RBR-TVBR spoke with Marketron CEO Jeff Haley and Jelli CEO Mike Dougherty on their recent integration of the Jelli RadioSpot ad server platform with Marketron’s Mediascape open platform. The partnership will allow stations to manage the sale of inventory directly to programmatic buyers from within the Marketron solution’s interface. In the deal, Marketron will license Jelli’s RadioSpot Supply API to enable the Mediascape open platform to programmatically price, package and sell inventory through RadioSpot. We asked how it helps radio, a bit about the revenue model and why this offering may do the trick where others in the past haven’t:
We’re hearing that radio ad sales are pretty tough right now in the month of April, and a lot of the agencies have pointed out that they want to make radio buying easier. What are agencies telling you, and what are they telling radio that needs to change to get some of these dollars back on the table that are literally just flocking to the internet?
Mike Dougherty: First, I would say that platforms that are solving problems for radio aren’t seeing some of the broader trends you’re noticing from others. We had a record 1st quarter and April was our strongest month so far, and we expect May to be even stronger. I think what you’re noticing and the specific comments you’ve heard about making radio easier to buy is part of the problem. Radio has always been bought and sold and run the same way for literally decades. If we were talking about how to run a radio ad ten years ago, we’d be talking about basically the same process, and unfortunately twenty years ago it would be the same process as well. There hasn’t been a lot of innovation in changing up the work flow and changing up the way that clients or agencies or marketers have access to the medium, and in the era where two of the largest trends in all advertising over the last three years have emerged. One of the trends is mobile, which has become bigger than radio overall in the United States in the span of just a few years, and then you have programmatic, which is a trend primarily in the digital market that represents now half of all digital advertising, both of which make buying ads a lot easier, and also tracking and reporting on those ads so you can line up whether the campaign was effective to you as a marketer. Those things are, I think, visceral, process-oriented experiences that the marketers have when they buy digital and mobile, and when they come back to radio they realize radio hasn’t evolved enough. That’s one of the issues. That doesn’t mean the medium’s not effective. That’s the big irony. The medium is as effective as ever. It’s one of the highest ROI mediums for reaching your goals as an advertiser, but the process to buy it hasn’t kept pace with these other channels.
I think its good how RadioSpot partnered with Mediascape platform to really get a jump-start and make it easy for people to use. There’s not a big learning curve here. Tell us about the nuts and bolts of RadioSpot, and maybe Jeff can tell us how it fits in with the Mediascape platform.
Dougherty: Sure. Maybe I’ll start there and then I’ll hand it off to Jeff to talk a little about how the partnership integrates. RadioSpot is a combination of an ad server that works with the local systems at the radio station, and a buying platform we call SpotPlan, that allows the buyers to have – as we talked about – an easy experience to target and identify campaigns by audience using Nielsen data, and then transact and have it seamlessly delivered across the country, getting real-time reporting, effectively creating a digital-like experience for broadcast radio. When we look into the radio market, having that tie in to the systems that local radio stations use is critical to make that even faster and easier, and that was the genesis of the conversations we started with Jeff and Marketron.
Jeff Haley: What we’re hearing from our customers is that they believe that the programmatic aspect of media buying, particularly on what we traditionally refer to as transactional inventory, is something that’s coming down the pike, and they want to be prepared for it. Given that we have 65% of all radio stations in the U.S. on our software systems, we’d be the likely people to build an integration into Jelli’s innovative product, and that should give broadcasters an end-to-end solution that allows them to look at their inventory that’s sold, look at what inventory is unsold, creating an opportunity for buyers through the RadioSpot dashboard to look at inventory by station, by city, and look at those prices set by the inventory owners, and transact for that inventory, all within a very seamless dashboard. That’s the impetus of ours and Jelli’s partnership; to bring the innovation that Jelli has together, and create an easier way to transaction radio.
Companies have come and gone in the last decade in this business, like Softwave/SWMX – that was another media exchange done over the internet. We’ve seen similar types of things from Google, and that failed. We’ve had radio inventory auction sites out there – the bottom line is, a lot of these really haven’t made it. How do you compare and contrast what you’re offering here, and why do you think the other ones failed? Is there some very big difference here in the technical aspect or the service offering? What’s going to make RadioSpot promote a sea change, move the needle, and stick around for a while—and maybe solve this once and for all for our medium?
Jeff Haley: From my perspective, I don’t know that there are any new ideas in marketing. I think there’s just the right time. We believe we’re coming into the market at the right time, and I don’t think it makes sense to comment either positively or negatively about past initiatives. Ours is happening this year at this moment, and we have full confidence that it’s going to be something both advertisers and inventory-owners like. Some of the earlier executions just may not have been the right time, or it may not have been the right solution.
I think part of it too is you’ve got to have enough of a footprint. If a buyer sees, “Softwave is only on this many stations. I can’t really do my buy because there are not enough stations participating.” It’s really about getting those numbers of stations participating up and being able to move the needle with a large buy. Am I correct on that?
Dougherty: That’s correct. I’d like to amplify on both Jeff’s comments and your question there, Carl. First I would say timing is strong right now for this concept. Maybe those other initiatives would have been more successful in 2014. When you see the fundamental macro trends occurring in advertising again, programmatic has a surge right now. It’s a core aspect at the agency level. It’s half of all digital at this point, and digital is now fifty billion dollars in the US. You have a combination of the digital market growing significantly since ten years ago and you have a combination of programmatic within digital growing in the last 3-4 years significantly. So on the buy side, you have more demand for this type of technology than ever before. On the supply side, I think there is more competition than ever before for advertiser dollars, so perhaps that’s leading to a desire by some of the large broadcasters as well as regional GSMs and individual radio stations to try out new ways to sell their inventory, because they’re realizing that they need to be more competitive, and potentially they have excess inventory to sell now.
I think there’s a combination of factors leading to this having more growth in 2014 than it had five years ago. Now, I will say on your point about scale, that’s absolutely correct. Scale is critical, especially for national advertisers. Not only is scale important, but also the right cities. It’s not just weight. You need the right reach and the right coverage in the right markets. It’s really important to have a large number of stations in the top fifty markets. So we’re generally trying to make sure we aggressively push the platform into the marketplace to allow this to be targeted and bought by advertisers so they can achieve their goals. We had a really good quarter in the first quarter, we rolled out about 188 radio stations. I think we’re at 130+ cities now, over 400 stations live, we reach a lot of the big cities such as New York and Chicago, etc. We can’t reach 100%, but if you look at the 244 million people who listen to radio every week, we can reach about 18% of them weekly with the platform today. We index at about 70%. That’s important because that’s bigger than Spotify or many of the other digital platforms out there. If you’re thinking about buying audio, but you’re thinking between digital and broadcast, it’s important that broadcast can be bought with this programmatic technology but can give you a reach that’s bigger than some of these other digital platforms.
What is the revenue model? If a broadcaster signs up for the RadioSpot platform, how much are they giving up? You probably can’t give me the details, but could that be a reason why some broadcasters would wait a while to decide, or turn it down because they feel they’re giving up too much money in the agreement? Or is it really pretty inexpensive for them to have the service?
Jeff Haley: I think you have to look at it from their current cost to goods sold. In the industry that probably ranges somewhere between 20%-30%. That would be fully loaded. If this solution has a zero cost to goods sold, that leaves room to pay the providers and there’s plenty of room in the marketplace there to create value for everybody. I do think that it’s a different way of transacting inventory that has minimal costs, and the participants, in enabling that transaction, can put this in a way that’s profitable for everybody. It really is a situation where it ought to change fundamentally the value of that inventory, if anything because it’s easier to transact because through the RadioSpot platform there’s compliance reporting that’s automatic. You might argue there’s higher value in transacting this way to the advertiser versus the analog way.
Dougherty: Also I think we’re attracting new advertisers to the table who haven’t been buying radio. Maybe they’re new companies so they haven’t been around for very long, but they’ve been having hyper growth and their marketing teams now have real budgets. There’s a lot of those types of stories out there. Traditionally those high growth – you can call them startups, but some are pretty big companies right now – they have always bought digital because that’s where they came from and that’s what they’re used to managing, and when they find out about a platform like what we’re doing with Marketron that makes radio buying as easy as digital, that’s pretty attractive to them. As we were talking on the phone here I just got an e-mail from one of those potential customers, ironically. They were saying, “Hey, we heard about your platform. We’re interested and we want to do a multi-platform campaign right now.” That’s the kind of thing that I think is a way we can bring more dollars to the table, and with more dollars we can then keep that price point where it needs to be related to what the sellers want to sell at, and make it easier for them.
I think it’s also it should be noted that you may have not gotten that buy at all if you were not a subscriber or a participant of that service.
Dougherty: Right. These guys, I’m talking about these other new entrants, they’re not interested in the old method. They don’t want to call up somebody and do a fax or an e-mail order. It’s too hard for them. They’re used to using forms that are much easier to use, like a web-based system to transact the order. It’s not that they’re afraid of talking to salespeople. They don’t mind talking to salespeople. There’s always a salesperson in the mix. It’s just the salesperson doesn’t have to sit there babysitting e-mail threads to make sure something gets done. It’s a big difference.
That’s a good point. Do the agencies pay anything for the transaction? Or is it all pretty much the radio station’s revenue that the cut is taken from?
Dougherty: It depends on the model. Basically the general thought from the station’s side is this is free to implement, so there is no cap ex or cost. Marketron and Jelli are creating a way that is very easy to get started, including the hardware for RadioSpot to run. We actually send out, for free, this advanced server technology that gets integrated quickly to the station. What happens from there depends on how the transaction is set up with the buyer, we would take a fee collectively from that to facilitate the transaction. You can think of it as a commission or service fee.
That’s probably worth it. Tell us about the radio groups that are currently using RadioSpot. Who do you think might be next to sign on the dotted line? I guess we’re talking larger groups we have all heard of.
Dougherty: Sure. We’re at 400 stations now, so that was a nice kick-start to the partnership with Marketron. We’re really excited about Marketron’s six-thousand partners they have on their systems. So, we’re starting with 400 out of the gate, including working with all of Entercom, most of Townsquare and we have several individual stations that are well known, from groups like Emmis, for example Hot 97 in New York City, and some others across the board. So about 400 stations in 130 markets.
Jeff, how are you, if at all, trying to educate your Mediascape customers on the benefits of RadioSpot? Have you gotten involved in the promotion and education of RadioSpot?
Jeff Haley: Absolutely. The technology, as you know, has been around for a while, so people were familiar. The existing customers at Jelli, most of which are existing customers of ours, are eager to see that integration, so it’s a much more seamless way to operate. The remaining big group customers of ours, and frankly folks who are not customers of ours who have proprietary and competitive systems, have all reached out in varying degrees. Obviously we’re coming off of NAB with a bunch of conversations. So as we build up this integration we’ll likely take 2-3 of those partners and put a beta in place and then operate off of that, and kind of fine-tune so we have a final offer available by the end of this year.
You want to get as many people on that platform as you can before the full launch, because it will be more attractive. Let’s talk a little about standardization. There are other companies out there doing this. But isn’t it important to get one standard system out there that all agencies can use and most radio stations can use, just to get the critical mass together?
Jeff Haley: That would be nice, but we expect there will be many. I think there will be a lot of solutions here, and we think that’s fine. Our experience over the last few years as we built out Mediascape has been that our customers are looking for more integration, not less. They would like to have one means to operate their systems in the simplest way possible.
Are there companies like Clear Channel or Cumulus, trying to do this internally? Do you foresee them adding some stations as well? Are they trying to keep this service in-house? I’m just wondering why a company the size of Clear Channel isn’t on the list, because they should be.
Jeff Haley: We’re having conversations with everybody, and I think there will be a variety of ways to approach this new field. We just feel it’s important to get started.
Anything else on the integration with Mediascape or about where the industry could be heading if we get this to the critical mass we need? How can it change broadcast advertising going programmatic service-based across the board? What kind of wonderful world would we see if that were to happen?
Dougherty: The good news is that two technology companies in radio, focused on radio, working together to help this industry keep pace with what’s happening in macro trends around radio, around programmatic real-time delivery, real-time reporting, I think we’re going to do our part. We’re here to work with the radio groups and the radio stations to help them participate, and we’re doing the heavy lifting to make sure the solution is fully integratable, easy to use, and easy to buy as well.
Jeff Haley: I’d agree with Mike’s comment completely. We’re trying to be proactive, to respond to where the landscape is going in media transactions, and if we make radio easy to buy, more radio will be purchased.