As Pandora continues to blaze a trail for streaming radio’s presence on everything from iPhones to refrigerators, whither the traditional radio companies? Bob Pittman, chairman of Clear Channel’s music and entertainment divisions, is betting on old-school local radio as the key to streaming radio’s success.

Earlier this week Clear Channel acquired Thumbplay, a subscription-based streaming-music service, in an effort to compete with Pandora and its ilk as well as expand the company’s own efforts in free, ad-supported music streaming. Platforms like iHeartRadio, which streams 750 of Clear Channel’s stations nationwide, helped the company gross an industry-leading $175 million in digital revenue in 2009, according to SNL Kagan. While that figure may still be a tiny percentage of the nearly $6 billion that parent company CC Media Holdings reports each year, it also represents the fastest-growing sector of an industry long plagued by the perception that consumers have ditched radio for TV and the web.

“Lucky for us, 93% of the country still listens to radio. It was about 92% in 1970, so that’s actually gone up,” Mr. Pittman told Ad Age. “If TV is America's hub then radio is America's companion. We live with consumers and they consume radio a little more than they do the internet every day. It’s still a little less than TV but a little more than everything else.”

Clear Channel will retain Thumbplay’s 60-person headcount, and integrate the staff into its existing local and national divisions. “Thumbplay will be our technology platform, and it speeds us up about a year faster than if we had tried to build that ourselves. It also allows us to increase our staffing tremendously,” Mr. Pittman said.

Mr. Pittman is a well-known media veteran from his stints at AOL Time Warner, where he most recently served as the company’s chief operating officer, and MTV Networks, which he co-founded. He joined Clear Channel late last fall as chairman and a minority investor, having invested in emerging companies like Zynga, Thrillist and Next New Networks through his private equity firm Pilot Group. He spoke with Ad Age about Clear Channel’s plans for future growth in digital, competing with Pandora and why we’ll see more apps from the company later this year.

He will also be a speaker at Ad Age's Digital Conference in New York on April 6 and 7.

Ad Age: How does Thumbplay fit into Clear Channel’s long-term distribution strategy as a radio company?

Bob Pittman: Our view of our company is that we're actually radio stations that have local brands that have very loyal consumers. Our strategy is that we need to be everywhere they are with the products and services they're expecting. Ninety-seven percent of our audience is coming to us through terrestrial but 3% is digital, so they are coming. They're looking online or on their phone or iPad, looking increasingly for their favorite radio station brand they know and love. We developed iHeartRadio for 750 of our best radio stations in these markets, and they can come to iHeartRadio through each individual station web site. If it's Z100 they'll go on Z100.com and there it is. Or they'll go on their mobile device and find their favorite station in their local market. But we also know there is a market for custom radio.

Thumbplay is really not radio, it's a playlist maker like a Pandora. It finds a bunch of songs and puts those on perpetual shuffle. We know people like that so we want to deliver that as well. Thumbplay has already developed a great product, so we wanted to quickly add it to what we’re doing with iHeartRadio, which has shown some demand for subscription services. Thumbplay has he capability to do that as well.

Ad Age: You recently said that Pandora was less of a business than a feature. What did you mean by that?

Mr. Pittman: As you look at media over the years, it’s very hard to determine what are features and what are businesses. AOL Instant Messenger was never a business but it grew as a feature of AOL. It was a great add-on for us as a feature. As we do iHeartRadio, it will be the radio stations which are the real radio stations with personalities and playlists constantly curated. Then we'll also have the custom radio stations. We don't have that kind of dynamic curation yet. There’s a place for it, and you’ll see two or three other things from us coming down the pike that speak to that. But I don't think we see Pandora as straight competitive with what they do, but they have shown us there’s interest in custom radio.

Ad Age: Will we see you continue to be as aggressive in getting Clear Channel on as many app platforms as Pandora has?

Mr. Pittman: We’ll be anywhere it makes sense. That’s a lot we can do for our partners that others can’t do. We have 228 million monthly listeners -- I think Facebook has something like 170 million monthly users. So we can use the fire power and promotional power of those listeners with any partnership we do.

Ad Age: Digital still represents a small percentage of Clear Channel’s revenues and audience. When will it become a more meaningful part of your business?

Mr. Pittman: It will grow over time, and we want to be well ahead of it. It's an opportunity for us because we can do a few more things with digital than a straight terrestrial audio feed. We have these very powerful local brands, 850 stations in 150 cities. Everybody who’s doing national is trying to figure out how to do local. We already have that kind of scope by having national and local reach. For us it’s a mater of really carefully figuring out what we do with that that creates value for listeners, advertisers, the company and our bottom-line. Digital is one of those areas we think is important to the future and indeed we are making some important steps to get there quicker than everyone else.