4 things we learned about the music-streaming industry

That figure rose from 3 million to 4 million in less than a year, demonstrating the rapid growth of the marketplace, said Rosso. Young people are driving a lot of that consumption: 69 percent of Americans ages 12 to 24 listen to online radio on a weekly basis, according to the recent Infinite Dial 2015 study from Edison Research and Triton Digital.

While Triton has over 3,000 streaming channels inside its audio ad network, the majority of those listeners are grouped around a few of the more popular music-streaming services, including Pandora and Spotify. But that also includes talk radio offered through the Web, such as CBS Radio and ESPN Radio.

The music streamers are pushing for new ad campaign performance indicators.
Click-through rate is one of the worst ways to measure the performance of an audio campaign, because most people listen with their devices tucked away in a pocket. Yet “we encounter accounts every day in which click-through on audio is the [key performance indicator],” said Rosso.

Les Hollander, senior director of U.S. sales at Spotify, would vastly prefer marketers to look at engagement, store visits among target demos and how long consumers are spending with sponsored playlists, among other metrics. “People who have customized playlists are spending an inordinate amount of time with a brand,” he said.

But there’s room to innovate beyond those metrics. “As we evolve our business, we also need to look at [our key performance indicators],” said Hollander. “If you look at Facebook, they invented likes, Twitter invented tweets, Pinterest invented pins.”

Lots of audio impressions are still “dumb.”
Pandora and Spotify executives consider their impressions “smart” because they have user-registration data attached to each one, which offers advertisers zip code, age and gender. But some publishers don’t have that universal registration data, though they still want to sell ads. Rosso estimates that 40 percent of inventory on Triton Digital’s exchange today is still “dumb,” with no demographic or location data enabling advertisers to target their campaigns. “There are fewer and fewer ad campaigns out there that are willing to run against any non-targeted impressions,” he said.

But even “smart” data from Spotify and Pandora doesn’t match the level of specificity marketers are approaching in other media on the Web, such as digital video. “You can target men 18 to 34 in Phoenix who listen to country music and overlay with auto intenders,” said Hollander. But “I don’t know that you could only target auto intenders on any of these [audio-streaming] platforms.”

Yet that could change in the near future. “One of the things that excites me is looking forward 18 months on our product roadmap,” said Doug Sterne, vp of audio development and industry relations at Pandora. “The same people that are applying their work to inform the music genome, are taking that data science and looking at the ad-listening experience. We’re trying to develop the models that allow to us to say, ‘We’re starting to know what kind of ad you want to hear, and how many times.’”

Programmatic advertising is coming to audio, slowly.
Technologies to automate advertising on audio properties are not as mature as they are for display and video across desktop and mobile inventory, but they are certainly on their way. Some are finding ways to make it work with their available inventory: Pandora is transacting Web display inventory with select advertisers, and it plans to bring that offering to mobile as well. Moving toward programmatic enables Pandora to devote more time to focus on more unique executions, including sponsored listening and branded content offerings, according to a company spokesperson.

Knowing where to place your ad dollars is “the billion-dollar question that is being posed by the buy side, and we’re doing everything we can to make it as simple as possible,” said Sterne.

But despite the unduplicated reach between the various platforms — average Internet radio listeners use 1.6 services a week, showing a lack of overlap in the space, according to Rosso — there are only a few ad-supported platforms with major scale. That’s holding back adoption of programmatic in the industry, said Cordie Depascale, vp of product and partner solutions at Mediaocean.

“If there were more premium audio suppliers, there would be a greater role for programmatic,” he said. “There’s a fair amount of supply beyond them that could be automated. But there isn’t a need to have a managed programmatic strategy, because the few that you do want to advertise on have scale.”

Main image courtesy of agsandrew / Shutterstock