• by Ken Liebeskind , August 20, 2001

Technology companies are making some progress in developing ways of replacing ads in web radio broadcasts, but one would have to say that progress is slow at best.

StreamAudio, one of the largest streamers of Internet radio with 350 stations in its lineup, recently reported that 109 of them have begun using StreamAudio's ad replacement technology to replace terrestrial radio ads with Internet only ads. All it takes is the company's ad replacement software, which interfaces with radio automation systems, which virtually every station already has. So there is no need for a station to purchase additional equipment, which is the case with other streaming companies, according to VP of sales and marketing Tom O'Connor.

StreamAudio works with MediaAmerica, one of the leading radio rep firms, to sign up Internet advertisers. Lightningcast also sells some ads. Major package goods companies Procter & Gamble, Pfizer and Anheuser-Busch lead the way. But O'Conner admits they aren't buying a lot of ads and most of the ad replacement that occurs is station promos instead of ads. StreamAudio is actually encouraging stations to use promos as a means of becoming accustomed to the ad replacement software.

Local stations can also sell their own ads, although they haven't been doing much of that yet, he says.

Two kinds of ads are being sold: gateways, which play as a station loads, and instream, which play during the broadcast. StreamAudio sells gateways for $40 to $60 CPM, while instreams are $20 to $25. The reason is that gateways are always seen, since they are shown before the stream comes on. Once it does, listeners frequently minimize their screens, so the visuals don't appear while they listen. The audio ads play without the video accompaniment, which means there is virtually no click-through on an instream ad, while gateways generate a 2 1/2 to 4 1/2 click through rate, O'Conner says.

Consequently, O'Conner says, "gateways will come on stronger," explaining they will be the top seller. He also predicts business will pick up in the second quarter next year.

One reason Internet radio ads are a good buy is advertisers can be assured of the audience, unlike terrestrial radio, which relies on uncertain Arbitron ratings. Most Internet radio stations use a registration process which gives them data on their listeners and they know when they listen and for how long.

"If you're a radio rep and you want to reach white collar males 35 to 54 who live in these zip codes and are married and drive a foreign car, I can throw it in a computer and rank the stations in the market that will do it," O'Conner says. "It's extremely well honed in what it can do."

The industry needs to make that argument to potential advertisers to boost business, which has been slow because of the struggles of Internet radio. Earlier this year, many stations stopped broadcasting due to the AFTRA (American Federation of Television and Radio Artists) controversy that demanded royalty payments for terrestrial commercials played online. It was the perfect reason for stations to start replacing their terrestrial ads with Internet only spots, but they have been slow to do it, O'Conner admits.

StreamAudio has five million ad replacement opportunities a week across its network. O'Conner was unable to say exactly how many are being filled, but he admitted, "Not many are running now. They're dipping their toe in the water."