SAN FRANCISCO (03/07/2000) - You've moved from Albany, N.Y., to San Francisco, but you still tune in the streaming broadcast of your favorite Albany radio station. Of course, you tune out the ads for local lube joints and record stores.
After all, it's not as if you can hop in your car and take advantage of a sale that's 2,000 miles away. In the offline world, advertisers buy spots on local radio because they want to reach listeners in their area. Take the same spots and stream them online, however, and they lose their relevance. The Web is global, radio is local. Add to that conundrum the cost of streaming a station on the Web, which can reach into five figures to do in-house, and it's a wonder any station bothers to stream online.
Not surprisingly, two of the largest radio conglomerates in the U.S. - Clear Channel and CBS' Infinity Broadcasting - have decided to wait on streaming until a revenue model emerges to support it. The wait may be over. Two startups, HiWire and Lightningcast, now offer a way for stations to delete the local ads from a live broadcast and simultaneously replace them with ads targeted at listeners based on data the listeners have voluntarily provided.
That means a San Francisco resident listening to an Albany station online would hear San Francisco ads, while an Albany listener would still hear Albany ads.
This method of ad replacement, known as "stripping" in the online radio world, had eluded programmers till now. The problem had always been "latency," the second or two of dead air before the targeted ad started to play. Some people still think it's a problem. Carl Grooms is senior VP of strategy for BroadcastAmerica, a Portland, Maine-based streaming-media business that recently partnered with radio-station owner Citadel to stream its stations online.
"I haven't seen software that works to a point that it wouldn't annoy my listener," says Grooms, who admits that he hasn't yet seen the HiWire or Lightningcast technology in action. Both startups claim to have solved the latency problem, which is music to investors' ears. HiWire, located in downtown Los Angeles, just landed its second investment round, led by Stewart Alsop's New Enterprise Associates and the ad firm Grey Advertising. Totaling $17 million, the investment will give HiWire a foot in the door of the advertising community, which HiWire obviously wants to interest in its ad-targeting technology. Lightningcast, based in Alexandria, Va., recently put to bed its first round, just under $5 million, led by the VC firm Red Leaf.
HiWire, formerly known as RocketRadio, has its own player with connections to 3,000 stations around the world and a search engine to help you find streaming audio by station or style. When you download the player you can opt to tell HiWire information about yourself - age and gender, for example. If the station you tune in has signed on with HiWire, the information you've provided will be used to target the ads you hear. So far none of the traditional radio broadcasters available on HiWire has signed up for the company's targeted ad insertion service, although HiWire says that should soon change. But to make its business play work, HiWire must ink deals not only with radio stations but also with the ad agencies it hopes will be buying spots across its streaming audio "network." "We come in and we say, 'We want to use those radio spots you've created but use them in a Net environment where we can target by gender, age, etc.," says HiWire CEO Warren Schlichting.
But to interest those agencies, HiWire must gain wide distribution. The company's biggest partner so far is MusicMatch, an MP3 jukebox with 4 million registered users. When a radio station signs on, HiWire will buy its ad spots, strip out the local ads and resell the airtime to advertisers; or a station can sell the spots itself and pay HiWire a fee to target the ads to online listeners. Lightningcast plans to buy ad time from broadcasters then resell it to advertisers at a markup. Like HiWire, its survival depends on its ability to sign up popular streaming sites. So far it's made a deal with CyberRadio2000, a competitor to NetRadio, but it too is still looking for partnerships with Web broadcasters. Unlike HiWire, Lightningcast doesn't offer a standalone player.
Instead, a listener who visits one of Lightningcast's partner sites can download an applet that works with a wide variety of players. The applet contains Lightningcast's client-side ad-targeting technology.
In Lightningcast's model the responsibility for collecting user data lies with the individual partner sites. They communicate the information to Lightningcast, which uses it to target the ads. How much and what kind of data Lightningcast gets depends on how many and what kinds of questions each site asks its users. If a partner site doesn't want to force its listeners to download the applet, Lightningcast can send targeted audio ads via its servers.
However, Lightningcast CEO Tom Des Jardins admits this technology doesn't hold up as well in a multicast streaming environment. Radio has been slow to move into the unprofitable, unpredictable world of the Internet. Early signs indicate Lightningcast and HiWire won't change that situation soon, even though they promise more income for broadcasters. Kim Johnson, director of sales for Clear Channel's Web Network, says she's familiar with HiWire and likes what she hears. But will Clear Channel sign up? She says she'll have to wait and see.