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Online radio looks to be coming of age

After giving Internet competitors a huge head start, radio giant Clear Channel introduces its first meaningful online strategy.

After giving its Internet competitors a huge head start, Clear Channel is ready to play catch-up.

The radio industry's dominant company, with more than 1,200 stations, has begun introducing its first meaningful online strategy after what could be the most protracted example of Internet indifference among major media businesses. At long last, Clear Channel is building more original programming and other features into its stations' Web sites to lure listeners and, it hopes, a new stable of advertisers.

"This is an easy way for Clear Channel to increase their stations' midday audiences, by making the stations available to office workers who have either no radio or bad reception in their offices," said Kurt Hanson, publisher of the Radio and Internet Newsletter. "And it opens up a whole new set of advertising opportunities."

Competitors and industry analysts say they welcome Clear Channel's initiatives, because online radio has just begun to attract the attention of listeners and advertisers. And they lay odds that the company will succeed despite its late start.

Clear Channel Radio, which is owned by Clear Channel Communications of San Antonio, has been going through the motions online for years. The company's stations have dedicated Web sites, but they offer little more than pages cluttered with advertisements, song lists, entertainment news and pictures of DJs.

This month Clear Channel began replacing those Web sites with simplified sites, featuring fewer ads and highlighting original programming, live Webcasts and other elements meant to keep visitors engaged.

The relative dearth of ads makes it easy for visitors to find "Stripped" and "Sneak Peek," two new online-only features introduced in recent weeks. "Stripped" is Clear Channel's version of MTV's "Unplugged" series: a live performance that visitors can either watch or listen to as a straight audio feed.

"Sneak Peek" offers Clear Channel's online visitors the chance to listen to tracks from albums that have not been released. Last month, 375,000 people logged on to the company's sites to hear a new album from the Backstreet Boys four days before its debut in stores.

Given the pedigree of the man leading Clear Channel's new online radio strategy, such changes are not necessarily surprising. Evan Harrison, Clear Channel's executive vice president of online music and radio, was lured away from America Online last year; while there, he oversaw the company's highly successful Radio@AOL division.

Harrison said that when Clear Channel Radio's chief executive, John Hogan, hired him, "he made it clear it was time to do something serious."

Offline, Clear Channel Radio reaches about 110 million people each week. Online, the Clear Channel's Web sites reach 8 million each month. Harrison said he expected that the new online-only features would help the company's Web sites "quickly compete with all the online entertainment destinations." He added, "After we build the audience, we'll be able to bring in our advertising partners."

Clear Channel is also cashing in on the podcasting trend. Podcasts, or downloadable audio files, have generated considerable interest in recent months, partly because they allow professionals and amateurs alike to create miniature radio programs and distribute them freely.

Music companies are still trying to determine how to allow for widespread distribution of songs within podcasts while complying with copyright laws. In the meantime, though, Clear Channel and its chief offline rival, Infinity Broadcasting from Viacom, have found early success with nonmusic podcasts.

In May, Infinity, which owns many of the country's most popular news stations, introduced in San Francisco a Web site, KYourRadio.com, and converted a station, KYCY-AM, to exclusively feature podcast content submitted by listeners. And this month, Infinity began offering podcasts of news, weather and other clips to listeners of its biggest news stations.

Clear Channel last month countered with free podcasts of "Phone Taps," a daily prank call featured on Z100 FM in New York. As of last week, more than 500,000 people had downloaded at least one episode of "Phone Taps," and Clear Channel had begun working on delivering 15-second ads with each podcast.

Overall Internet radio usage, while growing, remains comparatively small, according to Arbitron. In a January survey, 22 percent of Americans had watched or listened to Internet radio broadcasts in the previous month, compared with 10 percent in January 2000.

Yahoo claims the biggest online radio audience, with about 2.8 million weekly visitors in March, according to an Arbitron/ComScore Media Metrix survey. AOL was second, with 1.8 million listeners, while MSN and Live365 also attracted sizable audiences.

As Clear Channel vies for more online visitors, the competition is hardly standing still. In May, Yahoo started a $5-a-month subscription service, Music Unlimited, which offers commercial-free radio, personalized playlists and a feature that lets people transfer music tracks to portable devices.

AOL, meanwhile, last month began allowing nonsubscribers to listen to its 200 radio stations on AOL.com around the clock, as part of the company's overall strategy of attracting more non-AOL members to its free Web site. Previously, nonmembers could listen for two hours daily, according to Bill Wilson, AOL's senior vice president of programming.

Last week, AOL announced that later this month it would begin carrying 20 stations from XM Satellite Radio on AOL.com's radio service.

A handful of major advertisers, including Nestle and Cingular, have signed on for significant online radio campaigns, but for the most part, marketing dollars continue to flow elsewhere. Hanson of the Radio and Internet Newsletter estimated that online radio advertising revenues would amount to about $25 million this year.

Karim Sanjabi, executive vice president of marketing innovation for Carat Interactive, an advertising agency based in San Francisco, said: "Definitely the audience is there, but we haven't seen the excitement from clients yet, which is strange, because online radio is a very good option. It feels like there hasn't been a champion of Internet radio--someone who's really pushed it out there."

If any company fits that description, it is Ronning Lipset Radio, a New York advertising sales firm that last year created an online radio network composed of AOL, Yahoo, MSN, Live365 and Windows Media, and began selling ads across those sites to national marketers.

Ronning Lipset's stable of 60 advertisers includes RadioShack, NBC and Nestle. According to Eric Ronning, one of the company's principals, the firm's advertising fees have quadrupled, reaching prices that are competitive with offline radio. "It's truly normalized," he said. "We're not getting bought because we're cheaper than the other guys."