XAPPmedia: Internet Radio Q4 Advertisers Grow 5.4x

RADIO ONLINE | Tuesday, March 1, 2016

Internet radio ad load for the fourth quarter continued its fuctuations around 2-minute 30-second (2:30) average for 2015, reports findings from XAPPmedia. Total distinct advertisers in the quarter were nearly flat, but the full year saw a growth of more than 5.4 times of the 406 distinct advertisers on the five publishers tracked. That number hit 487, including Apple Music's iTunes Radio, but historically those advertisers were excluded from the sample.

Forty-eight percent of advertisers in Q4 were first identifed in the quarter. All five Internet radio publishers in the sample raised their ad load (i.e. total time devoted to ads per hour) in Q4 to deliver an average of 2:29 -- a 5.7% rise over Q3. The seasonal Q4 rise was anticipated. However, the publishers held the line in restricting hourly ad load.

Some additional findings revealed:

• The ad load average consistently hovers around 2.5 minutes per hour (about 22% of broadcast radio) and the high three publishers average 3 minutes
• The total number of advertisers identified in 2015 grew to 406, up 5.4x since 2014
• The Home Depot and GEICO dominated spot load in Q4 with 7.39% and 4.73% share, respectively. The next three-Progressive, Discover and Macy's were all between 2.51% and 2.66%
• There remains a strong bias toward 30-second ads despite the variable length options presented by streamed listening over Internet radio

Although most of the 2015 media coverage centered on a battle between Spotify and Apple for subscription revenue, advertising remained strong. Pandora reported a 27% rise in 2015 ad revenue to $933 million. The RAB reports that digital revenue for broadcast radio (which includes advertising from streaming) grew 11.4% to $550 million. Most publishers don't break out their advertising revenue, but MiDIA Research's Mark Mulligan dissected IFPI data to show that 56% of royalty payments to music labels and artists come from ad-supported listening.

The past year definitely saw other action in ad-supported listening. Google Play Music added an ad-supported listening tier in June to its formerly subscriptiononly service. Apple maintained its ad-supported iTunes Radio within Apple Music throughout the year, but finally shut it down for good in January. Rdio, which offered both subscription and ad-supported listening, ceased operations in December 2015. Meanwhile, Spotify was steadfast in its support of ad-supported listening as the most efficient onramp for securing subscription users.

Competition for listeners clearly intensifed in 2015 as eMarketer estimated total audience for Internet radio and streaming audio services hit 170 million monthly U.S. users. As that grows to 177 million in 2016, Internet radio presents an attractive destination for the 38% forecasted growth in mobile advertising spend. However, Internet radio costs scale linearly with revenue whether the publisher uses direct license deals or the CRB rate structure. XAPPmedia says the key strategy for improving audio publisher economics in 2016 will be to command higher CPM ad rates.

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