Monetizing Internet Radio With Music

Doug Perlson, CEO of our portfolio company Targetspot, which offers a monetization service (like adwords for audio) for internet radio has penned an interesting and thought provoking column in Alley Insider today.

Anyone can go to Targetspot, record a 15 or 30 second radio spot, and run the campaign immediately on a large network of internet radio streams. Targetspot has been offering that service since the start of this year.

What Doug proposes in his column is something more. In addition to submitting a 15 or 30 second spot, bands, labels, managers, and other music industry participants could submit a full song to a system like Targetspot and that song would run as "paid inclusion". As Doug points out, this is not very different from how keyword marketing services work today:

We have seen a similar arrangement — of course not denigrated with the
term payola — work well in the financially successful and
user-friendly online advertising search field. In that case,
advertisers can easily place bids on search results, and target their
message directly to a discrete and highly specific audience. An
Internet radio “pay to play” advertising service could accomplish a
similar goal.

I’m curious to see what the reaction of the music industry is to an idea like this.

#My Music#VC & Technology

Comments (Archived):

  1. aweissman

    This is a fantastic idea – and in SMS for a purchase and you have instant ad-commerce.

  2. Nathan

    You can already do something similar to that on You can purchase plays and select what similar artists radio stations it will be played on. My label has done that before just to see how it worked and we paid 20 bucks for 100 plays and it went pretty fast. I think you have to be extremely careful with something like this or you could just end up with the spam of some awful bands that can afford to pay the money.

    1. Nikhil

      Yes, I came across this recently on their rate-card. Surprised me for 2 reasons:1. Naivety aside, doesn’t “payola” inherently contradict’s positioning as the “social music revolution” – the kings of music discovery through collaborative filtering?2. The fees – that’s an effective $200 CMP. Wow.Another way of looking at this is the Gerd Leonhard hypothesis that recorded music may one day just be a promotional vehicle for artists, who make money by other means. This moves this type of service away from dirty payola and closer to conventional advertising.

  3. Jonathan Karon

    This could be a really great service for artists and labels! As soon as I read your post title I went “DUH!”.I don’t see how this is similar to ad words, etc. in avoiding the payola issue. If I pay a search engine for keyword-driven impressions or click-throughs I am simply paying for that promotional service. Correct me if I’m wrong, but I as an artist or music publisher get paid when an internet radio stream plays my song. So when I pay Targetspot to place my song in internet radio streams I will be getting a kickback from the stream operator.That is, unless by being classified advertising my song somehow isn’t subject to royalty collections. Now who can provide an FCC opinion on THAT puzzle?

  4. justjosef

    music industry endorsed this practice at retail though end-capping and listening stations.

  5. Nate

    How actionable are these ad impressions? Do songs and ads have a “buy it now” button in all internet radio clients? On iPhone the Pandora and AOL Radio clients have “buy in iTunes” buttons. Ads between songs aren’t actionable like this, but they obviously should be. All advertisers should be able to “ask for the sale” and measure clickthrough from any internet medium. That’s the key advantage of the internet over TV, radio, and print.While driving with friends a song came on the radio, we didn’t know what it was, but my iPhone Shazam application identified it as “Rich Girls” by The Virgins and then we watched the video on YouTube with one click. We also could have purchased it. Again, this is the holy grail for advertisers and record labels. Are they demanding it?

    1. fredwilson

      nathan, i’ve got one thing to say about your commentyou should be listening to instead of the radioi posted this months ago

      1. Nate

        Clearly what’s needed is a “Fred Wilson schools you with his mighty indie cred” internet radio station that I can listen to wherever I am :-)I never listen to the radio, have an audio jack for the iPhone instead, but we were in my friend’s car. This is a key point. Radio is dead to many of us, but mobile internet radio alternatives are lacking, so we listen to stuff we already know.For me the holy grail would be an iPhone accessible genre-based custom station that aggregates music pics by my friends, music bloggers, friends on Twitter, whatever. I just want a recommendation funnel with a high signal to noise ratio that I can get everywhere.

  6. Andrew of

    Howard Stern used to do that on his old TV show. He charged bands to play their videos in commercial breaks.

  7. andyswan

    “I’m John McCain and I approve this song….now enjoy ‘maverick P.O.W. by the Palinettes’ “

  8. Ethan Bauley

    I would love to see a “good” (as in “Be Good”) form of payola open up a new channel of demand-generation for artists. Clearly Ian/Topspin is thinking in these terms when he asked what is, in my opinion, the quintessential music-marketing question:”If you sound like Elvis Costello, how do we get you in front of Elvis Costello fans?” this begs for a market a la AdWords, if you ask me. As Doug P. implied in his comment on the original post:”If a station decided to use this type of monetization and accepted any and all takers, you can bet user experience would suffer. And I doubt any of the services we all listen to would do that. “So, like in AdWords, under performing songs get demoted, over performing songs get played more often (even if the advertiser is paying a lower price), etc.I wish someone would get Hal Varien on the phone and make this happen!http://googleblog.blogspot….

  9. vadadean

    Why stop there? The “click” to get media is a single event. The “clicks” to search, browse, tag, playlist, recommend, etc. are potential ad inventory. As long as users can filter that ad inventory so it doesn’t waste their time, music and video will be a huge draw for users and ad dollars.

  10. Josh Young

    I think this is brilliant. We forget all too quickly that good advertising fits its context. Magazines ads aren’t alluring photo spreads for nothing. Movie previews aren’t five minutes long for nothing. Search ads aren’t text-based for nothing. And so on. So set aside for a moment the the question of who would sponsor a ‘paid song.’ Instead, consider that listener is far more likely to listen to that paid song than they are to the yelling and screaming of some car dealership owner.

  11. danrua

    sponsored content…all media gets their eventually…I like it 😉

  12. Bruce Warila

    I don’t think payola for artists is going to be necessary or workable. Consumers are in complete control of their music consumption options, and this trend is strengthening. Functionality (in an application for example) that incorporates sonic fingerprinting / machine-based, sounds-alike listening recommendation technology that enables consumers to pull streams in from any site that streams music, and coupled to dials and faders that enable consumers to adjust the balance between established and new acts, that also completely cuts out audio ads, and all doing so whilst maintaining a consistent sonic experience…shoots way over the head of all the other options. Consumers will completely control their listening experience; anything they don’t want to hear will be bypassed. (note – the memory footprint for 1,000 tracks converted to fingerprints is less than 500KB.)Google this post “what’s in your seed song bucket” for more information on this..

  13. markslater

    Does the music have to stop in order for the ad to be played? (not the song from the band who purchased the spot in the stream) the actual ad?

  14. Jim Kerr

    You can do this right now with remnant inventory on real commercial broadcast radio stations using the dMarc service that Google bought. It’s basically the same as an infomercial you see on cable television. Take a sixty second song sample, go to Google’s radio ad service. Pick the markets where your band will be on tour. And away you go. As an added bonus the songs are likely picked up by Billboards monitoring technology and if you do a big enough buy your song may actually get close to hitting a national chart. 🙂

  15. Darren Herman

    Payola anyone?

  16. tedryan

    Payola has two problems. The illegality is driven only by the non-disclosure. There is nothing wrong with pay-for-play but it has to be disclosed to the listener as a commerical. This is a problem for FCC licensed broadcasters who are betraying the public trust that comes with the license if they do not disclose the commercial relationship.The bigger problem though is that whether broadcasting or streaming, the commercial message is linear and interruptive, adwords are not. Adwords run in paralell to the user experience and are not interruptive. Pay for play music is interruptive. If the paid music disclosed insertion sucks, you lose listeners, which, in-turn, devalues the next paid insertion.

    1. fredwilson

      Right but I want to be introduced to new music that is targeted to mylistening patternsThat’s what neighbor radio doesSo in this case, I want the ads (ie songs) in the stream so I can hear themIt’s easy enough to hit the skip button and you could even do this cpc withclick meaning anyone who listened for more than 20 seconds without hittingskip

      1. tedryan

        Good point. Not sure how to measure the interruptiv-ness of the skip button which likley increases with frequency. i.e if I get deluged with bad music (think mortgage and lower-my-bills CPC ads) the interruptivenes returns as I have to keep hitting skip and the clutter again overwhelms the entertainment. Most web companies have not done well in maintaining a good edit/ad balance.Traditional media is struggling with this death spiral too as ad units/hour have increased on both TV and radio.Not sure the CPC=20 sec is accurate either…you’re creeping up on CPM there since there is actually no click through.

  17. Wallen

    Fully agree. When one looks at other media channels successful with advertising (e.g., TV, magazines, etc.), there is always a good fit between the content format, the ad format and the user experience/purpose. In this case, the fit is really good between these 3 elements. So as long as there is a good enough balance to protect the user experience, it sounds like a good way of monetizing online radio.