The question is when that future begins.
Streaming audio is a whole industry unto itself. As more and more people listen to music online -- both to the Web versions of terrestrial radio stations and to Internet-only audio sites -- streamers say the time is now for advertisers to get on board. They claim that streaming audio users, "streamies," are a coveted group of avid Internet users and online shoppers. But ad agencies and sales rep firms say there's still some work to be done before major national advertisers sign up.
CREEPING INTO INDUSTRY
"Right now it's just creeping into the industry. It's not viewed by many people as a serious threat or even something that has much potential. I don't agree with that," said Ralph Guild, CEO of leading radio rep firm Interep, which has partnered with streamers such as RadioWave.com to add streaming audio to the mix of radio media it sells. "I think it has enormous potential, but it's still in the development stage of building critical mass."
Streamers and third-party measurement companies such as Arbitron Co., which added streaming media to its measurement arsenal two years ago, and MeasureCast, which provides next-day audience data, say the necessary mass already exists and it's growing.
"The critical mass is there," said Stephen McHale, president-CEO of Everstream, which provides back-end technology to Web sites to stream audio. "The key is aggregating it in a way to present it to the agencies, and that's now starting to happen" as major companies (such as Interep and Katz Interactive Marketing) sell streaming audio ads.
For example, Katz in recent months has signed on NetRadio Corp. and RadioFreeCash as clients.
A recent study conducted by Arbitron and Edison Media Research found 20% of U.S. Internet users listen to terrestrial radio stations online today, up from 14% in July 1999. The percentage listening to Internet-only audio has also risen, from 5% to 13% during the same period.
Proving the medium's efficacy lies in these numbers, said Bill Rose, VP-general manager of Arbitron Internet Information Services.
"It ultimately is going to be about the number of consumers that are doing this."
Interep's Mr. Guild agreed. "The tipping point for mainstream adoption of anything is considered to be about 25%," he said. "Just a little bit of growth and it's going to explode."
But Natalie Swed Stone, managing partner-director of national radio services at Omnicom Group's Optimum Media Direction, New York, said more than a little growth is needed. She predicted streaming audio will not be a part of major national advertisers' media mix for another 10 years because of low levels of penetration in the fragmented market.
"Advertisers are not rushing [to streaming audio]. I think that they have no reason to rush," Ms. Swed Stone said. "Our model is based on cost per thousand -- per thousand -- not per person. It's millions that we're used to dealing with and [streamers] are bringing it to a much smaller level."
Those levels will only increase as broadband expands, Mr. Rose said, adding that 30 million households are projected to have broadband access by 2004. "The more American households that have broadband, the more pleasant the consumer experience is and the more we'd expect that tuning activity to occur." He also projected that as online listening becomes more user-friendly, meaning easier and quicker to download and change stations, and more portable with wireless devices, the medium will experience "ubiquity."
"It's going to be like a big freight train. When it leaves the station, it moves slowly at first because it has a lot of power behind it. It takes a little while to get that mass moving," said Bill Pearson, president-CEO of RadioWave, which provides streaming audio content and ad technology to sites including Microsoft Corp.'s MSN Chat Radio, RollingStone.com and Artistdirect.
Although national marketers are beginning to see the value of streaming audio ads, local advertisers already have embraced the medium, Mr. Pearson said, using RadioWave's iSpot ads -- interactive spots that play between songs just like on over-the-air radio. Because RadioWave believes national marketers are ready for the medium, it recently began selling in-stream ads at the national level.
The ability to insert streaming audio spots during a broadcast, rather than just before or after a program, will help boost advertisers' interest, said Mr. Rose. "The real key for advertising revenue from streaming media is [having] ads in-stream, just like you would hear it on TV and radio," he said. "There are a lot of companies doing ad insertion today, but no one has been picked as a standard. It's just beginning."
And the beginning is the right time to educate, Mr. Pearson said.
"There is a lot of missionary work that needs to be done. There is a high level of interest, but there's not a high level of awareness and we're trying to build awareness."
The ad industry is trying to do just that. In June the Streaming Media Advertising Advisory Council formed as a coalition of agencies, measurement companies, rep firms and streaming media providers to try to educate all the players.
"I think that both interactive and traditional agencies, and the sell side, all sense a need to better understand how to use streaming media," said Harvey Goldhersz, chairman of SMAAC and president of MediaCom Digital, New York. "I think that anyone who's involved in buying interactive media or buying radio today should be taking a look at it today. I don't think it's a futuristic thing."
Many argue streamies' tendency to be e-commerce consumers makes up for the small number of them relative to terrestrial radio.
"As an audience, this audience is more valuable compared to the rest of the Web in general," said Real Networks' VP-Media and Distribution Sales Shelley Morrison.
Streamies represent about half of online users, but they account for two-thirds of those who have ever clicked on a banner ad, the Arbitron/Edison study found; they also are twice as likely as non-streamies to shop on the Net.
Real Networks, which in April 1995 launched Real Player software that brought Web listening to consumers, streams ads as well as content. It has supplied in-stream audio ads for marketers including Ashford.com, IBM Corp. and Intel Corp. "We have been sold out of all of our in-stream advertising for three quarters, and we are about 100% oversold right now," she said. "Every one of our advertisers who has tried in-stream advertising has wanted nothing but more of it."
MAKING THE CASH REGISTER RING
Most advocates cited streaming audio ads' ability to lead directly to transactions as their biggest selling point.
"Most audio is interactive, meaning you can directly respond to it," said Everstream's Mr. McHale.
"Audio advertising solves a lot of the problems that marketers encountered with ad banners," said Bill Piwonka, VP-marketing of streaming audience measurement company MeasureCast. "[Banners] are a very poor tool to do branding, yet audio advertising via radio is a well-known medium and is actually a very effective medium to do branding."
Jupiter Communications analyst Marissa Gluck said Web radio has an advantage now because it is still relatively uncluttered compared with Web pages.
"[Streaming audio] definitely breaks through and is more memorable than banner advertising," Ms. Gluck said.
But it might take some time for certain mainstream consumer marketers to sign on, she added. "If [streamers] are looking to bring on Procter & Gamble as an advertiser, it's going to be a tough sell," Ms. Gluck said. "If they're looking to bring on some of the early adopter, tech-savvy national advertisers, it's a much easier sell."
Web-radio supporters said getting out the word about the medium will bring the audio stream into the mainstream.
"The key is showcasing and highlighting the initial successes people have had with Webcast advertising," said Arbitron's Mr. Rose.
"All the pieces are in place now for advertisers to take advantage of this," Mr. Piwonka said. "I just don't believe that in the Internet economy being slow and cautious is worthwhile."