The growth of Internet radio has not resulted in a wealth of advertising because stations have been unable to sell it on their own and there hasn’t been a lot of outside help. TargetSpot, launched in conjunction with CBS Radio, which owns over 100 music, talk, sports and news stations, will sell Internet radio ads to national and regional advertisers. The Internet radio service launches in July and later this year the company will begin selling ads with online video content. TargetSpot’s CEO Doug Perlson explains how the company will serve the market for both Internet radio and online video advertising.
iSPOT: How much Internet radio advertising runs now and what is the reason for the small amount?
Perlson: It’s hard to say how much is sold now, but it is low for a few reasons. First, terrestrial stations are the ones most interested in selling in-stream, but their sales forces are used to selling on a spot basis, not CPM. Also, they don’t have access to the advertisers that traditionally buy online, different agencies, different budgets and different expectations of performance. Also, it is hard to sell online because it is relatively small compared to the terrestrial reach, which is why it is more appropriate to sell on a network basis across multiple stations and properties.
iSPOT: Can you give us some background on TargetSpot?
Perlson: We originally pulled the product out of CBS Radio. We’re an independent company now, focused initially on radio. We’re also going to roll out a video product and monetize more long form episodic video that we see coming into the marketplace in a very aggressive clip in the next few months. We’re seeing a lot of the larger media companies making available their old TV shows. They can be downloaded on a fee basis or more long term downloaded on a streaming basis, streamed in real time and monetized with advertising. You’re looking at larger media companies that have a lot of content and you also have other types of companies like Netflix, which is going to be allowing movies to be streamed over the web and I think there’s an opportunity for those types of streams to be monetized with ads. TargetSpot will be able to reach lots of advertisers buying radio initially. They can easily create video ads and target them based on zip code, type of show and whatever demographics we have available and run them with traditional episodic video. Radio is our first product, it will launch in July. We’ll sell 15-second video ads that users will see when they launch their media player to listen to Internet radio. We’ll sell similar ads with our video product later this year.
iSPOT: Can you discuss the growth of the Internet radio market?
Perlson: The latest stats are 72 million monthly users of Internet radio from Bridge Ratings. We’re seeing enormous growth in online radio, viral growth, you can get a stream off your computer, you don’t need a set top box and there’s a whole other area of growth we’re starting to see in the form of Internet appliances. The iPhone will launch in the next month and it will stream Internet radio. With cars there will be an Internet radio option. Avis is rolling out Internet capability across all their cars that will have an Internet radio component. We’ve heard from suppliers of these technologies that are in conversation with major electronics groups that enable traditional radio with an Internet component with their home systems. Once it moves beyond the computer, you’ll see another explosion in usage and we’ll be north of 100 million users in as little as a year. Now we’re at the point of critical mass and we can start selling this. We have the technology to serve advertising within the radio stream and we also give advertisers an end to end solution to create ads.
iSPOT: Will TargetSpot be primarily for local radio advertisers?
Perlson: There’s not an advertiser on this planet that couldn’t benefit from Internet radio advertising. You can buy it nationally and run the same ad across every station or locally target your national campaign and have a different message for different demographics, locations, stations, formats and genres. There’s a lot you can do to customize your national campaign. We’re also useful for traditional regional advertisers. They’re not buying a zip code but they buy the reach of traditional stations. They can buy on a DMA or statewide basis. There’s a whole group of local small to medium advertisers who are not buying radio today, they buy PennySavers, yellow page ads, direct mail. This is a more efficient way for them to spend ad dollars. We anticipate those advertisers coming into the system, buying one to two zip codes and spending what they would spend on other local media.
iSPOT: If a TargetSpot advertiser uses video, will you help them produce the ad?
Perlson: Now on the radio side they create it themselves, but when our video product launches we’ll have an ad creation component, which will be different from the companies where the price points are high. Our goal is to provide video advertising as a value added service and allow advertisers to create videos. We won’t have the glitzy production capabilities of some of the other companies, but we’ll allow advertisers to get their message out in a professional way without spending $4,000-$5,000 to produce the ad. So they can create their own ads on our system or use their own ads.
iSPOT: How do Internet radio advertisers select where the ads run?
Perlson: Within our interface they can choose by station, by genre or by demographic. When users of CBS Radio sign up to get the player, they provide their birth date, zip code and gender. That information is passed to us and we can use it to target ads. The advertisers can reach individual groups and get reports that show when the ad ran, how much they paid for it and where it ran. If you want to run a video gateway to all listeners of WFAN in New York who are female between 18 and 20 years old and live in zip code 10023 you can do it. That’s the beauty of it. If you want to appeal to women sports fans in that age group on the upper West Side you can get it down.
iSPOT: How is ad revenue shared between TargetSpot and the stations?
Perlson: Revenue is split between TargetSpot and the broadcaster, with the broadcaster getting the majority of the revenue.
iSPOT: How are you promoting TargetSpot?
Perlson: We’re talking to agencies that focus on radio and interactive, to aggregators of advertising and trade organizations that represent local advertising. We also have CBS Radio promoting across all their websites and we’re building a sales force to reach out.
iSPOT: Are you only selling Internet radio ads on CBS stations?
Perlson: CBS was our first announced deal. Yesterday, we announced an agreement with Entercom to sell advertising that will stream on the sites of its more than 90 stations.
