SpiralFrog Finally Leaps, Hopes To Be Music To Advertisers' Ears
"Our competitor is piracy," Joe Mohen, chairman and founder of SpiralFrog said recently during a press briefing in the penthouse suite of the trendy Night Hotel in New York's Time Square. Citing research that only one out of every 40 music downloads currently is paid for, Mohen says SpiralFrog's simple, ad-supported model offers a solution for all of the music industry's stakeholders - both content owners and consumers - and provides advertisers with a way of tapping difficult to reach, savvy young Internet users.
With a target audience of adults 18-34, but an anticipated average user age in the 20s, SpiralFrog hopes to emerge as an alternative to illicit music services by offering young music fans an easy, unobtrusive way of downloading music and video tracks with no risk of computer viruses, spyware, or potential legal repercussions.
About two-thirds of the advertising revenues SpiralFrog derives from the sale of advertising on its site are paid directly to the music business - about a half to record labels and performing artists, and about 17% to various music rights societies and publishers.
"The advertiser is kind of the hero here," said Hayes, who was a senior media executive at McCann-Erickson and Universal McCann before joining SpiralFrog. Coincidentally, Hayes appointment followed the departure of previous Universal McCann alum Robin Kent as CEO of SprialFrog early this year. Before joining SpiralFrog, Kent was CEO of Universal McCann. In April, Kent launched Rebel Digital, a new advertising consultancy focused on the digital music space that hopes to find new ways for marketers to integrate their brands with the digital music marketplace.
"This couldn't have worked three years ago. It couldn't have worked two years ago," said SpiralFrog's Mohen, referring to the evolution of the music download industry, the Internet, and the marketing goals of brand marketers that he claims have come together in a way that makes the market ripe for ad-supported music services.
The emergence of robust broadband penetration, the transformation of digital music distribution, and the need for marketers to find alternative ways of reaching young consumers is the perfect confluence of factors, he claimed.
The core of SpiralFrog's strategy relies on a simple, clean music downloading interface that is easy-to-use and is not intrusive to users. Ads are displayed as they would be on a typical Internet page, and marketers pay for the privilege of exposing themselves to consumers while they are researching music of downloading tracks on SpiralFrog's site. The downloads contain no embedded advertising, or pre-rolls, and no data tracking mechanisms, but require consumers to re-license their music by re-visiting SpiralFrog's site at least every couple of months.
Mel Schrieberg, SpiralFrog's current CEO, said the typical music consumer spends 70% of his or her time researching songs, and only about 30% actually downloading music.
SpiralFrog's team declined to disclose advertising costs, but Mohen said they would be "competitive with traditional media" and Hayes said they would be based on a "negotiated CPM." In additional to conventional display ads, Hayes said SpiralFrog hopes to work with marketers and agencies to develop special advertising formats and custom targets.
Generally, however, SpiralFrog plans to reach the younger segment of the music download community, which is the reason for its name, a made-up term Mohen said was conceived to "appeal to a 19-year-old, but would turn off a 50-year-old."
Subscription sites like Napster and Rhapsody, he said, are aimed at the 40-year-old crowd, while market leader iTunes is aimed at consumers with ample discretionary income. SpiralFrog, by contrast, is aimed at "people who have more time and less money," said Mohen. "And they're used to getting it for free," Hayes added.
One thing they won't be getting via SpiralFrog, though, is the ability to play their downloads on iPods, or to manage them via Apple's iTunes library. SpiralFrog does not support Apple's formats, though it is compatible with more than 80 devices that utilize Microsoft's media rights management system, including most personal computers.
With today's launch, SpiralFrog claims about 800,000 music tracks vs. iTunes 5 million, but Mohen claims the service will be up to 2 million free music tracks by the end of the year. Among the labels working with SpiralFrog are industry leader Universal Music Group, which includes artists such as U2 and 50 Cent.
Assuming the free, ad-supported music model works, Mohen said SpiralFrog would move into the television and film download marketplace with a similar model.
"Certainly, that is one of our strategic directions. This is the first," he said.
Ultimately, SpiralFrog's success will depend on how quickly consumers embrace its ad-supported model. Hayes said the company has plans for consumer marketing, but that the initial rollout would depend on public relations and word-of-mouth publicity.
"But you won't miss us," he promised.