For radio, the year of online listening
In 2013, online radio services like Pandora grew
December 20, 2013
In 2013, online radio took off. Pandora’s revenue swelled, iTunes and Google launched new radio services, and Spotify moved into mobile.
In 2014, online radio will come of age. No longer on the fringe of radio, it will attract an increasing amount of ad dollars because it is so highly targetable.
Advertisers can buy advertising according to what device is being used to listen to online radio. With the medium now available on smartphones, tablets and even cars, it offers a unique chance for advertisers to target people on the go, no matter where they are.
“Services that require a registered consumer can geo-target down to a specific area and even down to a specific consumer,” says Kim Vasey, managing partner and director of radio at GroupM.
“You can’t get any closer to a consumer than their cell phone in their back pocket.”
Online radio saw some impressive gains this year. In third quarter, Pandora delivered nearly 4.2 billion hours of music, its biggest quarter ever.
It also increased ad revenue by 36 percent, to $144.3 million, and doubled subscription revenue. It’s made a big push on that front since limiting the number of hours people can listen to the service on their mobile devices for free.
Competitors also began to step up their products. Spotify started offering free services to mobile users earlier this month, and it now has 24 million active users, compared to 72.4 million for Pandora.
Apple’s iRadio has more than 20 million users. Google’s premium radio service, Play Music All Access, has had a harder time gaining traction and there’s speculation it will be merged with a YouTube-based music service in the coming year.
Make no mistake, online radio still represents a tiny fraction of total radio revenue in the U.S., less than $500 million. But it has a greater upside than traditional radio. ZenithOptimedia forecasts total radio spending will hit $17.4 billion next year, up only 1 percent over this year.
Vasey notes that online radio budgets often come from dollars earmarked for digital and radio.
“Most clients today embrace all of these online digital options for radio because of the addressable nature of these assets,” Vasey says.
“Advertisers want to get as close to the point of purchase as possible and to deliver a strong ROI. Radio, whether terrestrial or online, has the ability to drive results.”
Still, despite the slow growth of terrestrial, Vasey says advertiser interest in the medium remains high, even with all the high-tech competitors.
“Radio has the ability to stay closely connected to the consumer and move with them as they move throughout their day. Therefore, [radio] enables advertisers to reach them anytime, anywhere. That’s a powerful medium,” she says.
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