PAT HIGBIE: There’s a paradigm shift going on between broadcast and Internet radio, and it’s creating business challenges on both sides. What’s happening in the Internet radio space is that there’s a ceiling on ad loads. That ceiling is about three minutes of ads per hour. At that volume, even the biggest players in the industry, including Pandora, are struggling to make money. The ceiling exists because there’s a lot of competition and if you increase your ad load, people are going to jump ship and go to another publisher.
So, what can be done? The only way forward is to increase the value of ads that are being run. We need to give companies that have already built fantastic followings the ability to change their economics. There’s a fantastic monetary opportunity and an ability to improve the listening experience as well.
How does XAPP fit into the audio advertising equation?
BRET KINSELLA: We’re an audio advertising service, which delivers a capability for publishers and advertisers to use interactive audio ads. That allows the consumer to respond to or engage with an ad through voice commands. We give publishers the technology to serve these interactive audio ads and we also work with advertisers to a certain extent to share best practice insight, as this is a new form of consumer engagement.
PH: We exist to give consumers a voice and to connect them with content and with brands through interactive audio advertising. What’s driving the move from broadcast radio to Internet audio is that there’s more personalization of content. But the content can also be more engaging.
What’s the opportunity for audio content within mobile?
BK: Internet radio advertising is mobile advertising. There’s comScore data to suggest that 95% of all Internet radio listening is now consumed on mobile. I’ve seen other figures that are a little lower than that, but they’re all above 85%. If you’re looking at a mobile marketing strategy for brand awareness or direct response, Internet radio is a place where you can guarantee significant mobile exposure. We’re starting to see some of the big publishers like Pandora, Spotify and iHeart Media getting really significant reach.
Who are your clients?
BK: Our only announced client at this time is NPR. We’re working with NPR One and NPR News, and we’ve been running ads on both of those platforms since April 8th of last year. The response has been good. First, NPR has been very excited about it because it’s been their highest-performing ad unit in terms of response rates. Also, it’s the highest-priced ad unit they have. They’re selling these ads north of $20 CPMs, which is much higher than anyone’s getting for audio ads. They’ve also been continually sold out. The advertiser demand right from the beginning was very strong.
PH: On the advertising side, clients like Amazon, Ford, Fandago, StubHub, Fox and others are using interactive audio ads today on NPR. In working with NPR, we’ve learned that 79% of the time that users are listening to audio content or an audio ad, their screen of their mobile device is dark. So a banner is completely useless.
What types of ad formats do you offer?
BK: We offer three types of ad formats. XAPP Ads promotes some sort of awareness, engagement or conversion, or serves some kind of deal. XAPP Content Discovery promotes a piece of content, or helps with content referral. The third ad format is a navigation offering, which prompts listeners to navigate by voice to a purchase page.
For our XAPP Ads, we’ve seen audience engagement rates of 1.09% to 7.86%. Our Content Discovery format runs response rates in the rage of 2.04 to 14.15%. For navigation formats, we’ve seen double-digit response rates where listeners actually go to the purchase page.
All together, we’re talking about engagement and conversion rates that are much higher than what we’re seeing in other digital media today. In the banner ad world, most response rates are .08 to .11% on average. If you look at an average for a mobile ad you might get something in the .35 to .4% range, depending on the ad format. And the good thing about it is that it’s measurable. That’s different from traditional radio.
How are publishers and advertisers responding to that?
PH: We’re seeing response rates at five to 10 times higher than traditional response rates for mobile banners.
When you increase response rates that much, it helps the advertiser gets more return on investment and it allows publisher to charge more. Even at significantly higher CPM rates, the return on investment is greater and more measurable for the advertiser. Our challenge right now is to increase the reach with various types of publishers and platforms. And the partnership with jacAPPS will help up extend our reach.
Is there an opportunity for these types of ads to be sold programmatically?
BK: There’s not a lot of programmatic going on in the audio space right now, but it will be coming and we certainly can support it. As far as the sales of the ads, we leave that up to the publisher, so we can support what our publishers support. Given our architecture it’s very simple for us to do that.
What’s the status of programmatic for digital audio?
BK: The audio industry has done some adoption of programmatic for digital display, but they’re still working through how they’ll use that for traditional audio spots.
For advertisers in this space, it’s more about them exploring and taking advantage of the new creative capabilities and the engagement opportunities within audio than it is about facilitating more effective buys. As the advertising spend grows, this will likely be integrated into the demand-side platforms and other forms of programmatic buying.
PH: Yes, but we first need to be embedded in a large number of publisher apps. When automation comes about, it could make a lot of sense because it would only improve what we’re doing with better targeting. Targeting is about finding those consumers with high intent. Programmatic with good targeting will marry well with what we’re doing, after we see industrywide standardization.