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June 2004

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Internet Radio Brings Mixed Blessings for Advertisers

by Glen Emerson Morris

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In a report issued in April, 2004, the Pew Internet and American Life Project estimated that one-quarter of adult Americans, or about 48 million people, now have broadband Internet access at home. Another report, recently issued by Arbitron, estimated that 10,644,450 different people listened to Internet radio for at least five minutes during February, 2004. While this is good news for e-commerce, it may mark the beginning of serious problems for the broadcast radio industry.

Internet radio is likely to be very tough competition for broadcast radio for two reasons. Broadcast radio has a very limited diversity, and it has, from the listeners’ perspective, far too many commercials. Internet radio on the other hand, offers thousands of highly specialized stations, and many of them don’t play any commercials at all.

Making things worse for broadcast radio is the emergence of large sites dedicated to hosting and promoting thousands of different Internet radio stations. The top five are AOL’s , Yahoo’s LAUNCHcast radio service, Live365, Musicmatch and Virgin Radio, Arbitron’s top British broadcaster. These sites have the ability to concentrate and channel money into promotion, driving ratings up and attracting new Internet broadcasters.

Live365 ( offers anyone the ability to have their own Internet radio station for as little as $7.45 a month, including music rights. Live365 cut a deal with the music licensing agencies that allows them to resell music rights to private individual broadcasters. Live365 makes a selection of songs available and netcasters simply select the songs they want in rotation on their Internet station. Live365 also offers a searchable list of all of the stations they carry, indexed by station format.

The cost for hosting stations on Live365 is based on the number of simultaneous listeners supported and the quality of the signal. For a non-music station supporting only 25 simultaneous listeners at 64K the cost is $75.00 a month (or $112.05 for 128K). For 500 simultaneous listeners at 64K the cost increases to $750.00 a month (or $2,000.00 for 128K).

While 500 simultaneous listeners may not seem like a lot at one time, it adds up over the month. If a business were to broadcast a half hour talk show promoting its products, it could potentially attract 1000 people per hour (2 shows per hour at 500 listeners per show), or 18,000 listeners a day (based on an 6AM to midnight schedule). The monthly total would be 30 times 18,000, or 540,000 listeners. At a broadcast cost of $750.00, the cost per thousand would be $1.39 (not counting the shows production cost).

Live365 offers two ways for businesses to netcast their shows. The first option is with streaming audio. This option loops through a list of audio files, but offers the listener no choice in when they hear any specific audio program. The second option is with audio on demand, which allows listeners to select any audio file on the netcaster’s Website and listen to it when they choose to.

It’s only a matter of time before the Internet is full of Internet stations broadcasting infomercials on a 24/7 basis. It’s likely that many stations will follow a specific format and netcast infomercials from a variety of manufacturers on a set topic like plumbing, lawn care and do-it-yourself projects. B2B stations will also appear. There’s already a B2B station on Live365 targeting small to medium-sized advertisers, run by Canadian e-biz guru Garland Coulson (his articles are now featured on the advertising & Marketing Review Website.) Done right, these stations could become extremely popular with the public and business community, and be a significant help in selling products and services.

As with commercial broadcasters, infomercial-based stations will have tough competition on the Internet. The listening resources on the Internet available to anyone with a broadband connection are truly awesome. In addition to thousands of amateur stations like those of Live365, there are many non-commercial professional stations on the Internet, and some are first rate.

The BBC simulcasts its radio channels on the Internet and also makes archives of previous shows available ( On the BBC4 channel Website ( there are hundreds of talk shows on history, science and the arts for listening on demand. There’s even an archive of Alistair Cooke’s “Letter From America,” which was carried on BBC radio for 58 years (

For public radio fans, there’s a site ( which links to the Internet simulcasts of many American public radio stations, and also those of many public radio stations in other countries.

Internet radio also features simulcasts of live commercial broadcasts from many different countries. Many of those stations have formats unlikely to ever appear on American commercial radio. For instance, there’s a radio station in Australia that only plays songs by the heavy metal band Metallica. There are also many stations simulcasting from Latin America offering a wide selection of Latin jazz, bossa nova and salsa.

For businesses that want to advertise on the Internet, but don’t want to setup their own station, there are two agencies able to make buys for them, the Adsorption Network ( which represents commercial broadcasters simulcasting on the Internet, and Ronning Lipset Radio ( which represents stations originating on the Internet, like Live365, AOL and Yahoo!.

Given the sharp rise in Internet radio listeners, it’s not too early to start thinking about ways to incorporate Internet radio into your marketing strategy. While commercial broadcasting is still strong, its monopoly on listeners is fading, and it will continue to fade. Within a few years many, if not most, cars on the highways will have broadband access to the Internet, attacking broadcast radio’s last stronghold, drive-time. While many people will continue to listen to local broadcast stations for local news and reports, they are likely to listen only intermittently, preferring commercial free Internet stations for most of their music listening.

How well advertisers will do in the years ahead will depend on how well they adapt to the changing landscape. It’s unavoidable that the Internet will bring major changes to the broadcasting industry. What is avoidable is the negative effect these changes might have on advertising.

Glen Emerson Morris has worked as a technology consultant for Network Associates, Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius, and is the developer of the Advertising & Marketing Review Data CD.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

' keywords: Internet advertising, Internet marketing, business, advertising, Internet, marketing. For more advertising and marketing help, news, resources and information visit our Home Page.

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