NEW YORK: Music-streaming sites have local radio ad spending in their sights as they turn to advertising in order to cover their costs as subscriptions alone fall short.
Marketers already have a plethora of digital channels to contend with and will face more as the likes of Pandora, Spotify, Rdio, iHeartRadio and iTunes Radio all pitch for advertisers' business.
Music-streaming sites typically offer both a subscription model with no ads as well as a free service supported by advertising. "We wanted a perpetual free offering," Rdio CEO Drew Larner told Advertising Age. "We've seen as the market has evolved [that an ad-supported free service] drives virality and an active user base," he explained.
Advertising Age noted that Pandora now expects 80% of its revenue to come from advertising, but said for that to happen it, along with its rivals, would need to get bigger in local markets and offer mobile ads tailored to local audiences.
"The cash register rings at the local level," observed Kathy Doyle, executive vice president at media agency UM.
But the sector faces a problem in that users relying on free services tend to split their listening across the various services. "We think the marketplace is getting cluttered, and there is a lot of noise," said Erin Clift, Spotify's vice president of global marketing and partnerships.
Digital streaming services offer a much greater level of targeting than traditional radio, with Pandora, for example, able to offer information on when listeners are using as well as device used. In addition, it has its Music Genome Project, which evaluates songs on up to 450 different musicological attributes.
Spotify is developing a similar approach. "We have this treasure trove of data that we are right now in real time trying to organize how to package and how to work with advertisers around that," said Brian Benedik, Spotify's vice president of North American ad sales.
Music-streaming sites will need to fully exploit the data they hold to compete effectively with Apple's recent entry into this market, as iTunes Radio comes pre-installed both for new iPhone users and on the iOS7 operating system which has been downloaded more than 200m times.
Time magazine recently noted that, based on initial trends, iTunes Radio could be on par with Pandora in terms of unique listeners in its first month, while investment analysts predicted that Pandora could lose 10% to 15% of its monthly listener-hours as a result.
Data sourced from Advertising Age, Time; additional content by Warc staff