Smartphones Make Mobile Radio Sing

For Clear Channel, CBS, Pandora, and other providers of streaming audio, the future lies in handheld devices

By Olga Kharif

In an early sign that mobile radio is coming of age, Clear Channel Communications in January sold out its inventory of certain mobile ads. The news came as the nation's largest terrestrial radio broadcaster, with more than 800 stations, was crawling out of one of U.S. radio's deepest-ever advertising slumps.

Traction in mobile ads signals a watershed among radio companies this year: Delivery of content to smartphones is emerging as a major audience-and-revenue driver. Clear Channel's mobile effort is already "meaningfully profitable" less than two years since it launched, says Evan Harrison, president of the digital unit at San Antonio-based Clear Channel. "Mobile is a strategic necessity for us."

By 2015, mobile radio apps that can stream programs onto Apple (AAPL) iPhones, Research In Motion (RIMM) BlackBerrys , and Android devices will generate as much ad revenue for traditional radio companies as will streaming on personal computers, according to consultant SNL Kagan. "Most of the growth in the digital space is going to come from mobile," says SNL analyst Justin Nielson. Terrestrial radio ad sales from streaming to PCs and mobile phones should more than double to $1 billion in 2015, from $480 million last year, according to SNL.

The amount of time consumers spend listening to mobile radio is rising. The average user tuned in to Clear Channel's iheartradio application on an iPhone or BlackBerry for 137 minutes a week in July, up from 120 minutes at the end of 2009, Clear Channel said. Usage has increased as the app improves and content increases, Harrison says. By contrast, the amount of time consumers spend listening to traditional radio has tumbled to four hours a week this year, from 10 hours in 2005, according to consultant Forrester Research (FORR).

mobile users: a more focused audience

Advertisers are following the audience. "There's a tremendous amount of interest" in mobile advertising, says David Goodman, president of CBS Interactive Music Group, part of New York-based CBS (CBS), which also powers radio apps for AOL Radio (AOL), Yahoo!'s radio service (YHOO), and Last.fm.

Mobile ads may be even more attractive than online ads to marketers because they're more likely to hold a person's attention and marketers can discern a listener's whereabouts. "When you are on the desktop at work and listening to music, you multitask," says Eyal Goldwerger, chief executive officer of New York-based TargetSpot, in which CBS has invested and which puts audio ads from such corporations as McDonald's (MCD) and Wal-Mart (WMT) into mobile radio apps. "When you are on mobile, you tend to multitask less. Your attention is much more captive. And your location is valuable."

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