• by Tom Hespos , January 4, 2005

Forgive me for commenting early on one of my 2005 predictions. This is, after all, my first column of the New Year. But there's a lot going on in the realm of online radio, and it's gathering steam very quickly.

I mentioned measurement models, increased consumption, and fragmentation as reasons why online radio will go mainstream in 2005. Its familiarity to traditional planning groups could be the thing that helps this medium emerge from relative obscurity. To be sure, I dialed up one of my old buds, Eric Ronning, managing partner of Ronning-Lipset Radio.

It turns out there's quite a bit more to it than that. Sure, traditional planning groups see measurement models that are familiar to them, but according to Ronning, the accountability factor is a selling point that goes hand in hand with measurement. Buys can be posted more frequently with online radio than with terrestrial radio and Arbitron provides monthly audience reports, as compared to their quarterly or bi-annual terrestrial measurements. Additionally, the information is based on passive measurement data deemed to be significantly more accurate than what traditional radio folks are used to.

Interestingly, Internet radio is not succumbing to one of the things that hindered online advertising in the early years: over-targeting. In the mid to late 90s, targeting mania led many online advertisers to pursue their ideal consumer overzealously, combining targeting filters and significantly decreasing the size of the audience they were reaching. Internet radio formats are decidedly more niche than their terrestrial radio counterparts, and this seems to do the trick in respect to targeting.

I asked Ronning if there were requests from agencies and media buyers to use registration information to deliver ads to niche targets, and he clearly let me know that micro-targeting in this fashion isn't something that turns radio buyers on.

Rather, the excitement over Internet radio seems to be coming from a number of other differentiators:

• Uncluttered Environments - The economics of Internet radio are significantly different than the economics of their terrestrial counterparts. Commercials aren't run six to a pod online. Rather, each spot stands alone. Ronning said this is in line with what online radio consumers expect and will tolerate.
• Significant At-Work Usage - Lots of Internet radio users listen at work, which is a tough environment for terrestrial media.
• Extension of Reach - This goes hand in hand with the theme that ran through my 2005 predictions column. Audience fragmentation drives a need on the part of advertisers to use more media to achieve the reach goals they set for themselves. As this vehicle develops, it will be more and more of a supplemental reach buy.

Obviously, Internet radio isn't driving the boat here, but its usage is more than significant and enough to get on the radar screens of traditional planning groups. You may have seen the Center for Media Research report that went out just prior to the New Year that showed 4.1 million people per week listening to the three major online radio networks. Recent studies from Arbitron/Edison show that 10 percent of the U.S. population uses online radio every week and that it is growing at a sizeable clip.

To me, this is just a natural extension of dollars following eyeballs (or, in this case, ears). If you think about the fragmentation of consumption habits concerning music and audio entertainment, you think about things like portable music players, satellite radio, and music pumped into households via the cable, in addition to online radio.

While terrestrial radio still reaches 90 percent of the United States, media buyers must adjust their buys to compensate for the diversity of consumption habits. Online radio is one of the first alternative audio media to come to the table with compatible metrics and a realistic ad model. All these things lead me to believe it will be largely successful in 2005.