Mobile Audio

There's a reason why radio and outdoor (billboard) advertising together became a $30bn to $50bn annual domestic market. When people are mobile, like driving a car, they are not reading, they are not watching video, they are not opening email. At least they should not be doing those sorts of things while driving a car.

While radio and billboards will still be attractive advertising opportunities for some time to come, there is a new way to reach the mobile consumer – on his or her phone.

I'm not talking about calling you or text messaging you on your phone. I am talking about when you connect your android phone into your car's audio jack or when you put on your iPhone headphones and hop on the treadmill at the gym.

In these situations, you are likely listening to audio and increasingly streaming audio. That audio stream can contain commercial messaging if it is done right. And because the phone, as opposed to the car radio or the billboard, knows a lot about you, including where you are, the messaging can be targeted (ie made relevant).

This is the opportunity our portfolio company TargetSpot was built to go after. When the company was started, it decided to focus on terrestrial radio companies and help them monetize their internet streams. It is the leader in that market today. Then it added "pure play internet radio" providers like Yahoo! Music, MySpace Music, and AOL Radio to it's network and further solidified its lead.

And today, TargetSpot is rolling out its first mobile audio advertising service, in partnership with Slacker. If you want to reach people who are listening to streaming audio via their phones in their cars, in the gym, at work, and at home you now can do that via TargetSpot.

Slacker is one of several streaming audio companies focused on the mobile phone. Others include Pandora and I expect we'll see hundreds of providers over time.

And I expect that we'll find out that the audio format is one of the most powerful forms of mobile advertising. Just like it has been in the offline world for the past century.

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#VC & Technology

Comments (Archived):

  1. Josh Maher

    Streaming audio is great, but they are missing a large group of people who never stream audio on their devices due to large electronic music libraries. Combining the two – being able to play both streamed and physically owned content on the device is key to converting this group of users to a monetizable group.In other words, if I buy my music in iTunes or download a podcast from somewhere, I will play that media in any piece of software that I decide is superior. If the superior product can also stream additional tracks, commercials, etc – I may be ok with that, so long as it handles my personal media with integrity.It will be interesting to see how long streaming companies go before tapping this group of people…

    1. chipcorrera

      I agree, in the short term. But, I suspect that the world is moving quickly towards streaming everything – soon (3 years) there won’t be much need for file based media. In addition, wireless (3G, 4G, etc….) will further diminish caching/buffering requirements and accelerate device capabilities.

      1. Mark Essel

        Smart streaming Chip is how I would describe it. Why burden heavily trafficked networks when you can subtly synch regularly used content when local fat pipes are available?

        1. ErikSchwartz

          The way I think about it is this; If you will listen to it only once then stream it. If you will listen to it more than once, store a local copy. Ludicrous amounts of storage have become incredibly cheap.

          1. chipcorrera

            Yeah I think that all local file storage is so painful today – downloading, library management, syncing with multiple devices, DRM, etc… – that eventually someone will eliminate this and make a ton of money when they do, despite the incredibly inexpensive local storage cost. Really the only reason why this exist today is because of the connectivity and pipe speeds.Of course local cache will play a role for a long time.

    2. JenC

      Right there with you Josh. I want to customize my content – what I want, when I want it. Furthermore, I’m willing to pay a “premium” to avoid ad content – a good example – I’ll take Apple TV over Hulu any day. I would pay more for the iPhone NYT app if I could do away with the mobile advertising that appears.I do think that streaming has it’s merits – as you mention, in combination with owned content, you can create a pretty rich experience and expose yourself to new content, information, etc. And on a mobile network, the ability to use geolocation could create a great opportunity for advertisers (throw in a layer of predicative analytics on top of that and things can get REALLY interesting).But Erik’s point is strong – storage is not cost prohibitive any more. And right now, the overall infrastructure for streaming is not quite there…

      1. markslater

        its amazing to me that people still fee like they would pay NOT to receive something. Doesn’t that sound absurd. And before people start to wax lyrical about revenue models or “how else can the service be delivered without being offset by ad revenues” i’ll venture that there are a whole category of far more innovative business models that can and will do this – and that they are just around the corner – as opposed to me paying so i DONT get something.

        1. ShanaC

          I mean, I can think of business model, but essentially it is to taste advertisement and sampling of music and to force bands to pay for placement. This would be a destructive model right now- I doubt bands would pay to play, though to do basically the adsense of music (take a cut) may work?That and can you really place music so precisely as to sell new music- slightly different than targetspot (same category, very streamlined)

      2. ShanaC

        Most content owners don’t know this. And what you are really paying for is ubiquity of service, not storage. That’s the benefit of a client-server, SAAS for the consumer relationship…

    3. ShanaC

      After finding and losing and finding and growing out of and losing ect my music collection a number of times, I think for the vast majority of people who have large libraries, Targetspot is something you will pay to opt out of.I may need to pay for storage and backup, and I can do it through advertising, but I may not want to. I think that’s the crux of the issue for people who don’t exclusively stream (or who will turn into the LaLa crowd). I’m also not sure how Spotify (since you are paying, but as someone stateside, I’ve never used it), will change the mix.I just know that if I claim ownership to my media, why would I want advertising infringing on it, unless I am supporting some other service. That’s the crux of the issue.

  2. Gabriel Brown

    Streaming audio on mobiles is niche because of power consumption and ‘Charge Anxiety’ induced by running these apps. Much better to have offline modes for playback that snyc the device with the network — e.g. Spotify Mobile.The car is an exception in that there’s power supply, but the connection is generally poor and unreliable while moving. So again the option of an offline mode with sync is better.

    1. Bill Davenport

      I’ve had excellent (99%+) availability with Pandora on iPhone while driving…

      1. Gabriel Brown

        Yes, but does it work consistently like you’d want from a regular service?

        1. Bill Davenport

          In Massachusetts yes, the connection has been very reliable and as a result that’s what I use a lot of times. When I don’t use Pandora it’s not for connection issues, more for discovery outside of my existing profiled interests and/or news, talk radio.

    2. fredwilson

      i have not had that issue, probably because i charge in the car and go to the gym first thing in the morning and then come back home and recharge while having breakfast with the family. i agree that battery life is an issue in the short run

      1. Gabriel Brown

        So it seems OK for your use case, and I guess where people are in cars a lot. But for other use cases it’s quite challenging and technology is not really helping.Podcasts are incredibly popular on mobile, so extending that model to cached playlists seems logical. A number of useful apps work online/offline with sync between device and network/cloud. That’s going to be a big area of innovation for the next couple of years.

  3. im2b_dl

    big piece of the story architecture we are encouraging with filmmakers and game dev.

  4. HowieG

    Except for occasionally listening to Jim Rome Sports Radio I have no idea what radio is. I listen to music and news podcasts all the time but news only when working or at home. Music 24/7 when moving around or at the gym but since 2004 99% of the music I get is free legally from podcasts, friends, my social network connections, and burningman/underground music culture almost all electronica. And while it might be wise for these DJs to have a preroll ad since they are speading free music, they are static since they are a recording from one moment in time and can’t be changed. And you don’t dare interrupt a DJ mix with an Ad in case people are dancing. So to reach me its billboards or bust. And I know lots of people like me.

    1. Mark Essel

      Thanks Howie, excellent perspective on the channels of content you rely on, an the quality of the experience.

    2. robertavila

      It is curious that for some one with “no idea what radio is’ you have nailed most of its virtues when it was at its best. Way back when, radio was a link in an extended community of musicians, DJs, listeners, and all of their friends. DJ’s pushed music they thought their listeners would like (Yes, there was payola, but …) the listeners could turn the dial and what they liked they shared in conversation with friends and when they really liked it they bought. BUT the radio/music/record business was never just about listening in sonic isolation to “my music.” It was about the new, the news about the new, and the social value of ones knowledge of and about the new. Streaming music and targeted ads are not really what gets people hooked. You need the social network…

      1. HowieG

        Robert I agree with you 100%. And I used to love radio. In 1996 my friend dated one of the primary DJ’s for KLOS in LA and she said she got to pick one song per hour. I think when we got to being only about the money with the program director selecting what to play only the hits, the quality of the experience and freshness dwindled. My comment was a bit tongue in cheek.But now we are in control of what we listen too whether creating stations on Pandora or using LaLa to check stuff out. Also artists can market themselves via social media like you mentioned. Cheers.

  5. ErikSchwartz

    The carriers need to step it up or the whole streaming mobile business is going to come crashing down. The mobile infrastructure cannot support the widespread adoption of mobile streaming. There are spectrum issues (technically hard), and backhaul issues (technically easy but REALLY expensive to implement).In order to “step it up” the carriers will inevitably do away with all you can eat flat rate plans. If a user knows they’re paying by the minute for streaming how will that change the way users think about the product?

    1. Mark Essel

      I wouldn’t mind dynamic pricing and multipath comparisons. Let the cheapest Gigabit win.

    2. ShanaC

      Probably. What will be interesting is that eventually they will overdo the infrastructure, and we’ll go back to the “all you can eat” world of mobile streaming…They locked themselves badly into this one…As a society, we’re becoming increasingly aware that it is pipes we deal with- the analagous pipes we pay fairly cheap prices (though not cheap enough for all still) Yet mobile phones don’t have the same infrastructure built in yet: However, as a mass, we’re probably going to treat them the same, even if the actual cost is much higher. I have no idea how they are going to make a profit on this one. It’s a tough situation to be in, and the next few years are going to be some majorly painful and expensively slow growth for mobile broadband (trust me people won’t give up the unlimited or near unlimited because ti is slow)until the pricing scheme is solved.perhaps we can do it by data down/data up. But I thought we used to have that model and we blew threw it badly….

      1. ErikSchwartz

        It’s not that simple. With landline access you can just pull parallel fibers and get increased capacity. With wireless you need to stuff more data through the same EM spectrum. That’s not a business problem, that’s a physics problem.At the end of the day if the wireless carriers can’t make a profit doing something, they won’t do it.

        1. ShanaC

          We’re not efficiently using the EM spectrum anyway…..`stupid auctions..and eventually TV will drop to a minimum, we can reclaim that….

  6. Mark Essel

    Groovy Fred.As many AVC’ers are well aware, I’m a big fab of relevant advertising. Whether it’s audio, visual or vibrational 🙂

  7. HowieG

    I did wish to add though we have 300+ million people. As we see with many many businesses if you can reach just 1% of the population you have a viable business. I mean Fox News is viewed by 1% of the US, MTV and CNN viewed by about 0.33% of the US. A reasonably successful movie (50 million gross) is watched by only 3-4% of the US in the theaters. So while it doesn’t work for reaching me it doesn’t have to in order to be a smashing success.

  8. Joe Yevoli

    I agree that it’s possible we’ll find out that audio may become “one of the most powerful forms of mobile advertising”. However, part of me wonders how much advertisements, even relevant advertisements will push people away, and turn people off from streaming audio sites.Especially when I find it increasingly easier to get whatever song I want, whenever I want it.

  9. DGentry

    The trouble with audio advertising thus far is the difficulty in automated matching of relevant ads. In my estimation thats a big reason podcasting never became a big market: no equivalent of Adsense or other auto-targeting technologies. Requiring manual ad sales is a huge hurdle to jump.Location-based advertising is another way to attack the problem, as it decouples the ad targeting from the audio content altogether. Nonetheless I think its an open area begging for a solution: automatically classify the topic or major demographic for an audio stream.

    1. Doug Kersten

      To me, podcasting is more of a magazine format. People who are successful at it tie it in to sponsorships, site-based ads, audio ads, and specific topics and then create networks that repeat the effect. It never was designed to work as a streaming media format. However, there are companies like that are trying to address that. If you don’t know when and where a listener is listening it is difficult to target ads. Streaming solves that problem, which is why I expect this to be an area of huge growth. Especially with the newer smart phones and the growth in bandwidth being provided by the carriers.

  10. Josh Fleischmann

    I really hope to see a Lala mobile app sometime soon. 9 cents a (web only) song? Craziness! It’s the best deal on the web right now, hands down.

    1. amishshah

      Agreed…What if it lowered its price point in exchange for occasional but un-intrusive ads like Pandora? The ability to hand-pick and stream songs while paying even less? I think I’d be on board with that.(Of course, maybe Apple will just make it free…)

  11. howardlindzon

    Hi Fred – wonder if you and the community could take a quicktry of a new product from blogtalkradio. We are using it for traders who seem to like it.

    1. Mark Essel

      Will gladly give it a try. How is this different then a podcast on a blog, is it more discoverable to an audience that’s looking for audio only?

    2. fredwilson

      voice twitter? why wouldn’t text be better for this kind of thing?

      1. ErikSchwartz

        My feeling too. We built this same app at Foneshow a while back. It didn’t really solve many problems that were not better solved with text.

      2. Guest

        Checked it out… Here’s my opinion–1) I read very fast… faster than someone speaking. It’s easy for me to blow through 20-30 tweets in a few seconds, to find something that catches my eye. Listening to each one is exponentially longer.2) Text is [easily] searchable– not sure about voice

      3. howardlindzon

        for consumer to consumer i think so yes.

    3. Gregg Smith

      I spend way too much time in the car right now. Will cinchcast read my twitter stream to me? I took a quick look and couldn’t figure it out…

  12. andyswan

    This may be a really stupid idea, but here goes.Premise: I hate 30 second ads while listening to music. Even 15 can be too long when on a treadmill.Solution: I think it would be really cool if companies came up with a “set” of 3-5 second ads that went together between each song. The BURMA SHAVE of audio adsLike this….Song 13 sec Ad: “You’re gonna love #FIVEsquare, more later…”Song 2Song 33 sec Ad: guy voice “Ya…#FIVEsquare keeps your friends in the loop of where you are….”Song 43 sec Ad: girl voice “I can’t believe you aren’t on #FIVEsquare yet…call me when you are!”Song 5Song 65 sec Ad: “Just Google Five Square for more info….(All voices) we look forward to seeing you!”AD RUN COMPLETE

    1. fredwilson

      i always liked that idea for video too. the issue is the creative is not built or served that way right now and advertisers drive the market so they have to want to do this

      1. andyswan

        Tell TargetSpot I’ll be the first buyer. 🙂

      2. Wavelengths

        The “creatives” working for the advertisers need to understand the medium to be able to use it effectively.The creative talent behind the message is someone who gets accustomed to delivering ads in a certain way, with a certain pacing, rhythm, and so forth.Unless the creative talent can “feel” how the listener will receive the message, they won’t be as effective at creating the ad.There’s a learning curve here.

    2. ShanaC

      In certain ways-what you are saying points out to the difficultly of Twitter. At least there you can have a conversation but this is broadcast media. But you are asking for the same kind of condensing of message. it’s really difficult…

      1. andyswan

        Brevity is the soul of wit….and sales :)Sent from my Millennium Falcon

        1. ShanaC

          if you get too brief, you may lose the message. Just saying it is difficult…:) where do you park the spaceship?

          1. andyswan

            Park?  We’re ALWAYS moving….

  13. markslater

    so i have to listen to a commercial? i’ll turn it off.If you want to get to me – i have to ask for something. Thats my mantra going forward. The way things are going i should not ever have to be subjected to unsolicited digital messaging. I’ll suffer through terrestial bombardments – but not digital.

    1. awaldstein

      I’m with you.Why make what is distasteful palatable in small bites?Not to say that someone can’t find a creative antidote for interrupt but yes, tolerance is less in the digital realm.

    2. J.D. Falk

      It’s interesting to see all the comments here about “targeting,” which is something advertisers do TO you. “Relevancy” is something they do FOR you. Big difference.

  14. Bill Davenport

    I agree that this is a big opportunity. I don’t mind the occasional ad on Pandora and if it was more targeted based on location or my profile it might actually have some positive consumer value.In reading the post I had a bit of a wacky idea (with some obvious flaws) that if digital billboards or other electronic ads were “smart” they could also somehow tap into demographics / interests of drivers / passerby’s. That might work better for smaller digital displays for passerby’s than highway ones, but I guess the idea is that Fred’s post goes to the idea of smart advertising for audio and there probably is a similar extension for video with non mobile devices that are aware of mobile consumers.

    1. Wavelengths

      You mean like a smarter version of the realtor’s “talking ad” that goes with the sign in front of the house for sale?

      1. Bill Davenport

        That would be one implementation I think though not the first ones that came to mind. What I had in mind when I wrote the comment was that if I’m walking past a digital display ad, say in NYC, the ad would choose from an inventory of ads one that most closely matched my interests. If there’s a bunch of people walking past it would have to get smarter and figure out a best “group match”. All that presumes some sort of general ad opt in by the consumer or willingness to have some anonymous profiling data to use by the display co.

    2. fredwilson

      Aren’t billboards a “broadcast” medium. One message for everyone?

      1. Bill Davenport

        They definitely are today. But where I was heading particularly on the smaller displays for walkers / passerbys (say the advertising on the side of busstops) was that a smart screen could display messages targeted to the individuals walking past them. For true highway billboards or high traffic walking areas it would have to be able to process preferences from the group that is around at that time. So it would still be “one message for everyone” but a changeable message based on the viewers.

        1. fredwilson

          Got it. Cool idea

        2. Guest

          I like this idea as well… Though the road-map leading up to that point would probably be exceptionally complex (collecting the data, security, etc).

          1. Bill Davenport

            True. I think the smallest possible implementation requires a broadcast of the users location and interests to an advertiser. To get that there has to be something in it for the user. But assuming I give permission to somebody to display relevant ads to me, from there the rest is more straightforward. If the advertising company knows I’m at location x and interested in products a, b, c, they have enough info to choose an appropriate ad. From there they have to get it to the display, or if the ad is already resident on the display they just have to be able to tell the display to show a certain ad. Taking it one step further would be pushing coupons or other offers to me based on that location, tied in to the display ads being shown.

        3. amishshah

          I think Minority Report had some form of this!

          1. Bill Davenport

            Yeah, I can’t take much credit. I think I’ve seen this concept in movies as well, maybe Total Recall?

  15. richus

    I pay a lot of money per song for my XM car radio to be commercial free (I only drive on rainy days here in CA). If I were suddenly hearing commercials (especially 30 seconds or more of them), I’d drop XM straight away. With Pandora at work, I can deal with the mini-commercials every 5 songs or so, but it’s pushing it.robertovila’s post rings true with me as well: radio is about a social connection between the DJ and listeners. I always have this weird feeling that, when listening to my iPod or Pandora – if the world ended, how would I know? There wouldn’t be a DJ to come on the air and tell me!

    1. Bill Davenport

      Maybe Targetspot will serve you an ad guiding you to the closest bomb shelter!On a side note when I had XM they ran advertising on several of the channels I liked, which I found annoying. Dropped it in favor of Pandora…

    2. fredwilson

      The mistake that radio made was to pump too many ads in. Pandora’s approach is right

      1. ShanaC

        They may not do enough pandora shuts down with the right sorts of music (very soothing, the advertisements blend in a little too well)

  16. dkhare

    I think it’s high time that a good streaming audio ad network appeared in the market. Radio and billboard advertising ($16B per year in the US) could benefit from a closed-loop performance-based analytics approach. I also think that streaming audio is not just a question of taking existing media assets (music, podcasts, talk radio etc.) and streaming it but of bringing in social, locally-relevant and other web-based content through audio. And, I believe, the car is a key use-case. This is the reason for our investment in Aha Mobile –

  17. Mike

    Thanks Fred – this was a great post

  18. AlanPearlstein

    Hey Fred, I think these are very big opportunities that will take a large piece of the ad $ over time. My one thought is that billboards and radio are all about local and your companies would be best served chasing and converting the local market – not the big budget national dollars that all the sale guys love. maybe these services are the solution to untapping the local advertising dollars that have been so elusive. Many people dont realize that the Yellow Page directory business is still bigger than Google’s search business. Its time for that to change!

  19. ShanaC

    I’m sort of concerned about all sorts of media in general, and advertising in specific: Our phones are social objects, so the advertising streaming through them should be too. which gets back to the problem: location may not be enough. And I am not sure what is.

  20. Ed

    What if… traditional radio stations added a premium model.Something like this:At the end of a set, they go to commercial break – but you don’t.You’ve paid up front so you skip the ad and get another song in their playlist (possiblytailored to your likes).Yes – interactive broadcast radio.In fact, maybe you’ve paid by buying your music through the station’s website (affiliate link), and earned credits, so no cash goes out directly.The technology already exists.

  21. ChrisDonaldson

    Killer post and great idea. You’ll have naysayers of course.but why not blow it out even further. Yeah – location based marketing is the immediate and obvious play – but maybe I’ll one up you: how about feeding the music or audio stream into an algorithm and spitting out opportunities to the consumer that are both close by and relevant to what’s being listened to. But I’m sure the guy in the back room has thought of that.

  22. kenberger

    If the ad relevancy tech was good enough, even a militant ad hater like me would like this.But it would have to be *really* good. I’d love to see the latest that targetspot offers in that dept. Gmail, for example, has improved but has a very long way to go IMO.

  23. Wavelengths

    I found the following article today, or I would have posted it yesterday: “The World’s 10 Most Addictive Sounds.”…Yet another reason why audio advertising can be so effective, but the people who deliver the creative content need a richer skill set.

  24. paramendra

    Ads on the go have become more not less lucrative. Glad some people are on the case.

  25. Alexey Patsko

    We at MyVocal are sharing the belief in audio as the most relevant format for content delivery through mobile during commuting. Also in audio streaming – in our approach we are streaming audio to ANY mobile phone, GPRS/3G enabled and basic feature phones with audio only. Audio playback over the good old voice channel works perfectly with any headset and bluetooth system for a spoken audio content, it also enables voice-activated navigation in your personalized content portfolio. And yes, we are using both premium model (periodic billing with premium SMS and “pay as you go” through premium voice calls) and ad-supported one (affiliating with Voodoovox).more info on

  26. noamb11

    The other thing you have running on your Mobile when you drive will be your trafic application, with navigation and other road intelligence pieces. The advertising budgets aimed at drivers will find their way into these apps as a way of targeting individual drivers

  27. davidporter

    Agree the opportunity will be huge. People often forget that the global radio ad market (~$40bn) is about TWICE the size of the global recorded music market (~$20bn). That is to say, offline, there’s a lot more money in something like Pandora than in something like iTunes Music Store.And I reckon this will be even more true online, once (wireless) broadband is truly ubiquitous, given the depth and variety of internet radio vis-a-vis terrestrial radio on one hand, and the continued dominance of P2P or ‘sneakernet’ in acquiring music for many demographics on the other.