Radio InSights

Now Television Has Its Own Nielsen PPM Problems

Did you find the switch to PPM added additional stability, precision, or depth to radio ratings?

PPM may have increased granularity to the numbers, but it’s hard to claim that PPM brought stability or precision to radio when ratings are too often based on one or two meters.

Now Nielsen intends to use PPM to measure local television promising, wait for it...greater stability, precision, and depth.

If you think you’ve got problems with PPM, take some solace that television broadcasters in 44 markets will soon feel our pain and then some.

While Nielsen’s plans may not seem to have a direct impact on radio, the move has implications that do not bode well for radio.

According to Nielsen’s press release:

The addition of PPM panelists to the local TV service will...provide local clients with ratings that reflect precise measurement of local viewing behaviors and insights, and boost ratings fidelity....

The inclusion of PPM measurement into the Nielsen Local TV service will bring additional stability and depth to local TV ratings. The integration will advance Nielsen's ability to provide clients more granular data while measuring consumers wherever they watch.

We hope TV people talk to radio people before they get too excited.

Radio people were given those same assurances as Arbitron rolled out PPM.

Radio may have been sold a bill of goods with PPM, but at least Arbitron replaced the diary with PPM in the top markets.

Nielsen isn’t even going to do that.

Nielsen apparently intends to combine data currently gathered via other means with PPM data, much like the company’s RADAR studies for network radio combine PPM numbers from large markets with diary numbers from small markets.

How’s that worked out for radio?

Radio’s RADAR was stripped of MRC accreditation in 2010 when Arbitron started combining PPM and diary data. The MRC has a problem combining different measurement methods.

Local television diary measurement is Media Rating Council accredited. However, the MRC is warning that local television too may lose MRC accreditation.

Every time the MRC refused accreditation to one of Arbitron’s new products executives quickly reaffirmed their commitment to accreditation:

We will continue to focus on obtaining and maintaining Media Rating Council accreditation in all of our PPM and
Diary markets. (Michael Skarzynski, CEO Arbitron 2009)

MRC accreditation for our PPM markets is a company-wide priority at Arbitron. (Gregg Lindner EVP Arbitron 2013)

Nielsen, in contrast, barely acknowledges the accreditation process, perhaps because so many of the company's products are not accredited.

In fact, no new radio PPM market has been accredited since Nielsen acquired Arbitron, and today nearly half of PPM markets remain unaccredited a decade after PPM launched.

Even the number one market in the nation—New York—is not accredited!

Nielsen pays lip-service to accreditation and then rolls out another unaccredited product.

If Nielsen is willing to compromise television ratings to save money how likely is it that Nielsen will invest to improve radio ratings?

Is Television Smarter Than Radio?

Are television people smarter than radio people?

Both television and radio face aggressive challenges from digital alternatives. Both media have seen a loss of audience as well as a decline in revenue.

The arc of the decline, however, differs between radio and television.

Over the past few years television has seen a greater decline in audience, but a smaller decline in revenue, which begs the question: Do television people understand the digital threat better than radio people?

The graph below encapsulates what’s been happening over the past few years. (Click to enlarge.)

We’ve indexed the latest numbers to comparable numbers in 2011. The current index for daily time spent for radio and television is shown on the left in red.

Radio stands at 95, which means that listeners are spending 5% less time listening to radio compared to 2011. Television stands at 90, which means television has lost 10% of viewing time over the same period.

In other words, television has lost twice as much “time spent” (think of it as consumption) as radio has.

Relatively speaking, good news for radio.

The right hand blue bars show the change in revenue over the same period of time. Radio indexes at 93 compared to television’s 96.

It means that while television has seen its audience decline twice as much as radio, radio has seen its revenue drop nearly twice as much as television.

We're only looking at the past four years, but television’s resiliency is nothing new.

It is a phenomenon that we've been discussing as far back as 2009 on Radio Insights. Here are two posts from 2011 here and here that illustrate that television’s defense against digital has been more effective than radio’s for quite some time.

What is television doing better than radio?

Both legacy media face growing competition from pure-play digital alternatives. Both are witnessing declines in audience.

And one can make the argument that local radio ought to be more nimble able to more quickly respond to digital threats.

Yet television, already a medium three times as large as radio has seemed to manage digital assaults better.

It’s an important issue for both media, so Radio Insights is going to explore this issue in greater detail in future posts.

We’ll identify differences between the two media’s responses to digital’s threats, and what it says about how best to minimize the negative impact of digital.

Stay tuned.

 

Nielsen Flips Off Media Rating Council...Again

If Nielsen seemed overly anxious to quickly put the Voltair matter behind them, it is perhaps because they have bigger fires to put out.

While those bigger fires are about the way Nielsen measures video consumption, Nielsen's actions have major implications for radio.

It’s no secret that Nielsen is struggling to measure all the ways that people today consume media. It is true for both television and radio.

Radio’s dispassionate passivity regarding Nielsen’s poor performance, however, stands in stark contrast to television’s very vocal public reaction to Nielsen’s poor performance on the TV side.

Alan Wurtzel NBC’s research president has been particularly blunt in his assessment of Nielsen:

Nielsen will become increasingly marginalized. They are incapable of doing certain things and it's only getting worse.

At CES Linda Yaccarino, NBC’s chairman of advertising sales and client partnerships, described Nielsen’s current rating system as antiquated:

It's unfair to marketers, it's unfair to content creators, and it's up to all of us in this industry to take a stand. We need to reach beyond Nielsen’s C3 (the current) rating.

To Wurtzel the problem is that Nielsen isn’t measuring media the way it’s consumed today and the company's failure is hurting television:

Whether we like it or not, Nielsen winds up being a reflection of what the industry is, and what troubles me is that people, because they're looking at these flawed numbers, are getting the idea that the pie, the use of the video medium, is shrinking. Well, it's not. If anything, it's expanding. It's just not being measured.

While Mr. Wurtzel is talking about television, there’s no evidence that Nielsen is any more accurate in their measurement of radio.

Radio buyers are looking at flawed numbers and getting the idea that radio is also shrinking. Radio like television is being consumed in many new ways, and radio too is being hurt by Nielsen’s inability to measure all consumption.

In some respects radio is probably being hurt proportionately more than television because of the flaws in PPM measurement. We know that PPM is missing most streamed listening. Now we’ve discovered that PPM is missing plenty of broadcast listening too.

And if the next step Nielsen is taking in television is any indication of what Nielsen intends for radio, radio measurement accuracy could actually get worse.

You see, it is getting so expensive to measure people’s media habits by way of a survey that Nielsen is going to stop asking people.

Henceforth the company is just going to “model” television rating demographics in smaller markets using increasingly inaccurate estimates of larger markets.

As reported by MediaPost:

Nielsen is poised to make the most fundamental shift in its core currency -- national TV ratings -- since it introduced people meters in 1987. That methodological shift, which will effectively begin modeling a large portion of TV ratings instead of actually measuring them, is set to change on Dec. 28th (2015) and will be the new currency for the national TV advertising marketplace for the foreseeable future.

Local television stations in smaller markets are upset, but what choice do they have?

If Nielsen can make this move stick, why not do the same for radio? Smaller markets may have their ratings “modeled” based on what’s happening in nearby larger markets, essentially estimates based on other estimates.

In a surprising show of backbone, the Media Rating Council is not just rolling over. The MRC has expressed concerns about the accuracy of a ratings service that doesn’t even make a token effort to actually talk to media users.

The MRC has yet to vote on accreditation (PDF) for Nielsen’s modeling, but Nielsen is moving ahead without the MRC’s blessing. In discussing Nielsen's moves, MediaDailyNews notes:

It will be the first time its national TV ratings are un-accredited since the MRC began auditing them in the 1960s, stemming from Congressional hearings on the TV ratings business and a consent decree with the Justice Department.

It's a point that Nielsen disputes. However, according to Nielsen's own press release:

The MRC has yet to make an accreditation determination related to the Viewer Assignment process for persons-level viewing estimates in these markets only and therefore they will not be accredited effective Dec. 31st.

Nielsen still doesn’t have MRC accreditation in all PPM markets. If anything, the process is virtually stopped with no new markets added to the accredited list since August 2013.

And now Nielsen’s radio diary methodology is under MRC review.

Yet unlike television’s vocal critics, radio’s leaders remain silent and on the sidelines.

NOTE: The original post stated that there were fewer markets accredited today than in the past. Nielsen has yet to gain accreditation in twenty-two markets, a number that has not changed since 2013. In January 2012 the MRC revoked Salt Lake City's accreditation and the market remains unaccredited. New markets, however, have since been added keeping the total accredited markets at twenty-six.

We have also added a link to Nielsen's press release regarding the status of the company's Viewer Assignment accreditation.    

Did Arbitron Sell Radio a Bill of Goods with PPM?

A study with Chicago listeners back in the early days of PPM had participants keep track of their listening using a diary while at the same time carrying a PPM meter.

The study is important because it was one of the few opportunities we had to see directly how the meter compared to recording listening in a diary.

When Arbitron compared the self-reported diary to what the meter reported it found that people wrote down more listening than the meter recorded.

So which was correct?

Did listeners write down listening that didn’t take place, or did the meter fail to identify listening that people were exposed to?

Broadcasters were told at the time that the meter was more reliable, that people didn’t accurately record their listening, but today we have to wonder.

We now know that the meter does not capture 100% of exposed listening in a typical setting.

If it’s true that the meter misses some listening, isn’t it possible that the participants in Chicago were right and the meters were wrong?

In light of what we know now, it’s a reasonable question, but during the early days of PPM the questioner would have been dismissed if not burned at the stake.

It was a time when Arbitron took every opportunity to present upbeat PowerPoint presentations about how buyers were excited about PPM, that they were anxious to get more timely and detailed ratings data, and that PPM would bring radio into the 21^st century.

But did Arbitron sell radio a bill of goods?

Arbitron funded a PPM Economic Impact Study that predicted gains of $700 million in annual radio revenue.

At the time Gary Fries, head of RAB declared:

Advertisers and agencies are eager to embrace electronic measurement. Moreover, it is apparent that there is a risk of loss of advertiser dollars for media that do not advance to a more reliable-and better-measurement platform.

In a 2006 stock holders letter (PDF) Steve Morris, then President and CEO of Arbitron, declared:

I believe the time is right for the radio industry to upgrade its measurement system to one that more reliably measures listening habits, does so with 21st century technology, and puts our radio customers in the position of being leaders in answering the call of major advertisers for more accountability for their media expenditures.

Is it just coincidence that both Fries and Morris use the word "reliable" in touting PPM?

In retrospect the debate over the value of PPM was never really a debate. Arbitron simply stated as fact that PPM was more reliable, more accurate, and a vast improvement over the diary.

Industry leaders supported it, the Arbitron Advisory Board rolled over buying Arbitron’s upbeat story-line, and PPM moved forward.

Yet despite all the assurances that PPM was more reliable, despite upbeat predictions about the positive financial impact of PPM, there were tell-tale signs that all was not right with PPM.

We heard a lot about reach.

According to PPM, people listened to more radio stations than diaries showed they did. PPM reach (cume) exceeded diary cume.

What we didn’t hear about were the metrics that mattered, the metrics radio sold.

We didn’t hear about quarter-hour ratings (AQH).

Presentations rarely addressed PPM’s lower time spent listening (TSL). Reviewing numerous client presentations over this period we couldn’t find a single AQH rating graph comparing diaries to PPM.

Pre-currency books were run in each new market with Arbitron producing both a diary book and a PPM book so we could compare diary and PPM ratings.

Every new PPM market was seeing a decline in AQH ratings. It varied slightly from market to market, but PPM was saying that people weren’t listening as much as the diary said they were.

The sales implications were clear.

A station working with lower PPM AQH ratings had two choices: It could either cut rates to keep cost-per-points the same, or it could pitch higher cost-per-points and hope that buyers would go along.

Despite the promise of greater credibility with agencies and larger buys if radio switched to PPM, stations were looking at the prospect of lower rates, lower revenue, and as a bonus, a 30% higher Arbitron bill.

To Arbitron,it was no big deal.The company had its increased profits baked into PPM contracts.

However, Arbitron knew it had an awkward PR problem on its hands. Lower revenue was not part of the PPM narrative, so Arbitron needed a solution.

So Arbitron told radio that it should just tell buyers that spots are going to cost more.

Just tell them!

One hundred rating points using PPM numbers is going to cost more than 100 points using diary numbers, by Arbitron’s estimate, about 43% more!

What could go wrong?

Rather than pitch it that bluntly, Arbitron got clever. They came up with the slogan,"70 is the new 100" when it comes to PPM rating points.

Arbitron put together fancy four color print brochures (PDF) with smiling panelists on the cover.

To make it look scientific, the company calculated a new set of AQH rating numbers for each market.

For example, in New York 80 points equaled 100, in Los Angeles 74 equaled 100, and in Chicago 85 PPM rating points was just as good as 100 diary points.

Arbitron justified their new math by pointing out that 0 degrees Celsius is the same as 32 degrees Fahrenheit. Really, they did.

You can imagine how well the 70=100 program was received.

At the time we called it Arbitron’s fuzzy math, because fuzzy it was.

Arbitron persisted for two years trying to sell the idea to radio and media buyers, but then quietly buried the campaign.

While the campaign is gone, the implications are still with us.

Arbitron declared that PPM was right and the diary was wrong. And radio bought it.

But given what we now know about PPM’s flaws, isn’t it more likely that the diary got it right (or at least closer to the truth) than PPM?

Isn’t it time to reopen the matter?

 

What's All the Fuss Over Voltair? How About $2 Billion.

In the course of a serious online discussion there comes a time when it attracts pundits who want to demonstrate their higher intellect and superior knowledge by offering a new perspective on the subject.

Too often they do just the opposite. Their comments reveal ill and uninformed opinions that demonstrate their lack of understanding of the subject. Rather than make useful contributions that advance the discussion, they simply add to the noise level side-tracking the discussion.

So it is with the discussion about Voltair. Failing to understand the broad implications of Voltair’s apparent success, too many people new to the issue bring up silly issues. It’s like a child around a group of adults shouting "look at me, look at me!" to get attention.

The first foray into silliness was the assertion that using Voltair was unfair. Anyone who feels this way simply doesn’t understand the economic value of a device that may significantly increase TSL and in turn a station's AQH rating.

The latest diversion is the notion that there is just too much fuss over Voltair. It is no big deal, just another way to game PPM.

"What about engagement, what about passion?" is asked, as if these things somehow make up for a flawed technology potentially undercounting radio listenership.

Suggesting that radio is too obsessed with accurate listening estimates proves that one has no concept of the role that ratings play in today’s multi-media environment and tomorrow’s programmatic marketplace.

Only a person who has never sold radio time, never tried to explain PPM’s 30% lower AQH ratings, or had to make a sales budget makes that argument.

Voltair is a canary in the coal mine, a warning that something is amiss with PPM. It is a warning with broad implications regarding radio sales and radio revenue.

A rough "back of the envelope" calculation illustrates the magnitude of the problem.

Last year US spot radio revenue totaled $13.6 billion with nearly three-quarters of the total coming from PPM markets.

How much of the revenue was ratings driven is anyone’s guess, but large market managers tell me it can be 70%+ of total spot revenue. Even in smaller PPM markets the percentage can be 50% and higher.

We’ll use the lower 50% number, knowing that it probably understates the actual average across all PPM markets.

Let’s call it $6 billion in spot sales driven by ratings.

Let’s also assume that rating sensitive sales are tied to cost-per-point. In other words, the higher a station’s AQH rating, the higher the rates it can charge.

Now for our last assumption let’s say that PPM is under-reporting AQH ratings by 30%. Remember Arbitron’s "70 is the new 100" campaign? That was an admission that AQH ratings are about 30% lower when measured by PPM.

Given those assumptions, spot radio revenues should be north of $16 billion instead of less than $14 billion.

If these assumptions are in the ballpark, PPM is costing radio a little more than $2 billion in lost revenue every year.

Let that sink in. Two billion dollars of lost revenue. Every year.

What if a higher percentage of spot sales is driven by ratings?

What if lost listening is higher than Nielsen’s estimate? We’ve seen ratings jumps over 50% at some stations after installing Voltair. (Your mileage may vary!)

It is not inconceivable that ratings driven sales revenue could double. That would put total spot radio close to $20 billion.

And if programmatic sales really do take off, you can kiss good by all those warm fuzzy reasons to buy radio. Spot sales deals will all be driven by ratings.

That’s really what the fuss is all about with Voltair.

If Voltair is helping PPM meters more consistently log radio listening, it confirms that PPM based estimates are low, that listening levels are higher than we thought, and we ought to be charging more for our spots.

If a flawed ratings system is conceivably costing radio $2 billion a year in lost revenue, that’s worth fussing over.

Next up, we’ll take a closer look at the "70 is the new 100" campaign that Arbitron hatched in 2009 as a way to explain the drop in listenership with PPM.

 

Remember the Promise of Engagement?

 
Remember Arbitron’s promise of developing an Engagement metric for radio?

As Radio Insights reported in 2009, Arbitron intended to:

Develop an ongoing measure of "affinity" that is designed to reflect the advertising value of the unique relationship listeners have with their stations. The mission of this (effort) is to design a relevant, timely and accessible metric that captures audience involvement.

At the time we noted that the company’s new found interest in measuring affinity was ironic because Arbitron had essentially stopped measuring affinity when it switched to PPM.

A year after the announcement without much explanation the idea was dead. There would be no engagement metric–at least from Arbitron.

We speculated that Arbitron may have killed the idea because engagement measures an active listener wilfully choosing one station over another.

PPM does not measures listening. It measures only “drive-by” exposure. Arbitron could not repurpose PPM ratings to create a measure of engagement.

Ironically, while PPM cannot tell us anything about engagement, the diary does.

It is a good instrument to measure engagement because the listener herself writes down the stations she listens to, and how often. If she is really engaged with a station, she is going to write it down a lot.

Now five years later, another company is rolling out an engagement metric, but not for radio. For web advertising.

And the irony is particularly telling given that the Media Rating Council (MRC) has already accredited the engagement metric. It’s from a company you’ve probably never heard of, Chartbeat.

As reported by Gigaom:

Web analytics firm Chartbeat says it is the first to be certified by the Media Ratings (sic) Council for a new way of measuring the actual attention of readers, as part of a move to get publishers and advertisers to stop focusing only on clicks and pageviews.

Chartbeat measures the amount of time a viewer spends reading online content arguing that the time spent with content is more important than things like unique viewers.

As we pointed out in the 2009 post:

We at Harker Research have found that there is a strong correlation between high Time Spent Listening (TSL) and affinity. As one goes up, the other one does too. If a listener has a natural attraction towards a radio station, she probably listens to it a great deal. She listens less to a station that she feels less strongly about.

Read the prediction of one digital ad analytics firm as reported by AdAge:

With the viewability standard in place, creative agencies should expect the ground to continue shifting toward attention metrics -- whether cost per hour, cost per 30 seconds or something else. "I don't think it will be one single metric," said Jonah Goodhart, CEO of Moat, a digital ad analytics firm. "We will see a shift on transacting on viewability in late 2014 or early 2015," he added. "This idea of buying media on the metric that makes the most sense for you is where we'll see the world going."

Yet at a time when advertisers are embracing engagement and turning away from metrics of reach and unique viewers, radio is heading in the opposite direction, using a measurement that emphasizes reach over engagement.

PPM “atomizes” radio reducing radio listening into homogenous ten minute listening spans preventing radio from capitalizing on its unique ability to engage.

Maybe Nielsen should take another look at engagement. Maybe Arbitron was on to something in 2009, but didn’t have the right tools to develop the metric.

And radio could sure use some engagement.

iHeartMedia: Risky Business

One of the most dangerous marketing blunders a brand can make is to link its business to an aspiration rather than the thing it is best known for. As Business Week points out:

Advertising your aspirations only invites people to catch you failing to achieve them, and these days it's easier than ever for them to spread the word. Aspirations are, by definition, promises that can't be fully kept. Don't announce them, just try to live by them-use them within the walls to rally your troops but don't let them escape to rouse the ire of your customers.

Which brings us to iHeartMedia. Last week Clear Channel became iHeartMedia.

Maybe this is going to be a huge success. Maybe this will catapult the company into the digital realm. Maybe not.

In announcing the change Clear Channel’s CEO Bob Pittman declared:

iHeartMedia reflects our commitment to being the media company that provides the most entertainment to the most engaged audiences wherever they go, with more content and more events in more places on more devices.

Elaborating in a New York Times story, he noted:

To capture all these concepts and still call it the legacy name really is a disservice to what we are and what people here have built. So we've taken our biggest national brand, our newest brand, our most digital brand, and made that the name of the company.

The company has certainly been moving in that direction. Clear Channel stations have been aggressively pushing the iHeartRadio thing even more than they have their own station identities, so maybe this is the next logical step.

As AdAge added:

Mr. Pittman and his team decided to align itself more closely with iHeartRadio because it's what the company has been using as its consumer-facing brand for several years. "We haven't used Clear Channel with consumers in years," Mr. Pittman said. "We use iHeartRadio on air."

Clear Channel stations may all use iHeartRadio, but after two years and tens of thousands of promos Clear Channel still isn't a single brand that Pittman can rebrand. It is a company with over 840 brands.

When you think of Fruit of the Loom, do you think of Berkshire Hathaway? What about Geico, Burlington Northern, or See’s Candy?

These companies and fifty more are owned by Warren Buffet’s company, but only four have Berkshire Hathaway in their name.

Warren Buffet understands the value of an established brand name and wants his companies to continue strengthening their brand names even after he buys them. 

Radio stations from Z100 WHTZ in New York to Love100 WLVH in Savannah are the brands of Clear Channel.

The 245 million listeners who tune into Clear Channel stations do not do so because the station is a Clear Channel station. They couldn’t care less. And rebranding the company will not change the relationship.

In reporting the name change The Hollywood Reporter noted that less than 5 percent of Clear Channel’s broadcast listeners engage with digital platforms. Just 5 percent.

Take a look at Clear Channel’s streaming success based on Triton Digital figures. The top line is Pandora session starts. Nearly 2 billion. The lower line is Clear Channel at almost 234 million. (Click to enlarge.)

Look at the tremendous gap between the two. And remember that over the last two years as the 840 Clear Channel radio stations were flogging iHeartRadio, with its promotions, and concerts the gap has been growing.

And to make matter’s worse, Clear Channel streaming (along with most others) seems to have plateaued. Consumption hasn’t significantly grown for over a year.

iHeartRadio may be the company’s newest brand, but those are ominous signs for a company pinning it’s hopes for the future on a streaming platform. 

According to the New York Times, Pittman claims that iHeartRadio accounted for "hundreds of millions" of dollars, a fraction of the $3.1 billion in radio revenue the company made in 2013.

Imagine if the energy going into iHeartMedia were put into growing the revenue of each of the 840 stations by just 1 or 2 percent.

Why would the leader of radio’s largest group suddenly change its name? An interview with the Wall Street Journal gives us a clue:

Mr. Pittman said he'd seen first-hand how a corporate name change can open doors. When his former employer, the Warner Amex Satellite Entertainment Company, switched its name  to MTV Networks, the division that Mr. Pittman had founded, Mr. Pittman said advertisers suddenly became much friendlier, saying "Oh, great, we know your products, come on in."

Pittman is recycling the MTV story, hoping for a similar outcome.

The problem is the analogy. MTV began as a national brand that needed a more unique national identify. Clear Channel isn’t a national brand in the same sense that MTV is. It is 840 brands all of which are stronger in their individual markets than iHeartMedia.

Jennifer Meyers, Executive Director of Strategy at Sullivan, a brand engagement company, with clients like Yahoo, UPS, Pfizer, Disney, and American Express expressed doubts about the move:

I've seen this move before. When established companies like Clear Channel struggle to keep their leadership positions in industries that are rapidly transforming - like media - renaming is rarely the solution.

Time will tell. Maybe the move will open the doors of media buyers that dismiss radio as irrelevant. But the possibility remains that the buying community will see this as Jennifer Meyers does, as a desperate attempt to appear relevant.

If Pittman is right, he stands to grow those millions. If he’s wrong, he’s jeopardizing those billions.

Stay tuned.

Social Media Fails to Deliver

U.S. companies spent a combined $5.1 billion on social media advertising last year. According to new research, it appears most of the money was wasted.

Gallup research found that two-thirds of U.S. consumers say that social media has no influence on their buying decisions. The conclusion of the authors:

“Social media are not the powerful and persuasive marketing force many companies hoped they would be.”

That’s an understatement. Only 5% of those polled felt that social media has a great deal of influence on their purchasing decisions.

In another study Nielsen (paywall) found that global consumers trusted ads on radio in addition to television, print, and billboards more than social media ads.

Radio Insights recently pointed out that fraud is rampant in the video ad business with more than half of online video ads never seen, and that an equal percentage of  banner impressions served on advertising networks and exchanges are never seen.

Now it turns out that social media is ineffective.

It makes one wonder how many products and services are losing out because they are pulling dollars from radio and other traditional media so they can buy online video ads, banners, and a Facebook presence.

Online Video: Bogus Sites, Fake Traffic, Drone Pools

A few days after Radio Insights noted the massive fraud in online video advertising, The Wall Street Journal reported that many big advertisers are being victimized:

Lured by the promise of advertising they could be sure was being seen by the right people, marketers are now contending with a deep bag of tricks that includes Web-crawling robots, server-based "drone pools" and the pixel-size video sites that has them paying for dubious Internet traffic.

The story illustrates the depth of deception by showing how just one site, USFunVideos, stole from J.P. Morgan Chase, Minute Maid, smartphone maker HTC Corp, and others by running their ads on tiny sites each the size of a single pixel, all embedded on a website playing cooking videos.

As we pointed out in our earlier post, the extent of the fraud with online video is not new. It is well documented, and virtually unstoppable.

The Wall Street Journal story is interesting because it documents how little advertisers and agencies care that they are being screwed.

This is how the three companies reacted when told their video ads played on invisible players:

A spokesman for J.P. Morgan Chase acknowledged the company inadvertently paid for the spots to appear. A spokesman for HTC said its media agencies have "robust monitoring solutions in place" to guard against fraud. A Minute Maid spokeswoman said that "known fraud is automatically stripped out" of ads counted, and billed, to the company.

That last line from Minute Maid is reminiscent of Dick Cheney’s “known unknowns” versus “unknown knowns.” Of course they don’t pay for known fraud. They do end up paying for unknown fraud.

Mike Turcotte, a senior vice president at Zenith Media, which handles J.P. Morgan Chase's online advertising said that the USFunVideos incident represented a small amount of the bank's total ad budget but declined to give any figures, or say whether the bank had been reimbursed for the fraud.

Mr. Turcotte is being coy here. Fraud experts estimate that fraud is siphoning off at least 50% of the dollars going to online video.

Yet the message is, “Nothing to see here. No big deal. We’ve got this under control.”

But of course, none of these ads were supposed to be on this rogue site, none of these ads were seen, and none of the companies had been aware of the breach before The Journal discovered them.

Perhaps the most telling line in the WSJ story came from the Zenith Media VP who confessed:

"It's always a big deal when advertisers can't control where their ads end up in the supply chain.”

Bingo.

When advertisers buy a radio schedule, it runs on a real radio station with listeners. The buy is rarely handled by more than one or two intermediators, generally human.

These video ads are being bought through electronic auctions and automated systems, and often run on foreign web sites. USFunVideos appears to be a Slovakian web site.

The HTC ad traveled through three middlemen, including the ad network OneScreen and the ad-buying tech company TubeMogul.

J.P. Morgan Chase placed its ad through AOL Inc. 's Adap.tv, and they handed off the buy to three more firms before it ended up on the rogue site. There can be as many as nine intermediators involved by the time a video ad runs.

But here’s the kicker: These advertisers are paying upwards of $30 per thousand views, more than they would pay for much of prime TV, and  considerably more than for a prime radio buy.

For the privilege of playing in a one pixel player on a Slovakian website.

These sorts of stories should make radio’s leaders livid. Major advertisers have been sold a bill of goods by digital stakeholders, and radio is doing virtually nothing to publicize the fraud and contrast it to radio's transparancy.

Where is the NAB? Where is the RAB? 

Radio Sleeps While Digital Fraudsters Steal Billions

Online video ad sales will probably be over $3 Billion this year. And according to the New York Times the majority of that money will be wasted on ads that few people see.

It’s a story that every radio sales person should carry and share with clients thinking of switching radio dollars to digital.

According to The Times:

By many estimates, more than half of online video ads are not seen, either because they are buried low on web pages or run in tiny, easily ignored video players on those pages, or run simultaneously with other ads. Vindico, an ad management platform company, deemed 57% of two billion video ads surveyed over two months to be "unviewable."

So advertisers are essentially flushing $1.7 Billion down the drain rather than spending their money on media that people actually see or hear.

The article goes on to show the numerous ways that advertisers get screwed when they buy video ads. There’s the legal ways that buyers get screwed:

The crux of the problem is that the number of video ads that agencies and brands want to run far exceeds the amount of quality inventory....When the premium space fills up, media buyers start looking for video players in less coveted online real estate.

Then there’s out and out fraud.

An agency working for a “mom-related” product placed an order paying for premium placement on premium websites. Here’s how the story described the schedule they ended up with:

Many of the ads were running in tiny players, 3 inches by 2 inches, on the sites. Some were auto-playing...(and) the list of domain names where the ads were running included pornographic websites.

The agency that placed the business claimed they were shocked, but should they have been?

No. The truth is that years of research has shown that many if not the majority of online ads are never seen.

As eMarketer reports:

Study after study shows that viewability makes for significant ad spending waste. In a survey from Integral Ad Science, roughly half of US banner impressions served on advertising networks and exchanges went unseen....The majority of ads bought never even reached a pair of eyeballs.

Half of banner impressions are illusionary and 57% of video ads unviewable. You’d think that buyers would wise-up to the scam and take their money elsewhere.

Unfortunately, the hype surrounding digital is just too great. Spending is expected to rise again this year. Mobile video ads are the hot new way to waste advertiser dollars, diverting money from effective traditional media like radio and television to digital ads no one sees.

Radio Insights recently noted three new studies highlighting radio’s strengths and its advertising effectiveness.

These studies represent the first serious efforts in decades to illustrate radio’s effectiveness, and neither the National Association of Broadcasters nor the Radio Advertising Bureau participated.

Remember NAB’s Radio 2020 campaign from 2008? Neither does anyone else.

Still use the RAB’s Radio Ad Lab 2008 study on radio spots and emotion in your sales pitches? Didn’t think so.

Radio 2010 and Radio Ad Lab are poster children for leadership's ineffectual efforts to counter digital's propaganda. In the battle to grow radio’s piece of the advertising pie the NAB and RAB are MIA.

Digital is going to continue to eat radio’s lunch until the industry pushes back against the fraud and hucksterism of digital. Is either organization up to the task?

Is the Digital Basket the Wrong Place for Radio’s Eggs?

Spot revenue flat-lined again in 2013. Radio can’t seem to move the needle when it comes to selling spots on the radio. Thank God for digital.

Digital is the one bright spot for local radio revenue. It was up again in 2013, so it is understandable that everyone from the Radio Advertising Bureau on down would crow about digital:

"Digital continues to gain momentum among advertisers looking to maximize their use of all Radio platforms," states Erica Farber, President and CEO of RAB. "Based on the recent Borrell Associates forecast of a 22% rise in Digital spending on Radio in 2014, this category is poised to surpass the $1B mark."

Everyone seems to agree that digital is the bright spot in radio’s future. Unfortunately, while a digital future may be inevitable, economic success for radio in a digital world is by no means inevitable. Quite the opposite is possible, an issue we raised back in 2009.

Putting all of radio’s eggs in the digital basket may be a trap. Instead of securing radio’s future, it may sacrifice broadcast’s enormous advantage over its digital competitors, leveling a playing field on which radio has always won.

The RAB press release to which Farber alluded in the above quote predicts a bright digital future for radio noting that digital grew 15.9% in 2013, and projecting another 22% growth in 2014.

That might sound like a lot, but as noted in the release digital contributes an anemic 3% to radio’s revenue. Take a look at the graph at left. It illustrates how little digital contributes to local radio’s revenue. That tiny sliver at the top is digital’s contribution.

Even if digital revenue continues to grow at the RAB’s wishful double digit pace, it will take over a decade for digital to approach even half of spot radio’s contribution.

And the RAB’s projections are extremely optimistic verging on the delusional. We need only look at newspaper’s attempt to cross over to the digital world to understand.

Facing precipitous declines in print revenue, the newspaper industry pinned all its hopes on digital. The major newspaper chains predicted that digital would save the medium. We questioned their strategy, and the wisdom of radio following a similar path in 2011.

What’s happened since?

In 2010, newspaper digital revenue grew by 10.9%. However, every year since the rate of growth has declined. Digital newspaper revenue barely grew at all in 2013.

Compare that to radio’s digital growth over the same period. The good news was that radio’s growth rate coming out of the recession was nearly triple that of newspaper. The bad news is that radio’s growth rate like newspaper’s immediately began to slow.

As the table at left shows, after growing 28.1% in 2010, growth fell in each of the next two years. Growth rebounded last year, but still failed to achieve the growth rate of 2010.

The graph at left shows each medium’s digital growth rate indexed to their 2010 rate. Note that with the exception of 2013, the growth rate declines of radio and newspaper seem to be following the same pattern.

Radio critics claim that the industry isn’t moving quickly enough. We’re told that digital revenues will grow faster if only broadcasters tried harder. But what evidence do we have?

Newspapers have been developing a digital strategy much longer than radio. The major chains have reallocated more resources to their digital product than radio has. And the end result appears to be only an accelerated pattern of growth then decline, not a stronger one.

If radio is following the same arc of rapidly diminishing growth in digital revenue that newspaper is tracing, then radio has to rethink its strategy of pinning its hope for growth on digital.

So if digital isn’t the right basket to put all of radio’s eggs, what’s the alternative? That’s the subject of the next Radio Insights post.

Radio: Highest ROI. Does Any One Notice?

Ad Age reports that a new Nielsen study marrying radio listening as measured by PPM with ad exposure and purchase concludes that Radio has the highest return on investment (ROI) of any medium.

Brands averaged a sales lift of more than $6 for every $1 spent on radio ads–an ROI double of even the best results from many recent studies of digital or TV media.

This may be shocking news for some, but Radio Insights reported in 2010 on a study by Morgen Stanley that showed radio wasn’t getting its fair share of advertising dollars back then. Now four years later, another study concludes that radio outperforms other media in ROI.

Delivering the results to an Advertising Research Foundation audience, Leslie Wood, chief research officer of Nielsen Catalina, believes one reason maybe people’s affinity with their radio stations:

It’s shocking how connected people are to their radio.

The study is further proof of radio’s effectiveness. The disbelief that Wood’s comment reveals is further evidence that radio has done a terrible job selling itself to the advertising community.

Read the Ad Age study here.

Talk Radio 2.0

Is Talk Radio dying?

There are plenty of pundits who think so, but as we recently pointed out every mainstream radio format goes through repeated life cycles. At some point every format seems to be near extinction only to come roaring back, renewed and stronger than ever.

We’ll save a deeper discussion of format life cycles for a later day, but here’s the one aspect that we need to keep in mind as we debate the health of Talk Radio: As a format gains more momentum it attracts listeners of a certain demographic and psychographic.

These listeners become the core audience of the format, and continue to listen as they age. The core audience grows older, moves through the demo, and ultimately ages out of the demo.

The format’s momentum stalls because the format cannot replace its aging listeners with younger listeners.

Talk critics delight in pointing out Talk Radio’s aging audience as proof that Talk is on its last legs, but every format reaches this point in its life cycle.

At this very moment virtually every mainstream format is aging. CHR, AC, and Classic Rock as well as Talk are all getting older.

(Consolidation and radio’s current fixation with centralized programming is worsening the problem, and the major groups that operate cookie-cutter formats across markets are going to pay a price in wilting market shares. But we digress.)

The basic problem is this: People don’t listen to their parent’s radio stations.

Listeners who are aging into Talk Radio’s prime demos have parents who listened to Talk Radio. They may be as politically engaged as their parents, they may share many of the beliefs and viewpoints of their parents, but they still want their own radio station.

If you’re in a format that’s getting a little too old, you have a choice. You can stick with the old format and squeeze as much money out of the aging audience as possible, or you can bite the bullet and recreate the format for younger listeners growing into the target demo.

History shows that the first option makes more money in the short term, but only delays the inevitable. Worse, it opens the door for a new competitor to reinvent the format and hasten your station’s demise.

(There are rare heritage stations that manage to reinvent themselves every decade or so, but the odds of success are low, particularly if there are competitors ready to pounce.)

What does all this mean for Talk Radio?

As formats go, Talk Radio is long in the tooth.

The formula has worked well beyond any other format’s normal life cycle. But while Talk has proved it’s ability to outlive other formats, a format’s age span is no more elastic than a listener’s age span.

The title of  Part 1 of this discussion, Talk Radio is Dead, Long Live Talk, is a reference to the 15th century phrase The King is Dead, Long Live the King, addressing the ephemeral status of a king. A king is the ruler of his empire, but upon his death, a new king becomes the ruler. Thus the notion of succession, that kings may die, but the throne is forever.

One day Talk Radio 1.0 will run its course, but that does not mean the end of Talk Radio. It will simply herald Talk Radio 2.0.

History and the cyclical nature of formats makes this a certainty. The only question is what form Talk 2.0 will take.

Pundits and self-proclaimed futurists speak confidently of the future as if they have some special gift for seeing the world over the horizon. However, study after study has shown that the only accurate futurists are the ones that admit we can’t predict the future.

CHR was pretty much written off as a tired out-of-fashion format when Saturday Night Fever reignited the format in 1977. Alternative came out of nowhere to reinvigorate a stumbling Rock format twenty years later.

Reborn formats rarely announce themselves before they take off, and rarely take the form that radio assumes. That’s why we suspect that Talk Radio 2.0 is not going to follow the arc that Talk pundits are predicting.

A lot of the punditry predicts that Talk Radio will become less tempestuous, more measured, less extreme. Nicer.

We don’t think so.

Stations will try it. We’ll have more intellectual hosts, more balanced discussions, less verbal bomb throwing.

But it will fail.

We talk with literally thousands of Talk Radio listeners every year, and our research has shown that the next generation of Talk listeners is different than this generation’s, but no less passionate.

They are not looking for a watered-down version of Talk Radio 1.0

We think Talk Radio 2.0 is going to sound considerably different from today’s Talk, but more from a structural standpoint, not an ideological standpoint.

Perhaps when Rush Limbaugh and Sean Hannity decide to retire there will be others capable of filling their shoes, but perhaps not.

In their absence, the format will begin to experiment with shorter faster paced shows, and there will be few three and four hour shows. Talk 2.0 will have more in common with the old radio networks than Talk 1.0.

So is Talk Radio dying? No. Talk 1.0 maybe, but there will be a 2.0. Long live Talk!

Radio’s Great Schism: Two Visions of Radio’s Future.

There was a time not long ago when radio broadcasters were united sharing a vision of a vibrant industry full of opportunity and potential.

The recession and new-media’s growing threat has fractured this shared confidence, creating radio’s Great Schism. Today radio’s leaders are deeply divided by dramatically different visions of radio’s future.

One vision sees broadcast radio entering its sunset years. This mind-set believes that new media’s assault will prevent radio from ever recovering its former glory.

Those who share this vision believe the best is behind radio.

With a dark foreboding future facing the industry, they believe that radio’s past necessities are today’s luxuries.

Local program directors, live announcers, marketing budgets, and the other tools that every station once used to drive ratings are expenses that this faltering business can no longer afford.

Every traditional medium making the transition to digital has seen significant declines in revenue, so why would radio be any different?

As we noted in 2010 in the post Digital Dimes for Broadcast Dollars:

Even if we use the most optimistic newspaper numbers to estimate radio's future digital revenue outlook, there's still a good chance that local radio, once a $20 billion industry, will become a $6 billion industry.

If one believes that streaming will ultimately replace broadcast radio, then there’s no choice but to dramatically lower costs.

This realization is perhaps why large public groups in particular have chosen to cut expenses by abandoning radio’s unique historical strength as a personal local medium.

They believe radio’s economic survival depends on it.

But what if this pessimistic vision of radio’s future is wrong?

There are those who see radio entering a new transformational phase. While radio has faced challenges from new media in the past (and predictions of its imminent demise), it has survived by creating new products that revolutionized radio.

Believing that radio’s past is its prologue, broadcasters who hold this more upbeat view of radio’s future continue to invest in the broadcast product, with local talent, entitled local program directors, and respectable marketing budgets.

The hope is that good local programming will enable radio to hold on to its broadcast audience (along with their much higher cost per point value), while at the same time giving the industry time (and money) to develop new digital products.

We were reminded of these differing visions as we surveyed the results of a Harker Research ratings analysis looking at radio group ratings success rates.

As we reported in the post Does Radio Group Size Help or Hurt Ratings?, taking into account group size, the most successful groups are not the largest.

Presumably with greater resources, one would expect the largest groups to have the highest proportion of winners, but that isn’t the case. Smaller groups with more limited resources are outperforming some of the largest groups.

Companies like Hubbard and Cox manage to win in more markets, despite competing against much larger groups.

Obviously there are many factors that go into a radio group’s ratings performance, but could it be that smaller groups are approaching radio’s challenges differently? Are they more optimistic that radio can remain masters of its own future? More willing to invest?

It will be years before we know which vision of radio’s future is the right one. The tell-tale sign will be whether future rating winners are the homogenized products of central planning, or local radio stations that take the slogan live and local seriously.

If radio’s optimists are right, and the pessimists preparing for radio’s sunset years are wrong, the pessimists will have done irreparable harm to their companies.

Stripping stations of the tools necessary to grow audience will ultimately back-fire, driving listeners into the arms of stations that continue to evolve and improve the product.

Stay tuned.

Social Media Stumbles: GM Pulls Plug on Facebook.

Auto companies are radio’s biggest clients, spending $2 billion last year, so the business should take some satisfaction in GM’s decision to stop wasting money on social media.

Just days before Facebook’s IPO, GM pulled it $10 million Facebook budget. According to the Wall Street Journal:

GM plans to stop advertising with Facebook after deciding that paid ads on the site have little impact on consumer’s car purchases.

GM may be the only company to publicly pull its advertising, but it probably won’t be the last. In the New York Times story on the pull-out, a Forester analyst offered this:

My colleagues and I have spoken with several other advertisers who were already thinking of putting their dollars elsewhere. Now that GM has done so in such a large and public way, many fence-sitters will know that they’re not alone in their disappointment about their results.

A new AP-CNBC poll may explain their disappointment. In the poll, 83 percent of users said they “hardly ever” or “never” click on the ads Facebook serves up.

The Los Angeles Times notes:

Social media has yet to be time tested as an advertising tool and research has shown that people don’t really pay attention to the advertisements. Consumer goods companies such as automakers are intoxicated by the huge number of people on social media, but they don’t know what its real impact is for driving awareness and driving sales.

Ironically, BIA/Kelsey chose the very same day to release new upbeat social media ad growth projections. The company believes that social media advertising will grow at a 21% annual rate for the foreseeable future.

The problem is that even before the GM announcement, there were questions about Facebook’s revenue growth curve. The company’s revenues actually declined in the first quarter.

Not exactly the direction one would expect if the BIA/Kelsey projections are correct.

Despite rosy predictions for social media, GM’s decision may mark the moment that advertisers began rethinking the value of social media.

A display ad on Facebook is a lifeless emotionless waste of marketing dollars.

Media Buyer's (Secret) Growing Interest in Radio

Did you realize that interest in radio is growing among media buyers?

Did you realize that radio ties television in growing interest?

Probably not. It’s apparently a secret.

A new survey of media buyers found that 25% of agency buyers are more focused on radio than they were last year, a 31% increase.

Not only did interest in radio increase, it equaled the increase in spot TV!

Given the persistence of the “Radio is Dead” meme, you’d think it ought to be big news. But it’s not.

The news was buried in a single sentence in the last paragraph of a 1000 word press release that focused almost entirely on the battle between television and digital.

The study, ostensibly a comprehensive look at agency attitudes across media, barely touched on radio. Check out the press release and a MediaPost story that completely ignored radio.

Perhaps radio got buried because the study was done by Strata, a division of Comcast that sells software to buyers. Comcast has plenty of horses in the TV versus digital race, but nary a one in radio.

But perhaps radio got buried because the business is doing a lousy job selling the value of radio.

Let’s be honest.

Think about the last time you saw another mainstream media mention radio. Rush Limbaugh calls a college student a slut, and suddenly radio becomes front page news.

Perhaps not the best PR for the medium, but at least people noticed radio again.

And within a week, it was over.

People went back to talking about singing cats on YouTube, Facebook’s IPO, and porn on Pinterest.

If buyers are thinking more about radio today, it is despite radio’s PR efforts, not because of them.

This year is shaping up to be a lack-luster year for radio if the first quarter is any indication.

Is it any wonder?

Streaming's Winners or Losers? MOG, Spotify, & Pandora

So much for the predictions that pure-play digital alternatives will come to dominate radio’s future.

After several years of hot money pouring into streaming and Internet radio, the reality is finally sinking in.

First, MOG is in play. Rumor has it that Beats Audio, a division of smartphone maker HTC, has either bought MOG or is in the late stages of buying the service.

Venture capitalists have already invested more than $33 million into the service. MOG claims a half million users, of which perhaps no more than 100,000 actually pay to use the service. (That compares to Spotify’s 3 million paying customers.)

The fact that MOG’s investors are looking to get out isn’t a positive sign.

VC companies invest in a start-up hoping to hit pay-dirt when the company goes public. They only unload a company after they’ve made a tidy profit, or when they realize that there will be no profit.

Ironically, MOG still has a lot of fans. Forbes recently declared: MOG blows Spotify away, but obviously its investors have a different view of the company.

HTC may see value in MOG as the handset’s “in-house” music service, the same way Microsoft packages Zune with its smartphones.

And while Spotify, streaming’s 2011 glamour-boy, is well ahead of MOG in subscriptions and revenue, there are growing questions of even its financial viability.

Michael Robertson, the man behind DAR.fm recently made this point:

I think Spotify is a tremendous service. Their technology is outstanding, their speed to stream is terrific, and users love it. It's just a math problem. Under the math (royalty payments to labels) they're forced to agree to, they will never generate a profit.

Remember this isn't the first wave. Go look at the archive from 3 years ago, 6 years ago, 9 years ago, you will find the iLikes, MySpace Music, Napster. They all paid up front and did the same deals, and they've all gone to heaven.

Pandora is another tremendous service that people love and yet may never make a profit.

The company’s stock got hammered after Pandora announced another losing year and predicted future losses.

The service’s loss widened to $16.1 million from a previous loss of $1.8 million despite nearly doubling revenue.

You’d think that doubling revenue would be good news, but Wall Street was expecting even higher revenue.

More troubling was the similar trajectory of expenses. Expenses increased at an even faster rate than revenues. On top of that, Pandora admitted to a 23% drop in active user growth.

Now analysts are questioning whether Pandora can even get its stock back up to its IPO price, let alone beyond.

Despite rosy predictions for the future of Internet radio and streaming services, the inevitability of pure-play success over local radio seems less certain than ever.

It is becoming even more obvious that broadcast radio is far from dead. Quite the opposite.

Radio groups continue to attract the majority of listeners and consequently the majority of radio dollars.

It is this continuing flow of advertising dollars that will enable broadcast to prevail over pure-plays on the Internet. Broadcast radio simply has much deeper pockets.

And all the hot money chasing radio dreams can't beat that.

Face It: Shock Sells.

There’s no such thing as bad publicity.

It’s a cliche' that Rush Limbaugh is testing in his defiant response to efforts to get him fired.

(We’re going to skip a review of the controversy, but if you’ve been living under a rock, go to Google News and type in “Limbaugh Fluke slut” to get up to speed.)

We're also not going to gloat and point out that people who have declared broadcast radio dead, writing it off as totally irrelevant, are the same people who are apoplectic that a host broadcasting on this irrelevant medium can generate such passion on both sides.

As new-media centric Ars Technica observed:

It seems appropriate to make an observation that hardly anyone else has. This latest Limbaugh Eruption indicates that broadcast radio still really matters.

The teachable moment for radio is what interests us. Will the concerted effort to get Limbaugh canned succeed? Will this hobble his show, either creatively or financially?

Does this open the door for Mike Huckabee, who Cumulus was already grooming to compete against Limbaugh?

And if the effort to boot Rush fails, and it instead boosts Limbaugh’s status, what does it say to us about the kind of radio that your listeners want to hear?

A great deal has been made about “no Limbaugh” dictates coming from major agencies and businesses. While the latest dictates have fueled the debate, the truth is that every controversial host attracts similar dictates.

Howard Stern had more than his share. Virtually every controversial “shock jock” morning man has had them.

And what about upset listeners, critical tweets, and organized Facebook efforts to get controversial personalities fired?

With all this aggravation, why do stations hire shock jocks and then defend them?

Because shock sells, and it sells at a premium.

Limbaugh says outrageous things that infuriate his detractors. But he also has a loyal devoted audience that keeps coming back.

In many markets Rush delivers two or three times the audience that his competitors deliver.

“Mike Huckabee is the latest in a long line of those who have attempted to compete with Rush,” was Premiere’s response when the Wall Street Journal picked up on Huckabee’s roll-out.

And they’re right. Bill O’Reilly, television’s most watched political talking head, couldn’t. Dennis Miller hasn’t. No one at Talk Radio Network has.

Which is why 99.9% of Limbaugh affiliates have not cut him loose since the Fluke story broke.

Shock sells.

Which brings us back to Mike Huckabee.

More Conversation, Less Confrontation. That’s the pitch, and that’s Mike Huckabee.

Perhaps America is ready for less confrontation. Perhaps America is ready for a guitar playing alternative to Rush Limbaugh.

The WSJ reports that Huckabee will launch with 140 stations. We wish Mike Huckabee and his 140 affiliates good luck.

This is a battle that every radio station with a controversial pain-in-the-butt personality should watch.

And it could produce an outcome with profound implications for the future of Talk radio.

Streaming Out to Crush Radio?

A recent Adweek cover with its smashed radio and bent antenna has all the earmarks of another hatchet job on radio.

The screaming title Is Streaming Music Out to Crush Radio Advertising? appears just one more example of the “radio is dead” meme that dogs broadcast radio.

So it is particularly ironic that the story by Erin Griffith is one of the more balanced looks at the battle between broadcast radio and its digital competitors. While most writers gush unfettered excitement over Internet radio’s future, Griffith captures the painful reality:

(Streaming services) pay a hefty rate each time a song is played. The services will never outgrow their costs, an unfortunate arrangement commentators have dubbed a "suicide pact."

Online radio's very survival depends on stealing ad dollars from its traditional counterpart, and it needs to do it fast.

Radio Insights made this point last August pointing out that the clock was ticking for the dozens of streaming services that want a piece of radio. In Is it Time for an Internet Radio Shake-Out? we noted:

Venture capitalists are still pouring money into music services and Internet radio providers. Pandora's successful IPO seems to have fueled even greater interest in the space.

VC money doesn't continue indefinitely, however. At some point, investors want to see a return on their investment, generally through an IPO. And there aren't any more Internet music IPOs in the pipeline.

That means these services are going to have to become profitable soon. That may be difficult.

We suggested that Internet radio was nearing a peak and that consolidation was inevitable, so it shouldn’t come as a surprise that cnet reports that MOG is being shopped.

Digital Music News notes:

MOG has always been a huge underachiever in the subscription market, though we've heard that the MOG Music Network (MMN) is actually quite lucrative. Either way, it looks like all or part of MOG is now being plumped for sale.

The website points out that the company has received $33 million in funding and has yet to make a profit.

After pumping hundreds of millions of dollars into streaming services, venture capitalists may finally realize that taking a piece of broadcast radio’s $17 billion (let alone becoming profitable) may be more difficult than they thought.

Pandora Ratchets Up Assault: The Fix is In

Pandora has a long history of confusing its aspirations with reality, presenting guesstimates as fact.

Two years ago we noted Tim Westergren’s seemingly pathological need to denigrate local radio using unsubstantiated unverifiable statistical factoids, confident that no one would question his numbers.

Since going public, Pandora executives have pursued the same wink-filled PR path, offering upbeat predictions backed by shaky statistics nearly always coupled with a solemn reference to broadcast radio’s imminent death.

The pitch of Pandora’s PR drone has recently kicked up a full octave, perhaps a consequence of Wall Street’s skeptical response to the service’s prediction of a bright future.

Pandora’s stock price is stuck below it’s June 15, 2011 debut, barely half of its first day’s high.

Over 40 million shares traded hands that grand day, and all those people who bought the future of radio at $26 can’t be too pleased seeing their investment chopped in half.

So Pandora’s PR machine has changed gears.

The service’s exponential growth in Triton Media ratings is old news. New month, new record numbers. The story has been told with numbing frequency.

Pandora is like the school yard bully that has already beaten up all the kids at school. The bully needs somebody bigger to beat up.

So Pandora has stopped picking on its weenie streaming competitors and instead is taking aim at someone considerably bigger: local broadcast radio.

In July the service released numbers it purported were AQH ratings, for the first time enabling the service to claim it is just as big as broadcast radio.

Pandora’s accomplis in this assault on local radio claimed, “this data demonstrates the significance and scope of Pandora’s audience.”

Like most of the other statistics Pandora releases, the AQH release had a thin shell of credibility.

Citing AQH invites, even begs one to compare Pandora’s numbers to Arbitron’s station ratings. And lest anyone miss the point, Pandora’s CRO John Trimble notes:

AQH is the industry standard for buying radio advertising and providing buyers with an apples-to-apples metric is just one of the things we do to help advertisers.

It didn’t help that Arbitron abetted the crime by allowing the release of broadcast station AQH ratings (KIIS 0.7 Pandora 0.9, WHTZ 0.6 Pandora 0.7, etc), a clear violation of the company’s “fair use” guidelines but then blocked our attempt to provide more meaningful comparisons.

With the duplicity of Pandora sycophants, the announcement and release ricocheted around mainstream media, radio trades, blogs, and then back to mainstream media so that today everyone just accepts the “fact” that Pandora is bigger than any local radio station.

If you Google Pandora beats local radio, you’ll find close to 11 million links. Yet Pandora's number-crunchers indignatly claim with a straight face that they had nothing to do with attempts to compare Pandora numbers to terrestrial radio stations. 

Radio’s giant flywheel of a ratings service finally got around to releasing a well-written thinly veiled response to Pandora’s scribbles, but long after the damage was done.

Arbitron’s paper (PDF) should be required reading by pundits who gush over Pandora, but we doubt few will bother. The fix is in.

Radio, showing vigilance that would make the guardians of Troy blush has finally gotten indignant about Pandora’s made up numbers now that Pandora has announced 13-25% gains in their made-up ratings.

And radio’s slow-motion push-back led to some defensive back-peddling on the part of Pandora’s enablers, but too late.

There’s blood in the water. Pandora’s fix is in.

CRO Trimble once declared that, “accurately reflecting our audience listenership is critical to our clients,” but that isn't going to stop Pandora from continuing to release their home-brew ratings.

And we bet they will show dramatic growth.

Did we mention the service is now releasing cume numbers?

Next post we’ll look a little more closely at the back of the envelope Pandora uses to calculate their numbers.

We’ll also explain why radio’s response has so completely missed the mark.