as individual songs
chosen from a catalogue of major and independent record labels.
"Moontaxi Media co-founder Alistair Mitchell says his
company is racing to fill a niche.
 "'The
demand we saw was with a la carte downloads and we frankly saw
ourselves alone, standing on top of tables, jumping up and
down, saying this is a great opportunity,' Mitchell said."
This entire article is available online here.
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