The Net/Net of Internet Radio

An Issue of Locality, Identification, and Getting Heard
There are three major challenges that Internet radio broadcasters face when trying to court advertisers. The first deals with an issue of locality. Because traditional radio broadcasts have a limited range, they tend to have strong regional ties, especially when it comes to local businesses buying airtime. These small to medium-sized companies typically only want to market to a local audience, meaning that the increased scope of Internet radio is actually a negative rather than a positive. Why spend precious ad dollars marketing a restaurant in Chicago to someone who’s listening in Bangkok? "For Internet radio stations, we need to have a national feel to our advertisers," says LRL’s Lewis. "That’s a huge goal." He cites the mortgage industry as an excellent advertiser on Internet radio. Gupta adds that the advertisers most interested in using Internet radio as a vehicle for marketing are companies that already have a strong Web presence. And now that the interactive ad space has grown into a $7-8 billion a year market, the demand is there for new ways to reach consumers via the Internet.

The second major challenge has made many national advertisers hesitant to invest in Internet radio: there are no metrics for identifying the demographics of an Internet radio station’s audience. True, Internet radio can track the popularity of a station by simply tracking the total number of listening hours, but that number is meaningless to radio ad buyers. They need to see a specific breakdown of the types of people that are listening. Many stations are moving to a subscription model to remedy this; they don’t ask for money, just demographic information from each user.

Thanks to companies like Arbitron, "we’re finally starting to get these kinds of numbers, which act like a currency that can be used and transacted at the network radio level," says Gupta. Arbitron announced in February that it was going to revamp its tracking of Internet radio but has yet to announce the new system. (You can find a breakdown of typical Internet radio audiences culled from a 2003 survey as well as a listing of top broadcasters here.) "Generally, for any medium to be viable as an advertising medium, you need to have an independent company doing this," says Gupta. Considering Arbitron’s place as the ratings provider of choice for terrestrial stations, it’s well-positioned to play a similar role for Internet radio stations as well.

The third challenge Internet radio broadcasters face involves building a brand name and listener base. Through sites like Live365.com, anybody can become an Internet radio broadcaster in minutes for less than the cost of a large pizza. What this inevitably leads to, though, is a glut of stations fighting for the same ad dollars. New rep firms have responded by consolidating multiple Internet radio providers to increase the negotiating power and advertising scope of individual stations. These alliances have met with mixed success.

The Internet Radio Marketing Group (IRMG) started in March 2003 with six stations; a year and some change later and it’s down to five, and only one of those five even mentions the IRMG on its Web site. Net Radio Sales represents what it calls "the largest network of independent Internet radio stations available to advertisers today.". But perhaps the most visible of these firms is Ronning Lipset Radio, which has agreements in place with Live365.com, MSN, LAUNCH: Music on Yahoo!, and AOL Radio@Network.

In the pursuit of ad dollars, visibility is what counts, making it tough for the little guys to compete with media giants like AOL Time Warner. One company intent on making it easy for users to find the Internet radio station they want, regardless of brand prominence, is Radio Tower.com. Started in ’96 as the first Internet radio directory, battered by the dot com implosion, sold off, and then repurchased by founder Paul Valkama, RadioTower.com has recently shifted its focus away from the Web site. Instead, Valkama hopes to make the company profitable by selling its RadioTower PLUS software. "You can do more with software than a Web site," says Valkama. "You can sell it." RadioTower PLUS offers a searchable, customizable database of over 5,500 Internet radio stations broadcasting more than 70,000 shows a week.