Grey Advertising and venture capital firm New Enterprise Associates today are expected to announce a $17 million investment in Hiwire, a deal that will also add NEA's Stewart Alsop and Grey chief executive Ed Meyer to Hiwire's board of directors.
The investment follows Hiwire's January release of an advertising-friendly Internet radio "tuner" that the company says can effectively drop targeted one-to-one advertising into any audio stream sent over the Web. The company said it plans to offer similar services for video streaming, but no launch date has been announced.
Although Net radio is still in its infancy, recent research suggests that streaming could be one of the most effective advertising mediums.
In a survey last month, Arbitron Internet Services concluded that online listeners purchase more on the Web than Internet users who are not listening online.
"Online listeners are worth their weight in gold to Webcasters and advertisers targeting the Internet audience," Arbitron vice president Bill Rose said in a statement last month.
The study, released at a radio advertising conference, revealed that 79 percent of online radio listeners are likely to visit a Web site advertised on their favorite radio station, and 60 percent have made a purchase from a Web site.
Hiwire's product uses an anonymous opt-in program that identifies demographic information about listeners, including the city where they are listening. Based on the data, a Boston-based radio show might insert an ad for a San Francisco business into a show being listened to by someone in San Francisco, for example.
"Companies like Hiwire are expanding radio, which tends to identify very strongly with a local market and geographic audience, into a national medium," said Van Baker, an industry analyst with research firm Gartner Group.
Today's investment is a coup for Hiwire, which must convince an array of broadcasters and advertisers to buy into its system. Grey ranked sixth in overall revenue among U.S. advertising agencies in a 1998 survey by Advertising Age, and its backing provides important validation for Hiwire.
The emergence of Internet appliances, such as Kerbango's standalone Internet radio, could accelerate the market for Hiwire's product.
"Our data shows people listen to one hour of Net radio a day," said Hiwire CEO Warren Schlichting. "That takes off when appliances go portable."
Nevertheless, analysts predicted the market for tapping a national advertising platform for local radio stations will make up a relatively small slice of the burgeoning online advertising spectrum.
"The bigger impact is on radio itself," Baker said. "It poses an interesting challenge of how to expand local programming into something that is of more general interest."