02/11

The Game-Changing Revenue Opportunities for Online Radio

Mike Agovino is COO of Triton Digital, the company at the leading edge of audio’s digital transformation and monetization. The digital audio space is changing fast, as is its relationship to advertisers. And nobody is closer to the action than Triton. So what’s new? And what does that mean for broadcasters in particular?

This is the first of a two-part conversation.  Today, we focus on what’s new in the digital audio monetization space and what that means for broadcasters in particular.  Tomorrow, we focus on the wisdom (or lack thereof) of simulcasting ads between over-the-air and online and whether or not there really is a business model for online radio.

Mike, bring us up to date on what’s new in the internet audio space and what that means for publishers.

This might not be new but it is important to note, we continue to see impressive audience growth with overall listening up nearly 50% in 2012 as measured by our MRC accredited Webcast Metrics service. We recently eclipsed the 2.5 million Average Active Sessions number during the average week and are witnessing peak listening times with audience numbers nearing 4 million. The overall reach of online audio continues to grow as well with more than 100 million people listening at some point each month.

Advertisers follow audiences and with this kind of audience growth more and more advertisers have been entering the space for the first time and still more are upping their year over year spends as they become more familiar with the space and its benefits. Early 2012 saw smartphone penetration in the US surpass feature phone penetration and tablets now outsell PC’s, these sweeping changes in the consumer market have had a dramatic impact on the size of digital audio audiences overall.

At Triton we have kept a laser focus on providing innovation that will activate the market by proving that a connected one-to-one listener has great value. We can’t do much to affect overall content costs today but we have done a lot to magnify the value of a listener.

Can you give me some examples of what you are talking about?

Triton is investing millions each year in R&D to build the digital audio advertising market. We believe deep down to our toes that we are witnessing a historical migration to digital for all forms of content and take it as our responsibility to provide publishers with the technology they need to build big audience and big monetization of that audience.

Recently, we have released two products that were a long time in the making at great expense but we believe are nothing less than game-changing for the space. These new products are called CM3 and a2x.

CM3 is an advertising system and decision engine built inside of our network that allows publishers to deliver both content and advertising on a one-to-one basis. At the same time, CM3 also allows publishers to conduct business in a variety of models from traditional spot, to digital “slotted” impressions based digital or dynamic real time. CM3 opens your available audience to be monetized through a variety of sales channels and business models while managing it all seamlessly in the backend.

So if you are a radio station and you want to sell your in-stream inventory in a bundled sell with on-air CM3 allows you to do that, but it also opens up your remaining inventory for sell-in from any number of third party channels. CM3 brings the capabilities of digital display advertising to the audio market. CM3 enables the targeting of ads and other content through a combination of first and third party data allowing publishers to unlock real digital value.

CM3 is not a new version of an old product – it’s a new product built from the ground up and deployed inside our infrastructure. Earlier technology from Ando Media and others focused primarily on solving a problem caused by union rules and the need for the separation of breaks. CM3 solves a different problem…revenue!

We’ve always believed that digital audio ads would have the same potential as other digital ad units and that when this power was delivered at scale audio would become a big digital business. We believe that day is upon us!

Triton also recently announced a new product we call a2x. It’s the first audience-based programmatic buying solution for online audio. It’s a private exchange for digital audio advertising. Triton publishing partners can now make their inventory available for real-time purchase through demand side platforms and agency trading desks. Agencies are already buying digital display and video through these platforms and now for the first time they can also use them to buy digital audio.

Triton’s announcement was followed by a release from WPP/GroupM’s trading desk, Xaxis. Xaxis has partnered with Triton Digital to power what they’re calling “Xaxis Radio,” which is a product to purchase programmatic real-time digital audio advertising. Xaxis connects into Triton’s technology allowing them to purchase distinct audience segments combining demographic and psychographic data with purchase intent across our network of publishers. The agency is now able to segment audiences across various data points that are relevant to different advertisers.

And since Xaxis is part of the largest buyer of advertising on the planet, I think it makes a pretty strong statement about the potential for digital audio advertising. This isn’t a beta with some small advertiser; it’s a partnership with the largest agency in the world.

So for the first time an advertiser will be able to buy spots not only based on where the listener is but across numerous other data fields like their activities or areas of interest?

Kinda…they are buying audience not spots.

The advertiser is not looking to buy the audience of a particular station or publisher; they are looking to buy audience that fits into a particular segment across a large network of publishers. The buyer is actually “blind” as to where the impression is delivered from a publisher standpoint. The audience is anonymous but we can infer a lot about them by appending various data sources to what we already know so that the right ad gets delivered to the right person at the right time as well as on the right device and in the right context.

So this doesn’t require any extra work or effort from the publisher? You don’t need to add new filters. You don’t need to add registration. All of this is based on data that already exists, right?

Almost.

It basically requires a “yes” from the publisher if they are already a Triton streaming client. After that its a minimum amount of work on our side to get them activated.

Other than that, another important component is that it’s real-time. Most of the advertising that people are selling in the digital audio space is slotted advertising where somebody is buying a campaign in December but it is running in January and is locked in. This channel allows for the monetization of an impression that was unsold and therfore is available in real-time. What we’ve seen with digital audio, especially with the broadcast publishers, is a significant struggle to sell through against all their available impressions and to have strong monetization of those impressions from a CPM standpoint. This helps on both sides of that equation. It also helps minimize the number of PSA’s and poor sounding direct response ads running in-stream.

So what do you expect that impact to be? How positively will these new tools impact the ability of publishers or broadcasters to monetize these streams?

The potential for audio is huge. RTB [real-time bidding] was 17% of the display market in 2012 and we believe as do our demand side partners that audio is a superior opportunity. Digital audio is premium above-the-fold inventory. We’re not talking about 10 ads on a web page you never look at, we’re talking about a native, interruptive and unavoidable delivery of an impression.

Audio has always been mobile; think of radio’s historical in-car listening numbers, and advertisers have always valued the mobile context. The idea that mobile is about a device type never made any sense to us; mobile is a context and no other ad form can translate that value the way audio can!

We spent a lot of time in the market validating our thesis. Our time spent with demand side players, agency leaders and ad technology experts confirmed our belief about the high value of digital audio inventory.

I want to stress that this is an invitation-only, premium, private exchange. Quality publishers with quality inventory – and the advertisers know that going in.

With the introduction of CM3 comes a host of other opportunities as well. We have the ability to integrate third parties so that ad networks, ad servers, local aggregators etc can hook into a marketplace. While nearly all publishers lack the individual scale to provide a viable local model today a combination/partnership of publishers at a local level can offer this scale. As the space scales further the hyper-local and mobile targeting opportunities will kick in.

As I mentioned earlier, our R&D focus is heavily weighted toward monetization builders. For us this has all been about helping our publishers get real value for their inventory and helping them to deliver more audience online. We can now see a path to monetization levels that exceed what an estimated over-the-air listener is worth.

Do you expect these announcements, these tools, to help even the playing field between traditional broadcast publishers and the Pandoras of the world?

I think for the broadcast guys this will be the channel that delivers the most value right now.

They have had significant challenges with the various aggregation plays or ad networks that they participate in, and that includes Triton. The limitations of the early tech pushed these companies toward the low-hanging fruit of established radio budgets. Therefore, it has primarily been network radio advertisers who have sought out this channel and so the CPM’s have been very poor.

Pure-play publishers have significantly more audience data, registration data, etc.. They have utilized that data to drive higher CPM for their various inventories. So I think from an impression value standpoint, it certainly helps level the playing field.

I do, however, still believe its very important for all publishers to capture registration data. This is a point that has always bewildered me with the broadcasters. Since they have not been so concerned about audience size online why wouldn’t they force a registration? I mean, if you think it’s challenging to monetize and therefore aren’t trying to maximize overall audience size, why would you be concerned about putting up a registration gate?

Is your focus leveling the playing field for broadcasters? Do you come at all of this from the broadcaster’s perspective?

Our market is digital audio. Triton serves any and all publishers in the digital audio space and we do so without prejudice. Any publisher, whether live or on-demand, broadcaster or pure play, may license any product we build. Where I came from will always matter to me, but our company cannot have credibility in the market without truly being agnostic.

Agencies and advertisers, those that create demand, do not see a distinction between publisher based upon their legacy. They have been crystal clear with our company as to what they want and expect. Our mission is to deliver to publishers, regardless of who they are and where they come from, the digital audio capabilities necessary to build audience and harness revenue.

The notion that Spotify, Pandora or any on-demand service is the “enemy” of “radio” makes no sense. Technologies like these prove that audio can and will evolve and with it so will audio advertising. Audio must evolve!

Did FM prove to be the “enemy” or a “friend” back in the 1960′s? The revenue that has left the broadcast radio industry since 2006 has disproportionately gone to Google and Facebook, not to Spotify and Pandora! I would actually argue that these kinds of services are helping to protect audio’s place in the advertising ecosystem as they give marketers a reason to believe audio will evolve to become more targeted and accountable – this is a critical point.

Whether a product is or isn’t “radio” doesn’t matter any more than whether a product is or isn’t “newspaper” or is or isn’t “TV.” Marketers are following the consumer and the consumer is blending their time between offline and online media with a constant uptick towards online. Ad budgets will continue to slant in the online direction as audience builds and they make better use of available data and precision targeting capability.

Back to a2x, how have broadcast publishers been responding to these recent announcements?

The response from our broadcast publishers has been tremendous. We haven’t been loud in the marketplace about that yet. The goal is to light up as many of the trading desks as we can, and we’ve had several more come on in the past few weeks since the Xaxis announcement.

With more trading desks comes more demand for inventory and with that demand comes higher prices paid to deliver the impression.

In Part 2 tomorrow, we focus on the wisdom (or lack thereof) of simulcasting ads between over-the-air and online and whether or not there really is a business model for online radio.

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