Internet radio and digital audio advertising is on track for a strong ad year in 2012 with solid CPMs and a growing local revenue base, according to speakers at RAIN Summit West 2012, held April 15 in Las Vegas during the NAB Show. However, given that only about 15% of listeners have shown a willingness to opt for a subscription model, online music providers are experimenting with various registration programs to increase the amount of information available to advertisers and help boost ad revenues.

Panelists said advertisers are beginning to more consciously make digital audio a part of ad campaigns, with the fact that ad agencies are increasingly reaching out to Internet radio players -- one sign of growth around the medium.

Part of the new interest stems from growing listener numbers and listening hours, as well as the fact that listeners tend to fall in the 18-to-34 demographic and that listening in the high-growth Hispanic demographic is strong. In addition, Internet radio tends to over-deliver in the upper-income demographics.

"We are in the second inning of a nine-inning ball game," said Pandora Media Inc. Senior VP/Ad Sales Steven Kritzman. Pandora has recently disclosed that its trailing 30-day active listeners had increased to 49 million in February versus 47 million in January, and that it had 150 million registered users as of January.

The mobile component is also quickly growing, with smartphone users in the U.S. alone set to grow from 93.1 million in 2011 to 137.5 million by 2013, according to eMarketer. Nine of the top 10 retailers (such as Target), nine of the top 10 restaurant marketers (such as McDonalds) and eight of the top 10 financial advertisers are already on board and advertising with digital audio.

Panelists agreed that while digital audio is one of the fastest-growing ad segments, listeners are not currently well-monetized, but using multimedia can help boost CPMs. Advertisers are just starting to learn how to best take advantage of mobile platforms, and they are eager to capitalize on the personalization of music that Internet radio offers in order to more effectively target listeners.

"Currently, Internet radio CPMs are in the range of $3 to $6 for nontargeted ads and higher for geo-targeted ads," said Alexis van de Wyer, president of AdsWizz Inc. Kritzman estimated prevailing rates of $20 CPMs for ads that involve video, with banner ads much lower. Kritzman said Pandora's advertisers tell the company that it is one of the highest-performing publishers for click-through, and in general have an 80% renewal rate for advertisers.