A year ago, the big media story was that Facebook couldn’t figure out its mobile revenue strategy. While it was obvious that hundreds of millions of their users had gravitated to using the platform on their Apple, Android, and BlackBerry devices, Facebook was at a loss about how to monetize all this activity. As they explained in their IPO filing, they were clueless about how to generate revenue from mobile. Not surprisingly, Wall Street took it out on their stock price.
Since then,
Mark Zuckerberg has done what he does best – hacked his way to success. Recognizing that mobile is the future (and a platform that advertisers were demanding), he focused relentlessly on determining how to improve the mobile experience by dropping their HTML5 approach, and converting to a native mobile app. Facebook also began to actively experiment and tweak its mobile approach until they figured out the first steps in monetizing its future.
They focused less on how to extract more revenue from their web platform, and instead concentrated their efforts on where consumers were heading. And they have had solid success in a short period of time.
The result? Facebook now has the second largest mobile revenue stream in the world after Google. Zuckerberg didn’t throw up his hands because of his company’s inability to develop a viable business model for mobile. He knew that advertisers will put money into media where consumers spend their time if companies create compelling ad solutions that work.
Last week on Bloomberg TV, Cumulus CEO Lew Dickey was interviewed about a wide range of topics regarding the state of the radio industry. Dickey spoke out about a wide variety of issues in a feature that we’ve linked here called “The Battle For Your Ears.”
The entire interview is worthy of your time. In it, he talks about the power of Country music, as well as Sports Radio, and yes, even Rock as a viable “content vertical.”
Dickey’s comments about digital, specifically streaming and mobile, are the subject of this post – and a different point of view. He noted that with respect to online listening, “streaming is really expanding the market.” He also said that while Cumulus is the third ranked streaming platform in the U.S. (behind Pandora and Clear Channel/iHeartRadio), “we haven’t put any effort behind it.” As he pointed out, “We don’t yet see a business model there.”.
So there it is – Dickey expressed problems with both streaming and mobile advertising from the standpoint of ROI – the lack of a business model, at least for the time being. To Cumulus’ credit, the company is active in both spaces, with impressive streaming stats and probably solid mobile downloads as well. So why the reluctance or inability to solve that business model piece?
Measurement probably has something to do with it. As we know, that’s a piece that has lagged behind the consumer demand for more content in more places. Nielsen’s CEO, David Calhoun, reported to investors this week that his company will focus on streaming metrics:
“We will measure streaming, and we will cover it around all devices. To be honest with you, the metric around the device itself is not difficult. It’s aligning the industry around the question of who gets credit. It will find its way into the commercially acceptable currency, but it’s not going to happen in a day.”
No, but it is going to happen, but the question is whether it makes sense to wait for that business model to develop or to innovate solutions NOW while the audience is in place. Today’s challenge for the radio broadcasting industry shouldn’t be a discussion about determining which radio formats are hot. That’s a conversation about rearranging deck chairs. The real issue is about how consumers are changing platforms, the user experience, creating viable solutions for advertisers, and establishing meaningful relationships with consumers in these spaces.
The Cumulus audience has spoken. The company’s big-time streaming metrics are laudable, but apparently more organic than strategic. Yet, they are a testament to the notion that consumers are finding the content they want online – on laptops, tablets, and smartphones – whether radio likes it and can sell it – or not. They are sending a loud, clear message – they want to enjoy broadcast radio content but on their terms and preferred platforms.
Now is the time for the radio industry to come to terms with that.
Bob Pittman and Clear Channel are trying to match those expectations. They aren’t moving to where the puck is now – figuring out today’s hot radio format or the ones that have lost their punch. Instead, they’re headed to where the puck is going to be. (Although many would argue – including us – that the puck arrived some time ago.)
It’s all a matter of approach, and the Cumulus one appears to view streaming as a necessary evil – one in which they haven’t worked very hard nor do they see much in the way of return on investment. And similarly, they don’t view mobile as a content platform for their radio and personality brands either. To Dickey, mobile phones are more about receiving mattress coupons on handsets, along with navigation, and the ability to buy products and services on these devices.
There is no doubt about the impact of mobile on search, point of sale, and geo-location. But to suggest that’s really all mobile does for consumers – and for businesses – is to miss an important part of the new ways that people inform and entertain themselves – on any number of mobile screens. More and more, they are mastering the art of juggling content on these devices. To suggest that there’s no scalability for mobile content distribution and consumption seems like an opportunity lost. There is more to mobile for radio than search and commerce.
Like streaming, mobile demands a whole new approach that melds reach, strategy, and innovation. Alex Moazed is the CEO of Applico, a mobile development company that builds apps for major companies. In a recent Marketplace interview, he said the following:
“If you really take a step back and think about what mobile allows you to do, that’s where you can embrace innovation; that’s when you can really start to rethink your entire business model…”
Anna Bager, VP/GM of the Interactive Advertising Bureau’s Mobile Marketing Center of Excellence, tells Adweek that most attempts at monetizing mobile are missing the mark:
“I want to make the point that mobile is not like display advertising. It’s part of a value chain. It’s not a device; it’s a behavior. So when you hear about the problems publishers are having with capacity and CPMs, there’s actually an undersupply. The reason you don’t get paid a lot is, we’re not doing it right. You’re not seeing it as a brand-building tool that it could be if we’ve only been focusing on promotion. With mobile, you can own the customer.”
The new app for Tampa’s 97X is a case in point. Tied in with Daniel Anstandig’s LDR, it is an object lesson in integrating mobile with the station’s content DNA. By providing a mobile voting mechanism, a stream, the ability for listeners to record shout-outs, and social sharing, 97X is breaking new ground for mobile and broadcast media. Will it work? Will it get ratings? Can they monetize it? All those questions remain to be seen, but Cox is hacking its way to success through experimentation and by paying attention to consumer behavior.
But as CEOs are fond of saying, at the end of the day, where’s is the scalable business model?
You have probably seen those powerful Erik Qualman “Socialnomics” videos over the past few years. They chronicle the incredible rise of social media and its impact on society and the world. And near the end of his videos, Qualman answers the “What’s the ROI of social media?” question in a very dramatic way:
When it comes to mobile and streaming, I think you could say the same thing to every broadcaster in America, from Cumulus to those Ma & Pa owners in unrated markets. The return on investment of integrating apps and the mobile web, as well as working hard to establish a quality streaming experience for the consumer, is now table stakes. The ROI for both mobile and streaming won’t be measured in advertising effectiveness anytime soon, but it will one day be a major contributor to every well-run media company’s bottom line.
For now, however, a strong stake in both mobile and streaming for broadcast companies translates to the notion they will still be here and relevant in the next 5 years. That’s our view of the “business model.”
This also brings to mind something that blogger and thought leader Greg Satell (“Digital Tonto”) recently wrote in a post called “The Problem With Facts.” Here’s the quote that jumped out at me:
“Good strategy is always becoming, never being.”
In radio, there’s never been a more critical time to lean forward, to see the potential in ideas, to track where consumers have gone and get there in time or ahead of time, to creatively solve problems, and to realize the opportunities that are in front of us. When we see our traditional customers buying smartphones and tablets, and watch them make streaming a larger and larger part of their entertainment landscape, it’s on us to find a way to make it work.
Radio has to come to grips with this changing reality. We can wait for Nielsen to figure it out or we can start hacking our way to success through innovation and experimentation.
One of the reasons we enjoy having this blog is that it allows for a dialogue like the kind I hope we have here. Dickey is a very smart and shrewd operator with a clear vision. But ours differs from his in these critical areas.
So we invite your comments and your take. And let’s keep it positive and impersonal. It’s not about personalities, layoffs, or other side shows. It’s not about rumors, name-calling, and innuendo. It is about guiding philosophies of doing business for broadcasting companies.
How do you see it?
What role should mobile and streaming (and for that matter, social media) be playing right now today within every radio company in America? How should we be gauging ROI in these key areas? Is it monetary or is it about maintaining reach and distribution in a fractious media world?
Please chime in.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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You’re right Fred. There is a huge opportunity right in front of us. I fear it’s being wasted.
Radio should’ve invented Pandora – all our research, focus groups and Listener Advisory Boards over DECADES told us what music fans and radio listeners want. We mocked them behind close doors. We ignored their requests. We never gave it to them because “that’s not how AM/FM works”
It took people outside our business to do it.
And our attitude problem still exists.
Radio has an upper hand in so many areas to make these innovations – except the most important one.
Leadership.
There is a catastrophic lack of appetite among radio executives for innovation in any way that challenges the status quo. No one appears to be willing to make moves until they can be assured that the “new thing” looks and acts exactly like the “old thing”.
But that’s what Managers do. They follow road maps & rules and benchmark performance against existing standards to eek out a little more performance for a little less cost every single day. And Lew, like most of his Radio CEO colleagues has a talent for Managing.
But this issue requires Leadership.
That means leaping ahead of knowing. A willingness to fail, but not quit – to constantly iterate and improve each time. That requires faith in your own ingenuity and inventiveness. And a willingness to not just “skate where the puck is going” – but to actually take the shot yourself – to direct exactly where you think the puck should go.
If our history is a guide – I fear that radio will wait for someone else to take that shot. We’ll wait for someone else to make it safe for us. But by then, it won’t be radio’s game – it won’t be tiled in our favor. It will be someone else’s game and Radio will have to play catch up.
Over on Mark Ramsey’s blog he has a terrific interview with Mike Agovino from Triton Digital. Among the many impressive ideas he’s pursuing, there was one simple distinction that really stood out to me:
“The idea that mobile is about a device type never made any sense to us (triton); mobile is a context and no other ad form can translate that value the way audio can!”
Mike’s right – audio is the best mobile ad medium. Particularly when you’re already listening!
Mike also said: “I truly believe we will be at a point within the next eighteen months where an online listener is worth more to broadcasters than an estimated over-the-air listener”
This is exactly the perspectival shift required to invent our way into a new business while we still have all the benefits of the old one.
One last thought. Contrast Lew’s comments with those given at the Goldman Sachs Tech conference this week by Apple CEO Tim Cook.
Just a quote from Tim on about the most commonly expressed fear of “the internet” from broadcasters – “cannibalization”
“When we came out with the iPad, what did people worry about? They thought, ‘Oh my god, you’re going to kill the Mac. What have you done?’ The cannibalization question raises its head a lot. The truth is that we don’t really think about it that much,” “Our basic belief is that if we don’t cannibalize, someone else will.”
“I think if a company ever begins to use [self] cannibalization as their primary or even a major factor in their decision making of what products to go into, it’s the beginning of the end, because there will always be somebody else.”
That’s Leadership.
Jeff, thanks for the thoughtful and insightful comments. As someone who was in the front of many of those focus group rooms, listening to listeners complain about commercials, tightening playlists, and even request line phones not being answered, I can nod along with many of your observations.
In an industry that enjoyed 50% margins in the ’90s, it proved too difficult to reinvent the product – much less to cannibalize it with innovations a la your Apple example. A great case in point was the “format draft” that occurred when the HD Radio project was initiated. Rather than develop exciting new formats that might compete with satellite radio – and beyond – the decision was made to protect existing radio stations with bland, duplicative formats.
I still believe that given listenership and the ease of the medium, there is still opportunity to innovate are way to success. But it requires a mandate from above to try new things, to reinvent, to experiment – even if it threatens the mother ship.
Thanks again for taking the time and for caring.
There’s always thought provoking stuff on here, Fred – thanks for sharing it.
I know you were at the forefront of advocating HD Radio become radio’s “test kitchen”. What was the industry response? “Where’s the business model?” Deja Vu all over again. 🙂
I agree with you that our assets and opportunities are presently great – but as you point out – they were even greater THEN. If we couldn’t invent and be willing to fail, yet keep trying at 50% margins – can we really expect it will happen at 15% margins when there’s 50% more fear?
This is also why I don’t think a “mandate from the top” is forthcoming. I don’t think we even want that. Most top down mandates are about protecting the status quo and are built from the vantage point of what is important to the organization – rather than what is important to the end users. This is not what is needed, IMO.
The needed innovations will probably have to come from others much further “down” the food chain (from inside the biz and out) who are more interested in serving the needs of our users (listeners/buyers alike) with great products.
Based on history – the “top” will most likely need to be forced to change – and only when the people with the money move enough of it out of our pile, and into the new pile.
But then we’ll be chasing again, instead of Leading. That makes me sad.
Thanks for the follow-up, Jeff. And I think you have it right. Change happens whether it’s smooth and well-planned out or whether its violent and revolutionary. In this case, consumers are leading the charge and the world of media will have to come along. Or get trampled.
Interestingly, it’s not just traditional broadcasters getting caught up in this. This change is so powerful that it’s forcing tech monsters like Amazon, Facebook, Apple and others to move quicker, take more risks, and innovate. The face that disappointment with the iPhone 5 could have a devastating impact on Apple’s stock price is a reminder of the fickle nature of the consumer and the financial world.
It is amazing to me that just three CES’s ago, the big story was netbooks. One year later, and it’s the iPad (and other emerging tablets), and you can’t find a netbook.
It’s painful, but that’s how change happens. Thanks for continuing to push the conversation along, and let’s hope for a more vigorous spirit of innovation.
This is probably the best exchange ever on how Radio owners and operators SHOULD be thinking. Learning to engage listeners instead of shouting at them. And offering listeners a “platform” for communication with each other.
Thanks so much, Fred, Jeff, and Denise!
Thanks, Ellyn – always good to hear from you.
Thanks, Denise, and thanks for reading our blog.