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| Radio gone ga ga | |
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Wallpaper, October 2001
Five thousand radio stations broadcast on the internet, many of them 24 hours a day. Listening to them is easy. You download RealPlayer or Microsoft’s Windows Media Player from the web (basic versions free, RealPlayer Plus currently on offer for $19.99), go to a radio station’s website and click Play. With RealPlayer Plus you get access to a website where you can search by city, country or music genre.
Nor do you need a fast connection (although it certainly helps) - connection problems are usually caused by ropiness at the radio station’s end. Beirut Nights can be particularly hit and miss. Most of the time though you get clear sound, often a live webcam of the DJ doing his stuff and an on-screen playlist where you can see what you are listening to, click on a track and buy the CD.
Setting up an Internet radio station is a relatively low-cost deal. With terrestrial radio the big costs are up front - building a transmitter, buying a licence and so on. Expanding your customer base relatively cheap. Internet radio, on the other hand, has it the other way round.
"For $1,000 and a couple of decks a kid could do it out of his bedroom," says Alex Hillinger, marketing manager of Groovetech.com, which broadcasts an mellow mix of electronic dance music out of studios in Seattle, San Francisco and, since last year [2000], London. "But most stations would start with about $5,000."
The real cost of broadcasting on the net comes when your audience grows. For each listener you gain, you have to provide more bandwidth so that every one receives the signal. The equation is simple: 40 listeners connected on their dial-up modems at 40 kilobits per second (kbps) and you have to have access to 40 x 40 = 1,600kbps of bandwidth (OK so it’s not exactly that, but it’s as close as dammit). Bandwidth isn’t expensive – about $100 a month for every thousand bits per second you buy – but it still costs.
These upside-down economics mean that the bigger you get the more revenue you have to make – and fast. As with most internet properties, users are quick to desert a net radio station if the connection gets ropey. After all, there are another 4,999 to go.
Revenue comes in three ways: on-air ads, like terrestrial radio; ads on your website; and record sales and merchandising. Groovetech has, so far, taken the third route.
"Terrestrial radio relies on geographical broadcast locations," says Hillinger, "so it was limited in its scope by definition – advertising was all it could get. The internet has effectively done away with those limitations."
About 90 per cent of Groovetech’s revenue come from record sales off its website (the rest comes from a record label the station has just set up and merchandising). The company has a warehouse in the US and one in the UK that supply about 15,000 titles - of the type its DJs are playing - to mail-order customers as far away as Johannesburg and Sydney. Hillinger won’t reveal the actual figures (the company is private), preferring to talk about "growth and expansion", but he will say that Groovetech was supported through its early years by "a private investor".
Mail order, however, does not a station make and bigger players are looking to advertising to pull in that all-important predictable revenue stream. At first sight, internet radio advertising is pretty unappealing. Because net stations broadcast all over the world, or at least wherever there is an internet connection, successful advertising would have to be both bland - to reach as many different cultures as possible - and non-price specific - to allow for the different markets that could be tuning in. At least a local radio station reaches local people.
Internet radio’s reply is to stress its almost unique position in the media. No other medium, other than cable TV, to which it is closely related, is able to know who is listening, what they like, how old they are and where they live than internet radio. The opportunity this information presents to hypertarget your sales message is enough to make any brand manager start to salivate. Add to that the means of combining your radio slot with a pop-up web ad giving a link to your online sales site and the ad men will be beating down your door.
Hypertargeting is achieved through a technology called "ad insertion". Ad insertion is a way of splitting an internet radio station’s broadcast stream whenever it goes to an ad break and sending out a different signal to each different markets. A skateboarding kid in San Diego might get a plug for Sprite, his dad listening at the office could hear a Lexus promo. At the end of the ad break the system hands back and the stream becomes one again.
"Ad insertion enables advertisers to target consumers according to a large number of factors, such as whether they are young or old, male or female, in San Antonio, Manchester or Birmingham…" says Bill Rose, vice president at Arbitron Webcast Services, an internet radio research company. "It’s an extremely effective way of targeting your sales message."
Ad insertion is a young technology and not all radio stations use it yet, which means you could be listening to music from your favourite club in Sao Paolo and hear an ad suggesting you indulge in cold bottle of DaDo beer. However the are a growing number of companies in the US – Hiwire in Los Angeles, RadioWave in Chicago and LightingCast, based just outside Washington DC – that sell a full internet ad package to radio stations, from stream-splitting technology to web ads, radio ad production and even advertising sales.
"Traditional media take editorial content and mix it with ads in a very controlled way," says Tom Des Jardins [CORRECT], founder and chief technical officer of LightningCast, "perhaps printing different runs of a magazine for different countries with different ads. We enable the same experience in an internet environment."
To target ads, though, you need listener information. The internet’s most listened to radio station, Beethoven.com, which broadcasts a shockingly middle-of-the-road selection of classical music, makes listeners fill in a form giving their age, sex and location before they can log on for the first time. Not this yet stops listeners in Lagos hearing ads for the Allstate Insurance company of Northbrook, Illinois. Kevin Shivley, Beethoven.com’s marketing manager, says ad insertion is "on the way".
Other stations belong to larger networks that share listener data among their members. A listener is asked to fill out a form the first time they log on to the one of the network’s stations and their data is then stored as a cookie in their web browser. Each time they connect with any of the network’s stations, the cookie passes the relevant information up the line and the ad insertion server send back a suitable ad.
"The old model of radio advertising was to divide people up into location, age and taste," says Hillinger. "Now taste comes first, because that is shown by the station they are listening to, then comes age, which is likely to be in a pretty specific range, and then geography, which could be anywhere."
Advertisers, however, are a tight bunch. Even with all this targeting they like to know where their dollar is going. As a result, the internet radio industry has developed a means of measuring listener hours – the total number of hours that listeners tune into a particular station in a month – and uses third-party companies such as Arbitron to compile the ratings. In Arbitron’s February 2001 chart, the latest figures available, Beethoven.com comes top with 741,500 listener hours and ABC’s WABC-AM talk radio is second with 310,900. (The UK’s Virgin Radio is sixth with a score of 204,600). Overall the chart is dominated by NetRadio, a US internet radio network with about 120 stations, which attracts a total of 3.2m listener hours a month.
Advertising, even on Beethoven.com, is not expensive. The station offers two ad slots: the "gateway ad", which listeners see every time they log on and which can be highly targeted; and the on-air ad, which until Shivley gets his ad insertion server is necessarily going to be more hit-and-miss. Gateway ads go for about $50 - 60 per thousand exposures (the total number of "listener hearings" of the ad). On-air ads cost about $25 – 30 per thousand.
"The costs is pretty cheap compared to traditional radio," says Shivley. "Most of our advertisers are spending about $2,000 – 4,000 a month."
Net users, though, are famously resistant to advertising. Just look what happened to the banner ad market. But it may be that for access to 5,000 radio stations – up from 3,500 just last year and still growing – ads turn out to be a reasonable price to pay. Besides, advertisers love internet radio. "People pay more attention to what they hear," says Rose, "and you can use the ad to cue them to look at something on their screen. Then you are just one click away from a sale.
"This industry today is what cable TV was in the 1980s. In the beginning cable was intended to provide a clear signal to people who lived outside metropolitan areas. It just broadcast what the terrestrial stations were broadcasting. Then people realised they could create a unique show. A guy called Ted Turner started putting old movies down the cable, running local ads and just look at that industry now."
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