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Monday, February 11, 2013
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The Online Radio Industry and Its Dilemma

There's a story making the rounds in the broadcast radio industry which is applicable to all internet radio operators. Lew Dickey, CEO of America's 2nd largest radio operator, Cumulus, is quoted from Bloomberg News: "We don't see a business model for streaming." To a degree, being done as it is done, there is no business model for streaming.

Let's explore how the approach can be changed to make a business model, because that is facing everyone who runs an online radio station today.
"There's no lack of advertising dollars online. But there is a tremendous lack of understanding on how you take an online environment and apply it to a mindset that's been set in 'broadcasting.'"

I get regular calls from internet station owners asking if I know of any company that can help them sell advertising. The answer is no. In part, it's due to coordinating the internet radio industry to standardize procedures. As described here dozens of times, it's like herding cats.

There are so many thousands of stations, so many operators with their own magic formula. Many are doing what they believe isn't being done by the broadcast radio industry - which makes what they do correct.

We all know commercial radio is homogenized, voice-tracked, losing local content, and playing a short list of songs in such high repetition that those who follow the industry closely upchuck at hearing another Taylor Swift song. What's not being considered is that the broadcast radio industry is on a short list of stations on a radio dial, confined by geographics. More importantly, it plays to gather the largest audience possible - which it then sells by CPM (cost-per-thousands).

And here's where the dilemma comes in: Too many internet radio industry operations follow a broadcast mindset on how they make money. Only, they are competing against a nearly unlimited number of stations with no geographic confines.

Sell advertising is the pitch, but it doesn't work online because the internet station does not have anywhere near the sizable audience. (Most broadcast stations don't have a sizable audience online either, which is why Lew Dickey's statement about no business model rings true.)

The broadcast radio industry and the internet radio industry are missing that what is being sold online is not the numbers of people exposed to an ad. What Google, MSN's "Bing" (which now includes Yahoo! Search), and any of the numerous ad serving platforms like Zedo, Adconion, ValueClick, etc, are presenting advertisers with is campaign metrics.

This data is configured in usually the same patterns for all online ad platforms, but it allows savvy media buyers to dissect the numbers as their clients' needs require to improve campaign response. In many cases this campaign improvement can be done in the middle of the campaign. Here is an example of one campaign I ran a few years ago, and the identifying marks of when adjustment needs to be made.

Online, any ad campaign can be configured for this style of analysis. Banners, audio ads, keyword buys - as long as the coding (or copy) of the ad is precise, the campaign can be continuously monitored and improved when needed.

This is strangely similar to the "if the tree falls in the forest" metaphor. If everyone in the broadcast radio industry (or who own an online radio station) is simply selling commercials against a cost-per-thousands formula and nobody buys, is there money to be made if a station offers the service of analyzing client campaign data for improvement if nobody is doing it?

Ask Google, Bing, or any of the online ad networks which are racking up the dollars. They are drawing much of their money from traditional ad sources.

There's no lack of advertising dollars online. But there is a tremendous lack of understanding on how you take an online environment and apply it to a mindset that's been set in "broadcasting."

As long as advertising is sold the same way online as it's sold over-the-air, there is no business model for streaming. Mr. Dickey is right.

But, when those who are pureplay online radio operators begin offering sales and accountability packages that reflect what Google, Bing, Zedo, Adconion, etc, are offering, I believe you'll find that even the radio industry will make money online - a lot of money.

The dilemma isn't whether there's a streaming business model, it's whether those who are streaming decide they cannot continue to use antiquated radio industry techniques to sell advertising.

Make the change. Online the companies making money aren't doing it by selling CPM; it's by giving data to the media buyers who are handing out the money.

While the broadcast side of radio has a near lockout on indie artists, introducing music is open wide to internet stations.
Here's a Hip Hop artist to consider: PreyjeŠn's Traffic.
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PreyjeŠn's Traffic

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Give PreyjeŠn's Traffic's "X-Files Cover Up" a listen.

Add it to your playlist, free! Such is the new world of music distribution.

The radio industry had its shot. It's time internet radio programmers take a chance and reach into a huge pile of talent. It is there that new hit songs will increasingly be found.

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