Internet vs Radio: The Fight for for Advertising Gets Personal

It's reminiscent of an earlier musical era: "The cowboy and the farmer should be friends,' warbled the cast of the Broadway musical Oklahoma! But that was never going to happen - and neither has it in this case.

The issue is how to measure listenership on the 'net versus that on radio. Decades of research have gone into the Arbitron data now used to determine the popularity and economic viability of the genre: stations, markets and musical artists. The problem is that data for determining internet audiences is in its formative stages -a sort of Wild West of competing claims and quick draw shooters who are fast on the trigger when gunning down other services' measurement claims.

There is implicit belief in the net as a music market, but no one can prove it's value vs radio with comparable data. Without getting into the competing claims, the issue is that advertisers are likely to be cautious about both channels until they resolve their differences. Ultimately they can - and must - coexist. Sowing more confusion hurts both. Just as the DVD manufacturers eventually agreed on standards, so must the musical stakeholders. And the challenge is that if they dont do it themselves, another entity with their own agenda will do it for them. JL

Suzanne Vranica and Ethan Smith report in the Wall Street Journal:

If a song plays on the Internet, rather than the radio, does it count for anything?

That question is at the heart of an intensifying dispute between traditional radio broadcasters and online radio service Pandora Media Inc. over how their audiences are measured. At stake: a share of scarce radio advertising dollars

Traditional radio ad rates are based on audience estimates provided by Arbitron Inc., which doesn't currently measure listeners for Pandora or other online music services.

Pandora, looking to win more ad revenue, recently commissioned a research firm to generate audience measurements. It paid Edison Research, of Somerville, N.J., to translate data from its servers about users into radio-like metrics.

But in a report earlier this week, Arbitron said it "urges those reviewing estimates from Internet music services not to make direct comparisons to Arbitron audience estimates in any market." It didn't mention Pandora directly.

Arbitron noted, for instance, that there is no way to tell whether a live human being is on the receiving end of the online music signal, whereas Arbitron measures that for traditional radio using a device called a "portable people meter."

A spokeswoman for Pandora says its service stops streaming if there is no consumer interaction with the site within a given time period. She adds "we pay royalties on every track we stream, we have every incentive to stream tracks only when someone is listening."

Arbitron's website says it issued the paper in response to questions from its clients, which are big radio companies such as CC Media Holdings Inc.'s Clear Channel Radio and Cumulus Media Inc.

Pandora founder Tim Westergren said in an interview that Arbitron's statements were part of a "concerted effort" to keep his company out of the radio industry even as online radio becomes a credible competitor.

"The broadcast industry does not want the world to know about us, basically," he added.

Earlier this week, Katz 360, a digital ad-sales subsidiary of Clear Channel, told Pandora it would stop doing business with the company.

Katz 360 is a middleman for advertising inventory, selling digital ad time on radio stations and online services like Pandora. In an email to Pandora, Brian Benedik, president of Katz 360, said: "Our core Katz Media Group Broadcaster clients have demanded that we focus our Katz 360 Online Audio efforts towards their Digital assets moving forward."

Mary Beth Garber, executive vice president of analysis and insight for Katz Radio Group, said: "We don't want to keep Pandora out of the industry and we are not afraid of them at all."

Ms. Garber says that the company originally thought that "Pandora was complementary to radio but as we tried to fit Pandora's ad time into pitches it become too cumbersome"

Ad buyers say they need an apples-to-apples comparison between traditional radio and Internet radio. Right now, some buyers pool together multiple data sources and try to come up with their own ways of figuring out what to buy.

The tussle could have ramifications for the entire radio business. Ad spending on radio had been declining for several years but is expected to grow 2.1% this year to $16.3 billion, according to ZenithOptimedia, an ad-buying firm owned by Publicis Groupe SA. Advertisers are expected to spend just $550 million on online audio streaming ads, according to Borrell Associates Inc. Pandora is expected to grab about $225 million of it, according to Borrell.

"There are so many media vehicles out there for consideration the harder you make it for an advertiser or agency to make a decision," the quicker they will "move on" says Matt Feinberg, a former radio ad-buyer.