NEW YORK (AdAge.com) -- Radio finally went digital in 2008, and the industry is already seeing some major growth as a result. According to the Radio Advertising Bureau's third-quarter-revenue release, online revenue, or "off-air" as defined by the RAB, has increased 9%, to $1.34 billion, in the first three quarters of 2008.
National ads down 11%
The nearly double-digit gains are occurring at a time when local has declined 8% year-to-date, while national ads have decreased 11%. Leading the digital charge are the top two radio groups, Clear Channel and CBS Radio, which each will end the year with double-digit gains in online ad revenue and audience, thanks to a succession of strategic partnerships.
CBS Radio began the year by powering the AOL Radio streaming player, a partnership that yielded a combined audience of nearly 8 million unique visitors in October 2008, according to ComScore Media Metrix. Starting in January, CBS will add Yahoo's Launchcast 150 online radio stations to its online network of 150 local stations, bringing in an additional audience of 2.87 million monthly unique listeners, according to Launchcast's October 2008 audience data from ComScore.
"We're now able to aggregate our audience in a variety of different ways for advertisers," said David Goodman, CBS Radio's president-digital media and integrated marketing. "If they want mass, now we have an incredible mass across our network. But we can also deliver significant audiences in a specific DMA or zip code. The new opportunity here is the result of integrating Yahoo's audience with our existing audience."
Help from an iPhone app
Clear Channel will also finish 2008 with 24% audience growth across its station sites, reaching nearly 20 million unique listeners throughout the year, according to Evan Harrison, president of Clear Channel's online music and radio unit. Fueling a lot of the recent growth is iHeartMusic, a music-networking site whose companion iPhone application, iHeartRadio, garnered 400,000 downloads across 20 participating stations in just over two months. This weekend, Clear Channel will roll out iHeartRadio version 2.0 across 150 radio stations and with iPod Touch compatibility for the first time.
Mr. Harrison said Clear Channel has come a long way in digitizing itself since he joined the company from AOL in 2004 to spearhead online initiatives. But unlike CBS, the company largely has focused on building traffic through its own properties rather than pursuing strategic partnerships.
"We've absolutely gone down the path of strategic growth," Mr. Harrison said. "We had a strong feeling that to truly keep up with the demand of our listeners, we needed to change the look of ourselves. [Clear Channel CEO] John Hogan saw that we firmly needed to become a media company first and foremost, and make it easier for our listeners to come across our platform."
But for major web portals such as AOL and Yahoo, having a stand-alone streaming radio site without any help from a major radio company has become decreasingly sustainable for long-term business. Michael Spiegelman, general manager of Yahoo Music, said Launchcast has never been a huge source of profit for Yahoo, and the economics of internet radio under increased streaming royalty fees made the site prohibitively expensive from an operational standpoint.
"We were faced with making drastic changes and limiting things, which we really didn't want to do, or looking for a partner that could effectively run a radio product," Mr. Spiegelman said. "[CBS] has been in the radio business for decades, have a very long-standing commitment to it, and are investing and building out a platform that will support digital radio."
Even HD radio, the terrestrial radio industry's hastily assembled answer to satellite radio's niche-based programming, is starting to attract interest from advertisers. Earlier this month, Verizon Wireless became the first national advertiser on a digital HD2 station, sponsoring a "Verizon New Music" block of programming on 21 of Clear Channel's HD stations.
Suzy Deering, executive director of marketing for Verizon VCast Music, said although consumer HD-radio awareness is still low (a recent Arbitron/Edison Media study found 1 in 4 radio listeners knew of the technology), the extensive sponsorship across Clear Channel's HD stations and accompanying web sites was an opportunity to innovate.
"VCast is all about driving consumer engagement and also ensuring that our consumers understand that we're ahead," she said. "We hear a lot of marketers talk about trying new media, but it's often a lot of talk without a lot of action. We want to innovate where it makes sense, whether it's enhancing a customer experience or trying something bigger to promote music properties, products and services."