Telematics and the rise of in-car Internet radio, part I

Telematics and the rise of in-car Internet radio, part I

When Singapore’s MediaCorp launched Digital Audio Broadcasting (DAB) in 1999, it was expecting it would eventually replace FM radio. Not only did the new technology promise to deliver better sound quality than the analog-based FM, it could also accommodate more radio stations as well as a broad range of complementary data streams, from news updates to album art. (Like FM, DAB goes out over the public airwaves. But as a digital technology, it suffers from less interference and, at higher bit rates, can deliver CD-like sound.)

Last December, MediaCorp, the country’s  leading media company, took all of its 13 DAB radio stations off the air, citing diminishing effectiveness of DAB and rapid growth of listening online and through its MeRadio mobile application.

Few radio broadcasters in the world have the luxury of serving markets as compact or as advanced in wireless connectivity as Singapore. It is therefore unlikely that others will follow MediaCorp any time soon. Still, the company’s decision to terminate DAB is a clear sign that Internet radio in its various forms—from online rebroadcast of terrestrial radio stations to interactive streaming services like Pandora—is fast becoming mainstream.

While Internet radio can hardly compete with over-the-air programming in terms of ubiquity, mass appeal and local relevance, it has a number of unique advantages, such as vast choice of content (that users can not only listen to but also interact with) and the ability to precision-target audio ads.

Internet radio and the car industry

To be sure, terrestrial radio remains hugely popular in most parts of the world and there is little evidence to suggest that Internet radio has thus far had much impact on its listening time or ad revenues. “In most major countries, nine out of ten people tune to the radio once a week or more, which is a fantastic figure that things like Twitter and Skype and Facebook don’t go anywhere near matching,” says James Cridland, a UK-based consultant focused on new radio technology.

Even so, Internet radio’s recent advances are not lost on terrestrial broadcasters, many of whom are starting to look at ways to provide richer content and even bring in a degree of interactivity. Nor are they lost on the car industry, for which radio has been the principal source of in-car entertainment for over 75 years and which has been increasingly adding Internet radio to its infotainment offerings.

In fact, the vehicle is where Internet radio is seeing some of its fastest adoption at the moment. And, according to IHS iSuppli, that adoption will only accelerate over the next eight years as global sales of cars with built-in Internet radio capability grow more than 30-fold to 24 million units in 2018. “Internet radio is going to be really really important, as you can see in the progressing numbers,” says Danny Kim, senior analyst and global manager, automotive research, at IHS iSuppli. It will likely impact every other source of in-car audio, from satellite radio, which Kim expects to take the biggest hit, to music brought in on a CD.

There are special considerations to be made when it comes to putting Internet radio in the car, such as the long-term viability of the service and whether it can be safely integrated, Kim says. But judging by the number of recent integrations, these considerations are hardly stopping OEMs from adopting Internet radio en masse.

Monetizing the medium

Pandora, an audio streaming service that allows users to create personal radio stations based on their favorite artists, has built partnerships with no fewer with 13 brands on the OEM side and six on the aftermarket side over the past two years.

Slacker, which relies on more than 70 DJs to program its 150 genre stations and allows users further personalization with things like on-demand news and sports updates, just debuted on Ford’s Sync infotainment platform and will be featured on Harman’s Aha Radio. TuneIn, a worldwide radio program guide that provides users with access to more than 57,000 radio stations online, powers the Web radio of BMW and MINI as well as of some 150 other products, covering everything from automotive and connected TVs to consumer electronics and mobile.

With the new medium, come new ways of monetizing it.

While audio ads will remain Internet radio’s main source of revenue, there is now room for banner ads that can be displayed while the user is interacting with the application, though perhaps not in the car, and the possibility to sell music downloads, tickets and other related products.

A number of providers are also selling premium audio services. For $3.99 a month, Slacker listeners get additional content from ESPN and ABC, song lyrics, station caching for listening offline and unlimited skipping of songs. For $9.99 a month, you get all of the above plus an on-demand music service.

Location, location, location

Thanks to Internet radio’s ability to learn the location of the listener as well as his music tastes and other personal details, it is now possible target ads with far greater accuracy and also measure their impact. 

“Whereas a broadcast is going to, at best, a geographic region, an Internet radio spot at least has the potential to take into account your context, your interests, who you are, where you are etc,” says Roger Lanctot, senior analyst, automotive multimedia and communications service at Strategy Analytics. “That is a much more valuable spot to sell, and it’s also much easier to measure whether or not the spot was actually heard, where and when and maybe even to determine if any action resulted directly from that spot.” (For more on location-based advertising, see The role of telematics in next-gen mobile advertising and Telematics: What’s next for apps and services, part I.)

TuneIn, for one, is setting itself up not only as a clever directory that allows users to type in, say, Guns N’ Roses and receive an international list of stations streaming the band at that very moment, but also as an ad network to deliver local ads to Internet radio listeners, wherever they might be. “You, sitting in Prague, can connect to any of my stations where I live in Manhattan,” says Carl J. Rohling, vice president of sales at TuneIn Radio. “But “right now the stations in Manhattan … have no way of monetizing you, because any ad that’s sold in that stream is entirely useless to you. But we know that you are in Prague and that you are listening to a station in New York, and so we are building out an ad network that can deliver a local ad anywhere you are accessing the station.”

While it may take time for a driver listening to an Internet radio broadcast to hear a two-for-one offer as he drives past a McDonald’s, geo-targeting of digital audio ads down to the ZIP code is already reality, at least in the United States, where the medium is maturing the fastest.

Early adopters

A couple of years ago, this was something only early adopters would try, says Eyal Goldwerger, CEO of TargetSpot, the largest digital audio advertising network in the United States. “Right now, it’s actually very mainstream,” he says. “We have pretty much everybody who advertises with us repeating and we have many new brands. So currently our advertiser base is very much representative of what you see in branded premium advertising in other kinds of format.”

Not everyone is convinced the benefits of niche targeting outweigh the added costs of ad production. “In a classic radio campaign, you might spend five percent of the cost of the campaign on the production, and that will get you a reasonably good advert,” says Nick Piggott, head of creative technology at the UK’s Global Radio. “But if you start super-targeting, if you say, ‘I am going to have one piece of copy that talks to women, then I’ll have another one that talks to men, then another one that talks to teenagers,’ how much you are spending on the air time is staying roughly the same, but your production costs are getting dramatically out of hand.”

TargetSpot’s Goldwerger disagrees. For one thing, it’s very cheap to produce a “beautiful, commercially impressive audio ad,” he says. And he also disputes the argument that niche targeting requires multiple ads. “You can do extremely geo-targeted campaigns in multiple ZIP codes with the same creative [and] you still get the benefit of targeting,” he says. “For example you are an auto dealership and you have dealers across the country in specific areas and you want to advertise to people who are very close-by or [you are running] a political campaign and you want to advertise in a certain area.”

Jan Stojaspal is a regular contributor to TU.

For more all the latest telematics trends, visit V2X Safety & Mobility 2012 USA on March 20-21 in Novi, MI, Content & Apps for Automotive 2012 on April 18-19 in Germany, and Telematics Detroit 2012 on June 6-7, 2012.

For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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