300% profit on streaming after "One-day Sale" at Federated Media

Company: Federated Media, which includes a cluster of 14 brands and 17 stations in Fort Wayne, South Bend,  Warsaw, Auburn and Goshen,  Indiana, as well as a newspaper, based in Elkhart, Indiana, and Federated Interactive, its digital division. Station music formats include rock, adult contemporary, and country. Spoken word formats include news/talk and sports/talk.

Initiative:  "One Day Sales" to launch and grow streaming revenues

Key Executive: Deb Williams, Director of Interactive Sales, Federated Interactive; James Derby, Chief Strategy Officer of Federated interactive

Challenge:  Federated Interactive is a separate division responsible for growing interactive revenues at the radio station  group.  While there are a variety of digital initiatives, the chief focus for late 2011 and 2012 has been building out sales of streaming. 

Since building a streaming audience - unlike traditional web-sites - increases streaming fees, many radio companies "park" their streams, rather than deploying them as a new revenue stream.

"They are not promoting (the stream) because it costs more and they are not making money on it now," Williams said. 

Prior to the October, 2011, most Federated stations did the same, including streaming in the radio buy as a value-added audience and not a separate revenue category.  A few stations charged a flat fee for the stream even though ads ranon the stream automatically. Williams set out to re-invent the stream as a profit center. 

Strategy

To launch streaming as a separate revenue stream required a comprehensive strategy, including new technology, growing the audience, training on the value proposition, packaging and pricing, and a concentrated sales drive. 

1. Upgrading the platform

To sell the stream, Federated needed a simple  streaming platform that could serve ads separately. They selected and implemented Abacast.com. 

2. Growing the streaming audinece 
Second, the streaming audience needed to be developed with enough traffic to create significant ad buys, not a massive broadcast audience but rather the core group of dedicated listeners. There were two main strategies to audience development: 

- Heavy onair and online  promotions 
- Android andiPhone apps 

Apps (see second image to the right, click to enlarge) were critical  to audience-building strategy, though app usage is format dependent. After the promotional drive,  for  Active Rock,  40% of the streaming audience now comes from apps,  compared to  15 to 20% of the streaming news audience. The Country station app users account for about 20% for the stream.

To develop the apps, Federated Interactive deployed a local game-development company, ChickenBrick Studios.  Today all the  apps have the same game embedded in the app, designed to increase time on the app, and social sharing (to see the app, search the Apple store for WBYR 989 The Bear). 

Both streaming ads and  banner ads  are sold on the apps, however the main purpose is to extend the streaming audience for programs. 

"The main purpose (of our apps) is very program focused. They are entities we have to have to stay in the forefront. ...  we have to have it.  Then we let the  the sales department know what is is so we can also sell it."

Apps and promotions worked: By 2012, streaming had more than doubled to 500,000 sessions a month, with one station posting 170,000 sessions.

"It's still growing exponentially," Williams said, and on its way to tripling. She says that streaming audience size is about 5 to 8% of the terrestial audience. 

Sales organization

The main role of Federated Interactive is to help the terrestrial sales force develop interactive revenues, so it does not launch an independent sales team, with two key exceptions:  A Digital Sales Manager directly  sells national interactive ads,  reporting to Federated Interactive's Chief Strategy Officer, and  a social media management sales rep develops revenues from Facebook services, and reports to the DSM. Williams is responsible for growing digital revenues through terresterial sellers in South Bend and Warsaw, and supervises a newly hired Interactive Sales Manager in Forte Wayne. 

By leveraging the 5 to 8 sales reps per market through 14 stations,  digital initiatives are driven by a  80- plus sales force  across the cluster. (See core strategies for radio stations to generate more digital marketshare). 

The key to selling the stream was to train and motivate all reps to sell the new value proposition. 

Benefits of the streaming audience

To sell streaming, Williams said that Federated does not position streaming as an added audience, but rather as a different, premium audience. 

"They are the tried and true audience - the Priority One's.

"Before we were basically simulcasting the ads. Not only is streaming different, but we are not going to just give it away. " 

Stream sessions have unique value; they are  "exceptionally longer than terrestrial, that is an average of 60 to 90 minutes compared to 20 minutes  so you are tuning in to that one key one listener who can't get enough and wants to listen all the time." 

Another benefit is being able to show "hard core numbers" to  advertisers who place in the streams, that is, advertisers can be told  "without a a doubt how many ears and how many times they heard the ad, a much more definitive result than an estimate from Arbitron."

Finally, streams have different kind of interactivity that allow for things like "click to call, fan or get a coupon" which terrestrial radio cannot provide. 

Please see the slide to the right (click to enlarge) from their sales kit pormoting the streaming audience to clients. 

The One-Day-Sale

To kick-off sales of streaming separate from the terrestrial campaigns required  Federated Interactive initiated  a  "One Day Sale" in late 2011, in which all stations participated. 

Starting approximately a month before the digital "one day sale", the AE's began pre-sales presentations to prospective customers.

Each station had its own a goal to sell a number of packages that clustered of stream together at an affordable cost.  Each rep asked to sell two deals, and a target of increasing streaming sales from zero to 50% of avails. 

Contracts were sold for $100 to $500 per month (based on weekly rates) depending on market size on annual contracts.  Packages included a week for 25 spots on each of four stations. That is, advertisers got 100 spots a week on four stations. The drop off rate is about 8%. 

Teams sold 95 out of 160 toal annual packages in the one day sale, with some reps selling no interactive packages while other sold six deals during the one day sale. This missed the target of a 50% sell-through, but achieved 38%.  The sale netted 300% profit on  hard cost on the stream - proving the case for profitable streams. 

After the One Day Sale, streaming is presented as  add-on buy for contracts, or as a standalone premium, though smaller,  buy for merchant who can't afford a terrestrial campaign. This made Federated Media profitable in streaming for the year, with a margin of 83%, after taking into account the Abacast Clarity Digital Radio System costs, bandwidth costs, and SoundExchange royalty fees.

Year two of the One-Day-Sale

Dissecting the original One Day Sale yielded some insights for the team's management. "We  realized some things were not understood."

One market, for example,  "didn't buy into the fact that selling streaming packages was a customer-focused sale, that is, that the reps could still address client needs individually," a key value proposition for interactive advertising.  Instead sellers resorted to "package-pushing" in which customers tended to get the same type of campaign.

"Now they understand that this can be very client-focused and addressed that need" which may include  Facebook like, coupon downloads, or traffic to the web site.

"There are separate interactive needs that our terrestrial  stations cannot handle." These could include a variety of interactive initiatives supported by the device being used, such as driving directions, click to "like", Tweets, or coupon downloads. 

So year two of the  "One Day Sale" coming up will be both easier and more lucrative. 

"Now (reps) are clamoring when are we going to have the package?"

Williams is aiming to sell-out 50% of streaming availability in 2012, and targets a 500% profit on the initiative. 

"We would be happy" if digital revenues  this year are eventually split 35% streaming (up from zero), 35% banner ads and the rest other initiatives" in 2012. 

Other station initiatives

So what other initiatives should a small cluster with a serious commitment to digital revenues take on? Here are a few more from Federated:

Social Radio to launch on two active rock brands. A new initiative is technology partnership with Social Radio (see our review of the platform here), currently in a still-under-the-radar launch at WRBR and planned for WBYR. The platform allows the station to provide mobile and online listeners access to hear existing programs on demand, and to create new programs not available on  terrestrial stations.  Since the terrestrial stations serve the broadest common denominator, they often miss lucrative niche audiences. An active rock station, for example can create an alternative or heavy metal brand on additional social radio channels that reside on the original station's site.

An Internet only station for a Hip Hop brand that failed as a terrestrial signal

"In South Bend, we used to have a hip hop station, but it as a bit of a hard sell in the conservative Notre Dame community,"  Williams said. The station attracted listeners, but not enough advertisers. So eventually Federated abandoned the brand.

A new standalone HipHop terrestrial station was created by a competitor,  who now "tries to do it,"  but still struggles with a bare bones staffing and advertising base.  

So Federated decided to "go ahead and relaunch the station through nothing but a web-site stream, both iPhone and Andoirs apps" and a Facebook platform. 

"Our fan base is just around  200 likes and growing.  The impressive thing is that the growth of the listener base.  Over 1,000 unique listeners each month with over 2,000 sessions.  The average session length is four times as long as our other station streams."

While the old brand was called "Power 957,"  the new brand is simply named "Power," Michiana's Hits and Hip Hop, (see third image to the right, click to enlarge) with programing created by the original station's popular DJ who has another job, but was happy to contribute his knowledge to the resurrected brand. 

Today the station is "slowly growing... It's been viral. The traffic via stream is great."

William's suggested that the rap format is  a great fit since it reaches "a demographic that listens to everything on their phone." 

Selling Facebook

Facebook contests and social media management is  another  growing source of revenues (and recommended revenue stream for other small market media sites). 

"So many clients were  saying 'help me I don't know what to do' that reps wound up being the admin on the clients sites, and they  don't have time." 

Federated Interactive now works with a local  tab app platform provider, tabsite.com. 

"We like like them because they are from here. They have 80,000 downloads world wide, and are pretty good at it for being from a little town in Indiana."

Reps sell  Facebook packages that include setting up the  the page - or fixing it -  tabs, and and a couple of posts per week.

"The client may be doing a couple posts on their own and we supplement. Or they call and say 'we need a new cover photo,' etc."

While all reps can sell the package, Federated Interactive has hired a dedicated rep who is sells Facebook services exclusively. The cost to merchants starts at $500 to set-up, then $265 a month for two posts a week and being on-call to change out the cover photo or meet other needs.

While the revenue base is small, there are not a lot of hard costs.

"We have a guy who was already on staff doing this."  The group had about 15 packages sold after five weeks, with a goal of having 45 plus accounts before a new hire will be needed. (Looking at the economics of this service;  sales of about 20 pages pays for a rep, that is at about $60,000 in annual revenues, while a rep with to 45 packages can earn $30,000 to $60,000 in profits for a small company. But the big money is extra: Selling traditional media that supports Facebook contesting to build fans, which can be much higher). 

Text alerts and campaigns

The last digital product sold by the group is text alert services with two way capability. That is, if alert is sent to the opt-in list they can respond back to enter a contest or get a coupon. Additional sponsorships allow local merchants to also build an opt-in list for their own coupons. One sponsor, Martins Grocery, for example, built a 15,000 opt-in list by tacking an offer on to text alerts. The original SMS partner was HipCricket.com, though the company has since switched to Vibes.com.

Lessons learned

1. Posting commercial contests or deals to the station's Facebook page required a "work around" with some program  directors who took a more purest and protective approach to the fan page. Williams stance is more aggresssive, "As long as you are providing the Facbeook fan with value, it is not perceived as a commercial."

2. A separate digital unit with two digital sellers - for national interactive advertising and Facebook services - and interactive sales managers to leverage the big sales team is paying off for Federated Media. 

"We are always leaning to the future and what's next. We've tried to handle one thing at a time and try to produce it about there. We are embracing it pretty well and move on the to next thing. " 

3. Federated is now looking at possibility of doing some consulting work for other media and already has one client. Contact Williams about consulting services at dwilliams@federatedmedia.com.

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