Radio is Hot Again: The Benefits and Challenges of Advertising on Digital Radio

First patented by Guglielmo Marconi in 1896, the radio is one of the oldest forms of mass communication. Given this 120 year history, few would have guessed that in 2016, radio would become more popular and relevant than ever before. Digital radio is transforming the way that people consume music by allowing them to customize playlists, select specific songs, and not worry about the potential hassle of downloading music. Streaming radio also has the advantage of reaching both active and passive listeners, both inside and outside the home: passive listeners can multitask with music on in the background, while active listeners can customize their playlists according to artist, genre, and song. In a 2015 Audio Today report, Nielsen Media Research found that 243 million Americans listen to radio each week, representing a staggering 91% of the U.S. population ages 12 and older. Digital radio is particularly popular among young people: the Pew Research Center reported that 53% of Americans ages 12 and older reported listening to internet radio in the past month, with 73% listening from their smartphones.

Naturally, advertisers are paying attention as increasingly more options for ad buying hit the digital radio market, from Pandora’s uninterrupted “Sponsored Listening” sessions, to Spotify’s “Playlist Targeting” ads, which focus on users based on their moods and activities. A March 2015 article by David Porter of Forbes, “Why Internet Radio is the Biggest Advertising Opportunity of the Future,” has been widely disseminated and praised for its exploration of how digital radio advertising can be optimized through big data analytics and hyper-personalized ad serving. Digital radio represents a unique opportunity to reach listeners 24/7, whether they’re at work, at home, or commuting between the two. In fact, it’s projected that over 2.2 million cars with digital radio will be sold in the UK alone by the end of 2016. As more and more users tune in to digital radio from their connected cars, tablets and mobile devices, the opportunities for targeted ad serving and location-based metrics seem endless.

From an advertiser’s perspective, it’s important to recognize both the benefits and challenges of advertising on digital radio. For example, even though listeners may be served ads that they are more likely to be interested in, facing an ad in the middle of a music stream can be a jarring and annoying experience. Users may opt out of in-stream ads by paying for ad-free streaming, or choose to have their free listening session sponsored by a single advertiser. Digital radio ads also don’t tend to encourage secondary actions by the listener. After an ad has played, the user probably won’t click out of the app to an unfamiliar, secondary page; they will continue listening to their music and go about their day. The passive nature of radio consumption means there also special considerations for pricing models when buying digital radio ads. As an advertiser, you might be paying for 30 seconds of view time that don’t reflect actual engagement. For instance, a passive listener might be hearing a video ad within her digital radio stream, but she isn’t actually watching it.

Considerations aside, advertising on digital radio holds many unique opportunities for brands to connect with users, whether they’re actively or passively listening, at work or at home.  With digital radio, you’ll be able to reach, target, and collect data on your audience in ways that would have been unprecedented over a hundred years ago.

Katie Hom
Just Media, Inc.

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