Internet radio is the sole bright spot in the declining radio industry

Radio industry in the U.S. has been in a decline phase for some time now. Listeners, specially younger ones under 35 yrs. of age, have less reasons to tune in amidst a plethora of choices. The broadcast radio has pushed them away with one bad decision after another that has led to diminishing quality in programming, songs, and commercials.

Any recovery in the radio business will need to understand the potential of digital media, adjust programming for today's consumer, and deliver to advertisers something that is unique and very different from what they've received in the past.

Digital media has been the only silver lining for the radio industry. Internet radio has seen impressive growth in both audience and advertising over the past five years. Ability to target and track ads online vs. terrestrial radio is the obvious reason for increased advertiser interest. While at AOL, I was involved in launching one of the largest radio service on the Internet with a base of ~14M monthly listeners through a partnership between AOL Radio and XM Satellite Radio. AOL recently ended that XM relationship and replaced it with a broader deal with CBS Radio. The AOL/CBS deal also brought together synergies for both party's advertising inventory and streaming ad sales partners. TargetSpot, a CBS-backed startup that sells targeted local advertising for online-radio stations, and Ronning Lipset Radio, AOL's partner for over four years that sells national advertising, gained access to the combined AOL/CBS inventory.

According to yesterday's Wall Street Journal, TargetSpot has acquired Ronning Lipset Radio. The deal makes sense because the two companies bring complimentary capabilities to the table (local plus national advertising). Additionally, increased scale will help TargetSpot to better capitalize on the fast growing mobile advertising market. Its audio advertising solutions will be highly relevant & effective for streaming radio services for mobile devices, whose popularity will only increase with the full rollout of the 3G network, increase in the number of streaming mobile devices and their adoption.

I've included some numbers on the radio industry's advertising figures from the WSJ article.

U.S. advertising revenue in general will probably shrink 0.8% this year, says Wachovia analyst John Janedis. The radio industry seems on track for an even worse performance. Local spot radio advertising revenue, the medium's bread-and- butter, has declined every month this year compared with a year earlier, with August's decline reaching 11%, according to the Radio Advertising Bureau.

Last week, CBS Corp., one of the nation's largest radio-station owners, revised its full-year business outlook because of declining advertising.

But online radio advertising -- much of it the audio ads listeners hear when they tune into a station on the Internet -- is rising at a double-digit pace. Last year, radio sold $21.3 billion in advertising, including about $1.7 billion in the "off air" category that is chiefly online advertising.

The detailed full-year industry revenue comparison for 2007 vs. 2006 from the Radio Advertising Bureau can be found here.