• by Pat Higbie , December 18, 2014

If 2014 was the year Internet radio came of age, 2015 will be the year it comes of age in the advertising world. Recent conversations with advertisers and agencies suggest that Internet radio is emerging from the experimental budget to a main line element of national campaigns.

That’s not surprising, with over 50% of the U.S. population using Internet Radio monthly as well as two thirds of the coveted 18-34 demographic. Industry forecasts and internal analysis suggest four factors will be critical developments in 2015.

Ad Supported Listening Hours Will Grow 50%

With 160 million monthly users there will still be some audience growth, but the bigger factor will be more listening hours as consumers shift their listening habits to Internet radio, due to increased mobile use and convenience. More listening hours means more advertising inventory for companies. It also means more opportunities for publishers to establish customer loyalty and advertisers to reach consumers in a favorable age demographic.

Interactive Audio Ads Will be the Fastest-Growing Format

One of the great benefits of Internet radio over its broadcast predecessor is the opportunity for interactivity. However, most initial forays into Internet radio advertising stuck with the one-way broadcast advertising model of terrestrial radio.

In 2015, Internet radio ads will respond to advertiser demand for more measurable consumer engagement. That will come from existing ad formats, the greater use of video and the rapid adoption of interactive audio ads that enable consumers to respond to advertised offers by voice.

Interactive audio ads drive dramatically higher consumer response rates and command significantly higher CPM rates.  We expect over 50 million consumer engagements via interactive audio ads next year with double-digit monthly growth rates.

Internet Radio Advertisers will Increase 5-Fold

Throughout 2014, we saw a steady increase in the number and variety of national advertisers on Internet Radio. The space is quickly becoming crowded which will drive advertisers to want a seat at the table and not cede the channel to competitors. Strong campaign success from Q4 of this year will provide the evidence that existing advertisers need to commit more to the channel next year and for new players to start using it.

Local Advertisers Will Grow Faster

There was a rapid increase in local advertisers in 2014 on one platform, Pandora. Based on the favorable results in its Q3 earnings call, Pandora has proven the local advertising business model increases CPM rates for Internet Radio. With Spotify announcing an initiative to drive local sales with partner Triton Digital, and other Internet Radio leaders having access to local sales teams, we expect this market to grow substantially.

There are at least four Internet radio players today that have large enough audience footprints to serve local advertisers and that will usher in a wave of new local advertisers.

Growth In Advertisers Means Revenue

If we were to sum up our 2015 predictions in one word, it would be: growth. Listening hours, consumer engagement and advertisers are all set to grow quickly as Internet radio takes its seat at the table of mainstream advertising channels. That can only mean one thing for its publishers: revenue growth. Costs may continue to be a challenge given the high royalty rates for music streaming, but strong revenue growth at higher CPM rates will strengthen the business model.