Targeted Ad Insertion, Do the Math
Harry Emerson, founder of SN, cites a hypothetical example to show how profitable the targeted ad-insertion model could be for radio stations. Take, for example, a station that has 100,000 listener-hours per month online. By charging a $37.50 CPM on 14 ads per hour, the station could see $52,500 in monthly revenue. SN then snags 85 percent ($44,625) of that total in an attempt to recover costs (in all likelihood, this would probably not even cover basic streaming costs). And then SN generously gives the remaining 15 percent ($7,875) directly to the radio station. This might seem small, but once (or if) SurferNETWORK becomes profitable, the split will be 50/50 between the radio stations and SN, Emerson says.
Coollink Broadcast Network (CLBN) also has announced targeted ad-insertion trials already underway with terrestrial stations re-broadcasting online. One trial, in conjunction with an ABC Radio classic rock station, utilizes edge server technology to run streaming media ads immediately after ABC's national, audio-only ads. The listener must fill out a brief questionnaire (similar to Hiwire's) before the station begins streaming.
With some 240 affiliate radio stations, CLBN charges a $60 CPM for in-stream ads and a $120 CPM for "gateway" ads that may include a visual component for listeners to click. Sam Stanton, vice president of new market development with CLBN, says that this pricing structure could bring Net profits of up to a third above revenue, minus costs, for stations within the CLBN network.
Still Evangelizing for Streaming Ads
But while the above companies position themselves with strategic partnerships, propose hypothetical profit scenarios, and clamor to declare their targeted ad solutions the most viable, a set of undeniably difficult factors stand in the way.
First, despite the optimistic numbers spread out by such research firms as Arbitron, which estimates that some 20 percent of all Americans have listened to radio stations online, the pool of regular, targetable listeners remains small.
"The audience is too niche right now to guarantee enough listeners for the targeted-ad model," says Graham Keenan, executive vice-president with Internet media buyer, CyberReps. His company is in the position of connecting advertisers with audiences. While he agrees that targeted ad insertion is a viable revenue source and potentially the most attractive business model for online radio stations, he maintains that the time has not yet arrived.
"Advertisers were wary of buying anything other than time on network television, where the model was proven. No one wants to think their ads are playing to some local cable access audience."
"Basically, it's like where the cable industry was when it first started out," says Keenan. "Advertisers were wary of buying anything other than time on network television, where the model was proven. No one wants to think their ads are playing to some local cable access audience."
Keenan says the challenge remains for media reps and station affiliates themselves to convince advertisers and advertising agencies that online ads, and specifically in-stream audio ads, constitute a worthwhile purchase. "We spend a lot of time on road shows to various agencies evangelizing the benefits of streaming ads. Two years ago, we would have had a great response, but in today's market climate the convincing is a difficult task," says Keenan.
Similarly, a big part of Jerry Boehme's job as president of Katz Interactive Marketing is just spreading the gospel on the wonders of streaming ad insertions.
"With a limitless number of channels, it's a bit daunting for an agency to conceive of an effective media strategy," says Boehme. "It's much more efficient and valuable to place ads with only the big stations and guarantee a mass audience. The idea is to have only one conversation with the audience."
Katz has been in the media buying business for years. "We're a sales organization," says Boehme of his company, which was founded in 1888 (the only other year that a candidate won the U.S. presidency on the Electoral College alone). "And we need to sell the idea to agencies that targeted streaming advertising uses the best elements of several forms of media and establishes a closer link with the person that they're marketing to."
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