Ready, aim, stream

Inserting ads into programs is old hat in the TV and cable world. But the concept takes on new dimensions when applied to streaming media. Rather than just feeding different ads to different station or cable signals, the ability to direct ads to individual streams transforms targeting capabilities for marketers.

It's obvious that this goes beyond simply adding value to advertisers. It also allows consumers to receive highly customized content.

And today, the streaming-audio industry stands ready to roll out the technology and techniques for its burgeoning audience. How radio streamers succeed here will also yield invaluable lessons as video streaming takes off in the years ahead.

For Kevin Mayer, chairman and CEO for Clear Channel Interactive, ad insertion will soon add a new dimension to Internet ad sales for his parent company's 1,170 radio stations. "Historically, the industry has been able to charge much higher rates for local over national ad sales because of the one qualification: the attractiveness of a particular local audience," he says. "That's why local radio has been much more valuable in terms of a cost-per-thousand basis than network radio."

Ad-insertion technology takes this to another level. Mayer adds, "Streaming media will not only be able to differentiate location but also a lot of other very important attributes for advertisers, including demographics, past spending habits, demonstrated preference for certain Internet sites or music types. Once you start expanding the ability to target, that increases value to advertisers."

Over the past few years, numerous providers of streaming-ad-insertion technology have sprung up to meet the anticipated demand for services. Los Angeles-based Hiwire has taken a leading position after cutting a deal with Clear, NetRadio and MusicMatch.

According to Hiwire CEO Warren Schlichting, ad insertion overcomes what has been seen as a fundamental problem in the business of bringing broadcasts online. "From a broadcaster's perspective, you have the ability to access the world," he says. "But that gives you an audience that's nearly worthless to advertisers. How do you gather the audience and ad avails to make for meaningful opportunities?"

What's particularly problematic today is that individual radio stations may have only a small number of streaming listeners at any given time. Taken alone, such small audiences are under the radar for advertisers.

"Ad insertion allows that inventory to be aggregated, sorted into meaningful piles," adds Schlichting. "We perform an alchemy that turns worthless ad avails into something more valuable than the inventory would have been on traditional radio or television."

The power becomes apparent when applied to something on Clear Channel's scale, according to Mayer. "It becomes irrelevant where you get the audience. You pull it together so that it's big enough for advertisers to make a meaningful buy," he says. As the audience grows, things change from making the most of limited listeners to making more from advertisers. "Ideally, you start with a large audience and slice it into the smallest component parts," he says.

"Our clients tell us the most important thing is the signal," says Philippe Generali, president of RCS Worldwide. "You have to respect, not butcher, that signal. If you cannot do that, you won't get any audience. You want a single stream uninterrupted with clean segues every time."

RCS is making its play in ad insertion with the benefit of an established reputation for developing broadcast scheduling systems.

Others are entering this business from the Internet side. "We've become experts in this area by acquiring companies with in-depth knowledge of the different on-air systems for radio," says Mike Leo, product manager at Real Broadcast Network.

This, added to RBN's understanding of the Internet as a platform for streaming media, allows for seamless integration.

"We fine-tune the network to account for the congestion at certain points. Add a proper buffer, and you get a better experience," he adds. Another complication is the variety of formats contending for dominance.

"It gets to be quite complex," says Shrey Battia, senior director of advanced streaming applications at iBeam Broadcasting, a streaming solutions provider. "You want to make your content available not only in different formats but at different bitrates within each format. Take one 15-second ad and encode it at four different bitrates in three formats—that's 12 pieces of content to manage and insert intelligently." The mark of success, adds Battia, is making this transparent to the end user.

Another crucial piece in the puzzle is market intelligence. Streamers need to collect information about the audience to target it properly. Even with the concerns for maintaining privacy online, the profiling needed to create an effective database does not have to be intrusive.

"There are ways to get info to make ads relevant that protect people's privacy," says Ebrahim Keshavarz, vice president of product and business development at DoubleClick TechSolutions, an online database marketing firm. "We make sure our systems respect privacy from the design element phase."

Still, hypersensitivity over privacy may make it difficult to achieve the same results seen by using similar techniques in other industries.

"You've got a double standard now," says Hiwire's Schlicting. "Credit card companies have never been held to the same standards that online businesses face. Credit card companies know who we are, where we live and what we buy. They know amazing amounts of information about us."

Other programming elements can be added to match individual preferences and interests. "We can give you the local weather, your local news, everything needed to make a network feed feel like a local feed," says Tom Des Jardin, president and CTO of Lighteningcast, an ad-insertion service provider.

For all the doubts about newfangled Internet ventures, ad insertion is really a hybrid of tried-and-true traditional businesses. It marries target marketing and broadcasting. Now that the technology is in place to make this practical, it makes sense to combine them. In fact, it should already be widely deployed.

What's the holdup? Confusion and controversy over rights and fees for bringing content online has, for the moment, put most streaming-radio broadcasters on hold. Despite the delay, streaming-ad-insertion technology is set to prove itself in the next few months. In the long term, it could define the online media industry.