Internet Radio Ad Load Report

Internet Radio Ad Load Report
Quarter 1 2015
May 2015
© XAPPmedia 2015 All Rights Reserved
Table of Contents
Overview
3-4
What’s New in this Report
What You Won’t Find in this Report
3
Summary Findings
3
What the Data Tells Us
4
Ad Load Declines
3
5-6
Quarter-to-Quarter Ad Load Trend
Monthly Ad Load Trends
5
Publisher Ad Load Practices
6
Ad Units Per Hour Decline
5
6-7
Quarter-to-Quarter Trend
Monthly Ad Unit Trend
7
Percent of 30-second Ads
7
Ad Sequencing
6
8-9
Time to First Ad (TTFA) by Publisher
TTFA Distribution
9
Advertiser Participation
8
9-15
Unique Advertisers by Month
Advertiser Diversity by Publisher
10
Total Unique Advertisers Grew Substantially
10-11
Advertiser Concentration
11-13
List of National and Local Advertisers
14-15
-2© XAPPmedia 2015 All Rights Reserved
9
Overview: Fewer Ads, More Advertisers
Internet radio and streaming music services will depend on advertising for their
economic future. As we mentioned in the Holiday 2014 Internet Radio Ad Load Report,
analysts estimate that no more than 11% of listeners will opt for ad-free, subscriptionbased services. By contrast, 150 million U.S. consumers have chosen ad-supported
listening.
Internet radio now has large audience reach and listening hour growth has yielded
significant advertising inventory. The ultimate size of that ad inventory is determined by
the number of ads served per hour of listening. This metric is known as ad load. The ad
load metric strips away the uncertainty of the sell-through rate of available inventory
and presents only what is actually filled by ads. It also is important because eMarketer
reports that many Internet radio services have expressed wariness about exceeding
three minutes of total hourly ad time and risk losing audience in a highly competitive
space.
What’s New in this Report
In the first Internet Radio Ad Load Report, we only considered data from four Internet
radio services. Starting in January, we also collected data from a fifth Internet radio
service and have included that data for the monthly and quarterly roll-ups. We also
have incorporated more information on advertisers including a chart that depicts the
relative density of advertiser concentration for particular publishers.
What You Won’t Find in this Report
The report does not name the Internet radio services directly. It instead presents the
data from the five services either in summary form or as Publisher A, B, C, D and E. The
intent is not to zero in on the ad serving strategies of any particular service, but instead
to reveal the variety of approaches as well as industry-wide trends.
Summary Findings
Five months of Ad Load data has yielded some clear trends. The most notable trends
are:
1.
2.
3.
4.
5.
Decrease in Ad Load between Q4 2014 and Q1 2015
Decrease in Ad Units Per Hour between Q4 2014 and Q1 2015
Increase in the percentage of ads that were 30-seconds in length
Increase in number of unique advertisers per month
Increase in the total number of unique advertisers identified
Since we had analyzed four Internet radio publishers in Q4 2014 and five in Q1 2015, we
have presented data for Q1 with and without the fifth service, Publisher E.
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Metric
Q4 2014
Q1 2015
Q1 2015
(4 Services) (5 Services)
Average Ad Load Per Hour
2:44
2:21
2:18
Average Number of Ad Units Per Hour
6.50
5.20
5.06
66.53%
74.90%
79.31%
36-54
47-68
49-72
75
164
165
Percent of Ads that were 30-seconds
Average Number of Advertisers per Month
Unique Advertisers Identified
Showing the results with all five publishers and breaking out the original four publishers
presents a more consistent comparison between Q4 2014 and Q1 2015. If we consider
just the original four publishes, the ad load decline is 13% whereas the addition of the
fifth service in Q1 creates a new average that could be interpreted as a 15% fall. This
difference arises because the new Service E carries a lower ad load than the previous
average. The proper interpretation of the ad load decline is 13% quarter over quarter or
23 seconds lower. Since the average ad length across all publishers was 27 seconds in
Q1 2015, this decline represents about one less ad per hour of listening than Q4 2014.
Similarly, the number of ad units per hour is lower when we consider all five publishers.
This is driven by the lower ad load of Publisher E and its heavy reliance on 30-second
ads. The latter factor also drives up the percent of total ads that are 30-seconds in
length. Publisher E has negligible impact on the total number of advertisers because
the research team only identified ten advertisers on the service in the quarter and
there was substantial overlap with the other services. However, the total number of
advertisers identified grew rapidly to 165, up from 75 in Q4.
You can see the major trend lines are similar regardless of whether Publisher E is
considered. The impact is only in degree and it is relatively small.
What Does the Data Tell Us?
We cannot conclude for certain whether the ad load reduction was intentional or a
driven by a softer advertising market. However, given the known seasonality of the
advertising market, our analysis suggests that at least part of the ad load reduction was
directly attributable to normal declines in seasonal budget allocations. For example,
broadcast radio revenue declined 17% between Q4 2013 and Q1 2014. Despite this
phenomenon, Internet radio publishers will see good news in the finding that the total
number of advertisers increased materially in the first quarter.
One other factor may be contributing to the ad load decline. Internet radio experienced
a rise in listening hours in the first quarter. That means there were more hours to spread
the ads across which would deliver an ad load decline even if advertising purchases
remained flat or slightly positive.
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Ad Load Falls in Q1
As we discussed in the introduction, Internet radio ad load fell in the first quarter from
a Q4 2014 average of 2 minutes 44 seconds (2:44) to 2:18. The average over the two
quarters is 2:31 or about five 30-second ads per hour.
Monthly Ad Load Trend
If we consider the monthly trend we see a fourth quarter spike up to 2:46 in December
followed by a 17.5% fall in January to 2:17. February was almost identical at 2:15 before
a small increase back to 2:21 in March. These findings would seem to be in conflict
with the responses from the Internet Radio & Streaming Report from RAIN News and
XAPPmedia. In that report, industry insiders projected a nearly 15% rise in ad load over
2015-16. However, those projections were for the full two-year period. Seasonality
would suggest a fall off in Q1 with a rise in subsequent quarters to a peak in Q4. The
industry could very well meet that ad load increase prediction.
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Publisher Ad Load Practices
The data also show a variance in ad load practices among the five publishers in the first
quarter. Publisher A has the lowest ad load at 1:39, which reflects a fall from around two
minutes in the fourth quarter. Publisher E is the next lowest at 2:05 in the first quarter.
The other three publishers (B,C,D) average an ad load about 40% higher than publishers
A and E. Publisher D shows the maximum ad load for the quarter at 2:45.
Ad Units Per Hour
Ad units per hour is different from considering the total time advertisements are
playing. It reflects how the advertising time is allocated among 15-second, 30-second
and other spot durations. From an advertiser’s perspective it provides insight into the
options offered by publishers and whether listeners are more likely to hear many short
ads or fewer, longer-form ads. With that said, “long” in the Internet radio context seems
limited to thirty seconds.
Ad units per hour fell 24% between Q4 2014 and Q1 2015 from an average of 6.50 to 5.06.
If we eliminate results from Publisher E, the fall was 22% but you can see the trend
holds irrespective of the number of services.
-6© XAPPmedia 2015 All Rights Reserved
When considering the monthly trend, the number of ads per hour climbs, falls and
then rises slightly. There is clearly an impact of how many ads are run by the publishers
promoting their own premium subscription services. A number of services run
15-second promotions which increases total ads served per session without increasing
ad load. However, you can also see a clear correlation over five months between the
number of ads per session and ad load. The metrics climb and fall together even if the
relative changes differ.
The ad units per hour numbers are heavily influenced by the percentage of 30-second
ads served. You can see from the charts below that 30-second ads in Q4 were 66.5% of
all ads served and they climbed to 79.3% in Q1. Conversely, 15-second ads fell quarterto-quarter from 22.46% to 7.76%. When more 15-second ads are played, the average ads
per hour increases.
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As we mentioned in the previous Ad Load Report, the reason for the 30-second ad
bias is unclear. Since Internet radio streams content segments in sequence instead of
following clock-driven programming, ad length variability is easily accommodated.
The bias most likely reflects a convenient adherence to the traditional conventions for
selling, purchasing and creating broadcast radio ads.
Ad Sequencing
Broadcast radio follows a standard clock, typically fitting its programming and
advertisements neatly within one-hour or thirty-minute blocks. Consumers that
start listening at twenty minutes past the hour enter one-third of the way through
a programmed one-hour block or two-thirds through a thirty-minute block.
Programming will vary from hour-to-hour, but every listener receives the same content
or advertisement at the same time.
By contrast, Internet radio sessions start whenever a consumer begins listening and his
or her content and advertising stream is unique. This leads to variable programming for
each session when it comes to audio content and advertisements. The ad sequence not
only varies among sessions, but also across publishers.
Time to First Ad (TTFA)
The average time to first ad (TTFA) was 13:41 minutes from the start of the listening
session in Q1. This is up from eleven minutes in the previous Ad Load Report. Without
Publisher E the TTFA would have been right at 13 minutes, which still reflects a rise from
the previous report. The data also showed a rise in the variance as well as the lowest
and highest TTFA. The variance between the lowest and highest increased from four
minutes to over six minutes. Publishers appear to be lengthening the up-front listening
session before introducing ads that deliver monetization.
-8© XAPPmedia 2015 All Rights Reserved
The distribution of TTFA over the period follows a skewed bell curve that is fairly
symmetric between 0 and 24 minutes, but includes a tail of ads served after 25
minutes. The longest TTFA recorded was 44 minutes and the shortest was zero minutes
for a pre-roll video ad.
Advertiser Participation
The data show a steady increase in advertiser participation each month through the
five months of recorded listening sessions. There was a slight fall in total advertisers
identified in January despite the introduction of a new service, Publisher E. We
attribute that to the natural seasonal decline of advertising between Q4 and Q1.
Even though we added Publisher E, it had little impact on the total number of
advertisers identified in the period. Publisher E added two unique advertisers to the
data set in January and four in March. That is driven by the fact that Publisher E has a
small total number of advertisers and many are already represented on other services.
-9© XAPPmedia 2015 All Rights Reserved
Advertiser Diversity by Publisher
In the first quarter, there was a continuation of the notable difference in the advertiser
diversity among the various Internet radio publishers. Publisher A led the pack with 57
unique advertisers identified, followed by Publisher B at 47. Similar to Q4, Publishers
C and D were considerably more concentrated in their advertiser base with 18 and 22
respectively. Publisher E was significantly behind all other publishers with only ten
advertisers identified.
We do not believe these numbers represent all advertisers on any of the publishers.
However, the data does provide a relative comparison between publishers and industry
trend lines over time.
Total Unique Advertisers Grew Substantially
The research identified 75 unique advertisers during November and December 2014 and
118 in the first quarter of 2015. Overall, 165 unique advertisers were identified during the
five-month period. The number of listening sessions grew in the first quarter and that
likely contributed to the growth. However, there is little doubt that more advertisers
are testing the waters with Internet radio and many others are incorporating it as a core
element of their marketing reach.
Of the 165 unique advertisers, 137 or 83% appeared in only one publisher app. The
remainder appeared on two, three or four apps and no advertiser appeared on every
audio publisher. The two advertisers that appeared in four publishers were GEICO and
NAPA. Nearly 50% of the advertisers identified in only one app appeared on Publisher A
while only 1% appeared on Publisher E.
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The percent of local advertisers identified increased slightly to 15%. Five of the top 10
broadcast radio advertisers reported by the RAB for Q4 2014 were spotted on Internet
radio in Q1 2015.
Advertiser Concentration
We considered advertiser concentration in two ways. First, we looked at the number
of advertisers that were unique to a single platform. Not surprisingly, Publisher A led
the pack with 49% of the advertisers that showed up on only a single platform over the
entire period. It also had the highest total number of advertisers leading to the lowest
advertiser concentration. Publisher E was on the other end of the spectrum. Publisher
E had only one advertiser that appeared solely on its app and relied on just 10 total
advertisers during the first quarter.
Our second consideration was the percentage of ad spots that each advertiser
commanded on individual publishers. The chart on the next page depicts two data
elements. The size of the colored section represents the ad load of the publisher.
Publishers A and E had the lowest ad load and you can see on the chart that they also
cover smaller total area than the other publishers with higher ad loads.
The boxes within each colored section represent the total percentage of the
publisher’s ad inventory commanded by each advertiser. Publisher A had the most
unique advertisers and the least advertiser spot concentration. The two advertisers
that commanded the most spots on Publisher A were SunTrust and the publisher’s
promotional ads for its own service at 3.68%. By contrast, Publisher E which had the
fewest total advertisers, relied on GEICO for 29% of its ads in the first quarter.
Publishers B and D filled significant portions of their ad inventory by promoting
their own services. These “house” ads tended to fall into one of two categories. The
first category was promotion for the publisher’s subscription service offering. These
offerings typically offer ad-free listening and other features such as saving music locally
to a device and the ability to play a song at any time. The second category reflected
promotions features of the ad-supported service. The intent typically was to inform the
listener of app features, new content on the service or new curated stations.
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Considering the Impact of “House” Ads
It is interesting to contrast Publisher B from Publisher A by stripping out the “house”
promotional ads and looking at the total ad load represented by outside advertisers.
When you do this, you find that Publisher B has an 18% higher ad load than Publisher A
instead of 48%. The range would be even tighter except Publisher B’s house ads average
closer to 15-seconds than 30-seconds for the other publishers. By contrast, Publishers
C and D are both running 2:07 of ad inventory with external advertisers and Publisher
E is at 1:59. Overall, there is a clear trend. When you remove “house” ads, publishers B,
C, D and E all fell within a tight range of average Ad Load at two minutes plus or minus
seven seconds.
We can conclude from this analysis that Internet radio is a dynamic advertising market
with publishers following a variety of strategies to generate revenue and promote their
premium services. We can also see that advertiser concentration risk varies greatly
across the publishers.
Conclusion
The combination of advertising budget seasonality and a significant increase in Internet
radio listening hours led to a Q1 Ad Load decline. This decline reflects nearly one less
advertisement per listening session. At the same time, the number of total advertisers
on Internet radio climbed, creating the opportunity for lower revenue concentration
risk for audio publishers. In all, this was a vote of confidence in Internet radio’s reach
and effectiveness as an advertising platform.
To improve listening monetization, Internet radio publishers may have an opportunity in
Q2 to increase ad load, but they would do so in a highly competitive environment and
risk losing audience. Growing audience and increasing ad rate CPM will likely be the top
priority for the balance of 2015.
To learn more about Internet radio an audio streaming services, you can also download
our other reports on Ad Load and Industry trends.
- 13 © XAPPmedia 2015 All Rights Reserved
List of National Advertisers
*Blue indicates new advertiser in Q1 2015
5 Hour Energy
ABC
Accountemps
Ace Hardware
Advance Auto Parts
AHCA
American Optometric Association
Amtrak
Angry Orchard
Applebee’s
Arm & Hammer
Audible
Autotrader
Autozone
BENQ TreVolo
Bing
Biore
BMW
Burger King
California Tortilla
CBS All Access
Comcast Xfinity
Constant Contact
Cox
Curlys
Dentyne Ice
Diesel
Drake’s
esurance
ExxonMobile
Fordham University
Free Slots Game
Geico
Gold’s Gym
Graze
Guitar Center
H&R Block
Home Depot
Honda
Hyundai
IHOP
JC Penney
John Frieda
JOIN.ME
Kohl’s
Land Rover USA
Lifebeat.org
Lowe’s
Lyft
Macy’s
MasterCard
McDonald’s
Medexpress
Mercedes-Benz
Mervis Diamond Importers
MetroPCS
NAPA
Net10 Wireless
Nissan
O’Reilly Auto Parts
Palm Beach Tan
Paramount
PNC Bank
Progressive Insurance
RetailMeNot
Ribbow Media
Rite Aid
Sam Adams
Sam’s Club
Sleep Number Bed
Sony Music
Special Olympics
Squarespace
Stamps.com
State Farm
Taco Bell
Target
TaxAct
Trader Joe’s
Truth.org
Turbo Tax
U of Texas Anderson Cancer Center
Universal Music
Universal Pictures
UrgentRx
Utz
Verizon
Walgreens
Walmart
Warner Music
Wendy’s
Wix
Yahoo!
Zengo
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List of Local Advertisers
*Blue indicates new advertiser in Q1 2015
ABC News 7
Anne Arundel Medical Center
Arlington Honda
Brunswick Bowling
Don Beyer Kia
El Centro Restaurant
Fairfax Hyundai
Fairmont State
Fiat of Tyson’s
George Washington University
Hollywood Casino
Hyundai of Chantilly
INOVA Health
John C. Flood of Virginia
Liberty, Whitetail Ski Resorts
NASM
Navy Federal Credit Union
NBC News 4
Northwest Federal Credit Union
NOVA/Northern VA Community College
Pohanka Honda
Pohanka Hyundai
SecureTransit.org
Ted Britt Chevrolet
Ted Britt Ford
The Chicago School of Professional Psychology, Washington, D.C.
The Eye Center
Washington Capitals
Washington Gas
- 15 © XAPPmedia 2015 All Rights Reserved
WASHINGTON DC 20006
About XAPPmedia
XAPPmedia™ is the leader in interactive audio advertising and is the first company to
Give Consumers a Voice™ allowing instant connections with brands through mobile audio
apps. XAPP Ads™ present branded content followed by an opportunity for consumers to
interact with ads by voice to receive more content, be connected directly with offers or
get back to more listening. Unlike other mobile ad formats, XAPP Ads are effective even
when consumers are ultramobile, which means they are listening but cannot interact with
a mobile screen visually or by touch. The immediate voice conversion opportunity brings
more value to advertisers and increases ad unit yield for audio app publishers. XAPPmedia
was founded in 2012 and is headquartered in Washington, DC.
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