May 01, 2011

Radio is now an interactive medium, engaging millions of consumers online and via mobile devices every week. Thanks to saturation levels of broadband and internet access, consumers’ tastes in music, news, talk and entertainment can be satisfied by a plethora of radio stations and streams on all manner of devices.

eMarketer estimates 37.5% of US internet users ages 12 and up will listen to internet radio—including online streaming of terrestrial broadcasts and online-only radio stations—or podcasts at least weekly this year. On a monthly basis, 44.3% of web users will tune in to online radio.

“For marketers, the rise of Pandora and the expansion of terrestrial audiences into online channels is good news,” said Lisa E. Phillips, eMarketer senior analyst and author of the new report, “The Internet Radio Audience: Personalized, Mobile and Targetable.” “But it may take some time before these new services and technologies have enough scale to warrant attention.”

Broadcast radio remains the dominant choice for consumers and advertisers. Research from both Arbitron/Edison and internet radio ad network TargetSpot found that listening to online radio stations complements and even heightens time spent listening to over-the-air stations. But the growing popularity of Pandora, coupled with the expected arrival of services like Spotify in the US, could tip the balance sooner rather than later.

eMarketer estimates that $15.7 billion in ad spending will flow to over-the-air radio stations in 2011, up 2.5% over 2010 ad spending on the medium. Online stations are projected to take in $800 million in ad spending in 2011, representing 27.4% growth compared with 2010. Looking ahead to 2015, over-the-air stations will reach $17.2 billion in ad spending, up 9.6% from 2011, while ad spending with internet radio pure plays will double, to $1.6 billion.

Internet radio offers advertisers new targeting opportunities. Pure plays like Pandora typically have a registration form that collects demographic information about listeners, and terrestrial stations are beginning to use social sign-on to get data about online streamers. This information can be used to target ads by age, gender, location and more. In addition, the websites where listening happens can take radio advertising beyond audio.

“There are a range of visual opportunities in the online radio industry that creative directors should pay attention to,” said Phillips. “These websites host videos, rich media and banner ads that music enthusiasts will see—and some will engage with. Impressions go beyond the audio portion of the listening experience.”

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