While much of the discussion around Apple’s forthcoming iTunes Radio is around its head-to-head competition with Pandora, this conversation is missing the larger opportunity. Radio advertising, with its $14 billion in annual ad revenue, is the real target here.
The 100+ year old institution of radio has been punished over the past decade. The first insult came with the introduction of Sirius and XM’s satellite radio services with hundreds of stations. This forced the traditional broadcast versions to be re-categorized as “terrestrial radio.” Next, the introduction of Pandora allowed users to create their own radio stations, in a virtual on-demand approach across many connected devices, including mobile phones. This was the new way of radio. So the now-terrestrial radio stations fired back with their own non-innovative innovation, HD-radio, which did little to pry lost listeners away from the new world.
When terrestrial radio was the only game in town, stations fought one another for radio budget dollars, based on the archaic Arbitron sampling rating system. But the modern technology radio battle will continue to be fought with real, attributable data, and massively improved targeting. No more audience inferences, no more “trust me since I take you to lunch” media buying. The new radio media buy lets the advertiser find the 32-year-old female Hispanic consumer, in Miami, between 11:30am to 1pm.
Enter iTunes Radio. When the service launches in the fall, it will already be on every iPhone, iPad, iPad Mini and iPod Touch which upgrades to iOS7. That is more than 250 million active devices just in the U.S. Pandora can work as hard as it wants, it will never be able to make that claim. Just to keep it interesting, iTunes Radio will also be on every PC and Mac with the new iTunes and Apple TV (which is much more than a TV service, but that is for another article). On day 2, iTunes Radio will already have a massive footprint. And as Pandora claims to be the sixth largest radio network in the U.S., where does that place iTunes Radio after its first 30 days of user experimentation by a historically loyal Apple audience?
The next advantage that Apple brings is the opportunity to leverage years of iTunes’ purchase, rental and download data for advertising targeting. On mobile, specifically, this will be a true advantage when it is fully realized, as it can be the core of fact-based targeting.
If Apple can offer smart, innovative and interactive ad units, they can move ahead in the market quickly. As they ultimately control the operating system itself, it affords Apple the ability to enable unique tactics that deliver value to the consumer and the advertiser.
When was the last time you were able to interact with a broadcast audio radio ad? Obviously, you can’t, which kept its direct response tactics on par to those of the 1940’s. Pandora took the first step, with simultaneous display advertising that runs in-sync with its audio brethren. However, Apple could move this much further. These iAds can integrate with the phone dialer (on iPhone) or Facetime (with external call termination partners) to allow true click-to-call straight from the dongle on the headset. Or even better, the ad could “ask-to-call,” where the listener could respond via voice without even looking at the screen. There is a true call-to-action, and technologically doable. Now, a local restaurant radio ad buyer can drive trackable, direct action from a very targeted ad, that was simple for a consumer to interact with.
Both iTunes Radio and Pandora offer premium, non-advertising based versions as well, which is yet another avenue of new revenue and consumer choice. And both companies have multi-platform strategies, with the next frontier being to target the in-car radio experience. While there are bumps in the road, such as the data consumption and associated consumer costs of the wireless carrier networks, these are just negotiable challenges. The would-be pundits who criticize the new Apple service as just a Pandora-look-alike are missing the story. The revolution on radio has begun, and it is not for the digital streaming audio market of today. It is the fight for share of the $14 billion prize of tomorrow, where the terms AM and FM are an anthropological relic.