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BizReport : Blogs & Content archives : August 05, 2015

Expert: How internet radio is taking over

Online radio could be the next big thing for advertisers according to one expert. Why should brands take note?

by Kristina Knight

Kristina: Why is Internet radio the next frontier for programmatic advertising?

Pat Higbie, CEO, XAPPmedia: Internet radio commands 12 percent of monthly time spent consuming digital media, which is more than that of Facebook at 6 percent. The reach is enormous and analysts also believe that over 90 percent of Internet radio listening is on mobile devices. Advertisers are hungry for targeted access to large numbers of mobile consumers and they want to buy exposure to those audiences programmatically because it's more efficient.

Kristina: How will Apple Music boost the Internet radio market and how will this affect providers like Spotify and Pandora?

Pat: We expect Apple Music to expand the Internet radio audience by introducing it to new listeners on the iOS platform. We don't see anything in Apple Music today that would compel satisfied users of Spotify, Pandora, and Slacker to make a switch. In fact, you may have seen that Spotify climbed into the top ten of iOS app downloads the week of Apple Music's debut. Apple is like a megaphone that can drive consumer interest in the entire industry and increase everyone's listener base. The bigger threat is probably to broadcast radio. With the Beats 1 global radio service, Apple is taking direct aim at a content format that has been unique to broadcast radio. Broadcasters need to take this seriously.

Kristina: What will drive users to Google streaming versus Apple streaming?

Pat: The obvious split will be Android users on Google Play Music and iPhone users on Apple Music. iPhone users can today access Google Play Music, the Google-owned Songza and soon YouTube's streaming service. Apple is only on iOS today so it has some catching up to do in terms of audience access. In addition, Google Play Music is easier to use for those that take the time to try both. Beyond that, whichever platform delivers the best content interaction experience will suceed, because neither one provides easy interaction today when the app is not visible on the screen.

Kristina: Why is Apple not talking about, but maintaining, its ad-supported listening service?

Pat: Apple wants to promote its subscription service in order to curry favor with the label executives who have expressed interest in maximizing subscribers and minimizing ad-supported listening. However, market data show that 89 percent of Internet radio users choose ad-supported listening over paying a subscription. Apple couldn't ignore 89 percent of the listener market nor did it make sense to abandon its iTunes radio users that already used the ad-supported option for the past two years. The Internet radio subscription model is profitable, but it serves a niche market.

Kristina: What are the industry standards (or lack thereof) for podcast advertising?

Pat: The monetization challenges for podcasting are largely tied to its slow transition from the legacy download model pioneered by iTunes with audio ads that are stitched into the content. This model doesn't provide reliable metrics on actual impressions served and it forces advertisers to make large investments for a single episode of the most popular podcasts when they would prefer to spread their investments across multiple episodes. This approach also lacks scalability and devalues the back-catalog of content. As podcasters shift to a streaming model with targeted advertising, the economics will improve dramatically and drive far higher advertiser demand.

Tags: internet radio advertising, podcast advertising, radio advertising, streaming music, XAPPmedia

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