System Targets Online Radio Ads

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Hiwire, formerly known as RocketRadio, is scaling back the marketing of its Internet radio desktop tuner to concentrate on the ad insertion system it developed to complement the tuner.


Called the Ad Manager, the ad insertion system lets broadcasters insert local ads into any Internet radio stream. A Los Angeles resident, for example, listening to a New York radio station on the Internet would hear an auto ad from a local dealer instead of an ad for a New York car dealer.


With Forrester Research projecting Internet radio advertising will grow to $22 billion by 2004, HiWire's system could spell huge revenue for stations and ad agencies that now earn nothing when their signal or ads are retransmitted on the Internet.


The information for this targeted service is obtained from an opt-in page that appears when consumers download the Ad Manager system. The page asks for the user's ZIP code, gender and e-mail address.


"The Internet has created an enormous opportunity for any radio station to reach anyone in the world, but the question is how do you make money from this advantage," said Warren Schlichting, CEO of Hiwire Inc., Los Angeles. "Even though we started off with the Hiwire tuner, we realized we had a better business model with the ad insertion system because this is where the future of the whole Internet radio business is - individualized, targeted ads."


The change to pushing the ad insertion system came soon after Hiwire announced a strategic partnership with MusicMatch Inc., San Diego, that bundled the Hiwire radio tuner with MusicMatch's jukebox product. Users who downloaded the jukebox also could opt to receive the Ad Manager. More than 600,000 users have downloaded the Ad Manager, either from MusicMatch or from HiWire.


"We realized the potential for getting targeted information from all these people and the turnaround made perfect sense," said Schlichting.


The system is in a beta test to an undisclosed number of stations.


The only comment the company would make regarding the test is that the system is working as planned and there are major deals signed that are too early to announce.


According to one potential competitor, Hiwire is onto something big, but could run into trouble.


"When people fill out these opt-ins they lie all the time," said David Isenberg, director of media and data development at Engage Inc, Andover, MA. "We found working with some free ISP companies that only 30 percent of people accurately gave their ZIP codes. A better method would be an application technology that could be applied to obtaining this knowledge without the user having to answer questions. We are actively exploring this ourselves."


But Kurt Hanson, publisher and editor of RAIN (Radio And Internet Newsletter) sees Hiwire at the forefront of a new radio revolution.


"It's groundbreaking, really," said Hanson. "The ability to target people will get more advanced, but right now [HiWire is the only company] effectively doing it at all. This is not just the Internet, either. Digital broadcasts from everywhere to your car to your home could one day be based on a similar system."
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