Webrazzi Digital 2013 The Global Market for Digital Audio Advertising Karnaval.

com
Ali A. Abhary CEO Spectrum Medya

Copyright © 2013 by Spectrum Medya Labs Internte Hizmetleri Tic. A.S. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the permission of Spectrum Medya Labs Internet Hizmetleri Tic. A.S. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. COMPANY CONFIDENTIAL

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Contents

The Global Market for Digital Audio Advertising • The Context • The Audience • The Advertisers • The Publishers

Karnaval.com

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The 4 Golden Ages of Radio
The past 80 years of radio have been marked by 4 “Golden Ages” – each of which was the outgrowth of the introduction of new, disruptive technologies.

Entertainment shows Radio theater News programming
Disrupted by: TV

Talk Radio on AM Music Radio on FM

Disrupted by: Internet

1930s – 1950s

1960s – 1970s

1980s – 1990s

Today

Disrupted by: FM

Courtesy of: Kurt Hanson

AM radio Music-focused
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Internet radio streaming Mobile listening
3

The 4th Golden Age of Radio – Key Characteristics
This latest “Golden Age” is marked by 4 key characteristics: increase in content variety; shorter and less obtrusive ad breaks; ubiquity of access; and personalization.

Variety
HEAD Top 40 AC News / Sports

Shorter Ad Breaks

• •

• • •

Unlimited spectrum Increased in variety of content offerings Tailoring needs of the “long tail” of consumer taste

3 or 4 spots per hour
Shorter spots (< 30 seconds) Less intrusive for listeners; greater impression for advertisers

Popularity

TAIL: 70s Disco, Bluegrass, Latin rap Available Spectrum

Ubiquity
• • • Availability wherever there is connectivity Device agnostic 3-4x more devices today deliver radio than 10 years ago • • • •

Personalization
Skip songs Ban artists Time-Shift Social music sharing with friends and likeminded individuals

Courtesy of: Kurt Hanson

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Contents

The Global Market for Digital Audio Advertising • The Context • The Audience • The Advertisers • The Publishers

Karnaval.com

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5

Online Radio Listening – US Example
Consumers throughout the United States have taken up online radio, with listening expected to reach over 60% of the total population within the next 3 years.

Number of people that have listened to online radio in the past month (US population 12+, millions)
200 180 160 140 120 100 80 60 40 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

186
64% of Population (12+ years of age)

Source: Arbitron; Triton Digital

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Online Radio Listening – UK Example
European consumer behaviour is also following the same trend, with one-third of all British radio listening coming from a digital platform. Distribution of listening hours across analog and digital platforms, the 12 months to Q2: 2009-2012
100.00% 19.60% 80.00% 12.80% 10.80% 7.90% 7.20% Digital Unknown Analog 40.00% 67.70% 20.00% 66.60% 66.30% 63.30% 22.70% 25.80%

29.50%

60.00%

0.00%

Q2 2009

Q2 2010

Q2 2011

Q2 2012

Source: Ofcom

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Online Radio Listening – German Example
And the German market is rapidly adding new online radio content sources, with over 3,000 different online radio stations broadcasting nationwide.

Number of online radio stations in Germany (2006 – 2012)
3500 3,064 3000 2,692 2500 1,914 1,600 1500 3,021

2000

1000 450 521

500

0 2006 2007 2008 2009 2010 2011 2012

Source: Goldmedia Webradio Monitor 2012

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Online Radio Listening – Pakistani Example
The trend is not limited to developed countries – naysayers should look no further than Pakistan, where 30% of men said that they use their mobile phones to listen to radio.

Pakistan: Radio listening locations % of people who said they had listened to radio in the following locations
80% 74%
70%

60%

57%

50%

40% 30% 30% 20% 20% 8% 5% 0% 0% Home Work Car Elsewhere (café, shop) Mobile Phone 4% 3% 4%

Men Women

10%

Source: BBC Pakistan Survey of Adults 15+ (n=1172 weekly radio listeners)

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Online Radio Listening – Turkish Example
And, predictably, the trend is also seen here in Turkey – with almost half of all listeners accessing radio via a digital device.

Average monthly reach of radio listeners via Internet / MP3 Player / Mobile Device (000s people)
10,000
9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 20% 1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 23% 22% 30% 36% 41%

44%

47%

47%

% of total radio listeners

Source: RIAK / Ipsos

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Online Radio Meets Consumer Demands
Consumers worldwide are listening to radio via the internet because online radio enhances the traditional linear listening experience, creating a richer experience for consumers. It is not simply “repurposing” the terrestrial listening experience. The Reasons for Listening to Online Radio (US Consumers)
To listen to audio you cannot get elsewhere 19%

To control or choose the music being played

18%

More music variety

15%

Fewer commercials

15%

To get a clearer signal than over-the-air radio

13%

Less DJ chatter

6%

Because it's new 0% 2% 4%

5% 6% 8% 10% 12% 14% 16% 18% 20%

Source: Arbitron / Edison Research

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Contents

The Global Market for Digital Audio Advertising • The Context • The Audience • The Advertisers • The Publishers

Karnaval.com

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12

Global Addressable Market
Online radio is vying for a global market of over $55B in annual advertising expenditures – composed of both online and broadcast expenditures. Addressable Global Advertising Market (F2011) Estimates for online (display / mobile / rich media / video) and broadcast advertising

Source: Morgan Stanley, IDC 2011

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US Addressable Market
In the US, ad dollars for online radio are sourced from a combination of online advertising; broadcast ads; and mobile ad markets – combined markets which are forecasted to grow 12% annually over the next several years.

US Addressable Advertising Market (F2011)
$37B Broadcast Radio Advertising $30B Online Advertising* $26B $24B $33B

$13.4B $9.8B
Mobile Advertising

$0.9B
* Display / mobile / rich media / video

2010

2011 Broadcast Ads

2012 Online Ads

2013 Mobile Ads

2014

Source: Morgan Stanley, IDC 2011

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US Internet Radio Advertising Revenues
The US has already established an online advertising market for audio-streaming publishers worth half a billion dollars annually. The 2nd largest mobile ad publisher in the US is Pandora. Estimated 2011 US online ad spending, Directed to streaming audio market (in millions US dollars) US Net Mobile Ad Revenues By Company, 2011-2012 (millions)
2011 Google Pandora FM/AM Radio Broadcasters $131.6 Twitter Millenial Media Newspapers $62.9 $550M Overall Magazines $45.4 Apple (iAd) Facebook Other* Total $750.0 $120.0 -$40.1 $38.3 -$502.3 $1,450.7 2012 $1,423.1 $226.7 $129.7 $84.1 $75.1 $72.7 $600.2 $2,611.3

Online-only players

$295.0

Note: includes display (banner, rich media, and video) and search * Includes other ad networks and publishers

Cable / Satellite

$12.9

Other Print

$2.1

Source: Borrell Associates, Wall Street Journal, e-Marketer (Sept. 2012)

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Broad Advertiser Adoption
Advertisers across segments and of all sizes have adopted digital audio advertising as part of their media buys across the United States. Brands using digital audio advertisements in past 12 months (US market)

Auto Brands • 9 of top 10 marketers

Retailers • 9 of top 10 marketers

Restaurants • 9 of top 10 marketers

Financial Services • 8 of top 10 marketers

Telecom • 7 of top 10 marketers

Source: IAB

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Digital Audio Advertising Effectiveness
Brands are turning to the immersive advertising experience – aural plus visual with call-to-action – of digital audio because it is delivering measurable results versus “static” internet advertising

18% 16%

INTERNET RADIO Listeners
10%
8% 6% 5% 5% 9% 11%

15%

8%

2.7x
4% 3%

INTERNET ONLY Users

3x
2% Became a "fan" on social network

5x
1% Called for information 1% Sent email / text

Purchased Purchased Clicked on an ad product / service product / service online at retail

Visited advertiser's website

Searched for more information online

Source: Targetspot / Park Associates Digital Audio Advertising Impact Study for IAB (2012)

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Key Features of Digital Audio Ads
The unique characteristics of digital audio – merging the best of traditional radio and online ad properties – are the key features driving higher recall and advertiser performance.

By station audience


• •

Registered users by demographics
Geographic targeting Device / time of day • • • Real-time measurement Cost-per-listen pricing models Accountability in audio

Targetability

Measurability

Call-to-Action

Audio ads synchronized with banners, rich media Pageskins / videos Context-based (user click, action, song change, station change)

Immersive Ad Experiences

• •

Audio calls to action reinforce banners Increased immediacy of response to audio prompts

• •

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The Connected Car – A New Venue for Digital Advertising?
Pandora, iHeartRadio and other streaming publishers have integrated to “connected cars” – providing consumers access to online radio in their cars, and digital advertisers the opportunity to reach consumers via the dashboard / soundsystem of automobiles for the first time. Pandora is now fully integrated into Over 50 models of automobiles across all major makes Usage of Pandora In-Car (% Used in Past Month by Age Group)
19%

1 in 5 18-24 year-olds are using Pandora in their cars.

7% 6%

3% 2% 1%

18-24
Source: Arbitron

25-34

35-44

45-54

55-64

65+

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Contents

The Global Market for Digital Audio Advertising • The Context • The Audience • The Advertisers • The Publishers

Karnaval.com

Confidential

20

Music Lockers vs. Radio
It is important to distinguish between “music locker” services (how we keep our music collections) and “radio” (how we connect to the world around us) Music Lockers Radio

Definition • How we keep our music collections

Definition • How we discover new music, connect with the world

Technology • Disrupted by frequent new technologies • Each new technology is substitutive

Technology • Slow technological change • Each new technology is additive

Role of Brand • Brand neutrality

Role of Brand • Brand loyalty

Listening Experience • Walled-off from the rest of the world • Solitary • Proprietary closed-loop

Consumers unwilling to accept advertising in this context

Listening Experience • Connected to the rest of the world • Social • Discovery of new music • Relationships with personalities • News and local information

Consumer “license” / willingness to accept advertising

45 years

110 years

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The Models of Streaming
Broadly-speaking, there are 5 key categories of music streaming publishers operating globally today.

STREAMING MODEL Music Lockers

SUB-SET On-Demand Services • • • • • • • • •

DESCRIPTION Broad selection of tracks Significant royalty costs Freemium models Little consumer acceptance for advertising Little / no non-music content Un-curated Repurposing of terrestrial stream Simple listening experience Not unlike car stereo

Radio

Basic Broadcasters

Aggregators

• • • • • • •

Thousands of station choices, across country / world Simple listening experience (interoperability problem) Ideal for “world travellers” keeping in touch Paradox of Choice problem Targeting music selection based on consumer preference Limited non-music content Arguable “not radio”

Personalized Radio

Rich Radio

• • •

Reinforces curated and mediated nature of radio Across multiple genres to capture broadest audience Augmented experience beyond simple listening (personalization, timeshifting, artist information)

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Global Examples of Streaming Music Models
From large publicly-traded companies, to small start-ups, to divisions of businesses in other industries – a number of different approaches exist towards streaming music around the world.
INTERNATIONAL TURKISH

Spotify

Last.fm

MOG

TTNet Muzik

Turkcell Muzik

Fizy

MUSIC LOCKERS

Rhapsody

Rdio

BASIC BROADCASTERS

AGGREGATORS

PERSONALIZED

RICH RADIO

CBS Radio

Kral FM

Pandora iHeartRadio Tune In

Accuradio

NPR Music Absolute Radio

RADIO

iHeartRadio iPower

Karnaval

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Apple Market Entry?
Reports have circulated that Apple is planning to launch an advertiser-supported internet radio service in 2013 to compete with Pandora, iHeartRadio and others.

• Likely launch in Q1 2013 • Digital audio advertisingsupported, personalized radio service • Likely to raise the bar for user experience • Positive long-term impact on growing demand for digital audio advertising

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Contents

The Global Market for Digital Audio Advertising • The Context • The Audience • The Advertisers • The Publishers

Karnaval.com

Confidential

25

The Market Opportunity in Turkey
Digital audio advertising in Turkey addresses a combined market worth over 400 million TL annually, but which is currently dominated by players that are unfriendly environments for advertisers – owned by brands themselves.

Turkish Addressable Advertising Market (F2011)

Existing Streaming Music Players
Player Description

287M TL

Online Advertising*

414M TL Overall

Search engine Owned by Turkcell On-demand platform GSM operator On-demand platform Owned by TTNet ISP On-demand platform GSM operator

Broadcast Radio Advertising

121M TL
Mobile Advertising

On-demand platform GSM operator On-demand platform Beer company

6M TL
* Display / mobile / rich media / video

We’re not selling mobile phones, internet service, or beer. We are about the listening experience in and of itself. We are radio, not a music locker.
Source: Reklamcilar Dernegi, 2011

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Karnaval.com – Radyodan Sonraki En Büyük İcat

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Ubiquity of Access – “Karnaval 24”
Karnaval has been designed with ubiquity of access in mind – across internet-enabled telephones, computers, and consumer appliances. The access coincides with all-day coverage – be where the user is.

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Karnaval’s Two Complementary Listening Experiences

Lean Back

Lean Forward

• • • • •

Curated music streams Non-interactive Personalities and DJs to help navigate Real radio experience News, weather, sports and related content

• • • •

Social radio experience Quasi-interactive
 Gives impression of interactivity

Participation in determining music choices Gamification elements

radio network

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Curated Stations – Just Enough Choice

radio network

Karnaval aims to have no more than 20 curated radio stations covering the broadest range of musical tastes – both the head and a substantial part of the tail of consumer tastes. Just enough choice, no confusion.
Super FM
• Top 40 Turkish Pop • Tarkan, Ajda Pekkan, Mustafa Ceceli, Halil Sezai

Zeplin
• Turkish / Foreign Independent Music • Vera, Motto, Melis Danismend, Supergrass

Metro FM
• Top 40 Foreign CHR • Rihanna, David Guetta, Beyonce

Kantin
• Teen Music • Carly Rae Jepsen, Jessie J, Carrie Underwood

Joy Turk
• Turkish Slow • Sila, Seksendort, Ferhat Gocer

Retroturk
• Turkish retro music (60s-70s-80s) • Nesrin Sipahi, Sibel Egemen, Baris Manco, Ayla Dikmen

Joy FM
• Adult Contemporary • Zaz, Elvis Costello, Charles Azanavour

Jeton
• Gamer’s radio • Fuat, Manga, Tyga, Jay Sean, T-Pain, Ne-Yo

Radio Mydonose
• Dance / Electronic
• Flo Rida, Inna, Guru Josh Project

Borusan Klasik
• Classical • Fazil Say, London Philharmonic, Sir Neville Mariner

Joy Turk Akustik
• Turkish Exclusive Acoustic • Model, Seksendort, Hande Yener

Joy Jazz
• Jazz • Kerem Gorsev, Dizzie Gillespie, Dave Brubeck, Miles Davis

Efkar (March 2013)
• Arabesque • Müslüm Gürses, Orhan Gencebay, İbrahim Tatlıses Confidential

Joy Marine (April 2013)

• Lounge

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Curated Stations – Rich Radio Experience
Karnaval’s listening experience has been designed to offer a rich array of audio and non -audio content and functionality – aimed at increasing user engagement and providing a “richer experience” than standard audio.

radio network

DJ Personalities, Radio-Feel

Biographies, Photos, Videos

Updated news, gossip

Pause live radio, rewind

Real Radio

Rich Artist Content

Music News

Time Shifting

News, Weather, Sports, Traffic

Giveaways, Sweepstakes

Real time Biletix integration

On Demand News

Contests

Concert Tickets

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Digital Sometimes Exclusive Jelli. Social 100% User Radio and Partner Controlled FM-Broadcast. you Experience. want in Turkey. to Radio. lean forward. Adding 30,000 registered users / month.

Confidential

Massive Listener Growth

Daily Unique Users

315827

54106

MAR’12

APR’12

MAY’12

JUN’12

JUL’12

AUG’12

SEP’12

OCT’12

NOV’12

DEC’12

JAN’13

FEB’13

Confidential

14th Largest Stream Internationally
Stream 1 2 3 4 5 Clear Channel Radio Digitally Imported Inc. CBS Radio Inc. Prisa Radio Cumulus Streaming Network Average Active Sessions 284,151 102,302 75,256 73,485 70,694 Session Starts 128,174,622 * 24,399,260 37,211,655 20,485,048 Avg. Time Spent Listening 0.70 * 0.97 0.61 1.08

6
7 8 9

Slacker, Inc.
EMF Corporate NPR Member Stations Cox Radio Inc.

63,092
32,866 32,546 31,925

33,466,492
5,403,632 10,067,368 9,424,073

0.60
1.91 0.97 1.07

10
11 12 13 14 15 16 17 18

ESPN Radio Corporate
977Music.com Corporate Entercom Communications Corp. Sky Radio B.V. Karnaval.com AccuRadio Idobi Radio Univision Greater Media Corporate

28,580
25,143 24,481 19,771 18,402 14,758 13,488 13,016 11,729

12,230,771
* 9,953,316 2,930,540 7,061,648 2,304,510 1,665,776 7,821,902 2,941,415

0.74
* 0.78 1.69 0.75 1.94 2.30 0.53 1.26

19
20

COPE
Emmis Communications

10,011
9,973

4,105,213
4,772,340

0.69
0.66

JANUARY ALL STREAMS RANKER (based on AAS) DAYPART 6:00am to 8:00pm, Monday through Friday Confidential

Total Listening Hours
The total number of hours streamed monthly has grown over 232% since our launch.

Karnaval Total Listening Hours*

13,611,034 13,632,930 13,101,503 12,531,797

10,332,164

10,674,496

8,060,216 6,779,658

7,871,775

8,040,264

8,277,623

4,111,733

4,428,208

Feb.12

Mar.12

Apr.12

May.12

Jun.12

Jul.12

Aug.12

Sep.12

Oct.12

Nov.12

Dec.12

Jan.13

Feb.13

* Total number of hours of streaming to listeners that were connected for a minimum of 60 seconds during a given time period. Source: Karnaval Streaming Statistics

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Mobile App Adoption Rates
At Karnaval we believe that mobile is the future for online radio – and our listener’s rapid take-up of our iPhone and other apps have proven us right. Today, we have over 200,000 iPhone apps downloaded – representing 10% of all active iOS devices in Turkey. Cumulative Downloads of Karnaval iPhone App (Against Days Since Launch)
160,000

140,000

120,000 Number of App Downloads 100,000
Number of Days to 100,000 downloads: 29 days – Karnaval.com

Number of Days to 100,000 downloads: 60 days - Hepsiburada

80,000

60,000

40,000

20,000

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81

Number of Days After Launch

Source: iTunes; Webrazzi 27 February 2012; Pozitron

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Karnaval Mobile – Functionality and Reviews
Our success in mobile is driven by our focus on functionality, user experience – and is proven by our user’s ratings and reviews.
Functionality Multiple Stations HD Sound Artist Biography Karnaval    iPower   Kral FM   SlowTurk  Radyo App   Fenomen  Best FM  NR 1 FM  Fizy   TTNet Müzik   Turkcell Müzik   -

Time Shifting
On Demand Music On Demand News, Weather Next Up Song Song History Music News


    

-

-

-

-

   -

   -

   -

Iphone App
Number of Ratings Number of Stars 2.678 4,5 83 3,5 204 4 12 3,5 4.000 4,5 43 3 366 4,5 6 5 1551 3 1954 3 960 3

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10000000

12000000

14000000

16000000

2000000

4000000

6000000

8000000

0

* Within Turkey only Source: Topsy

Social Buzz

Total Cumulative Gross Impressions on Twitter Mentions of “Karnaval” versus Competitors (2012)*

Delivering “buzz” in the social media is also a key measure of Karnaval’s success – and by this measure, the newly formed brand has outdone established competitors over the past year.

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Jan 01, 2012 Jan 08, 2012 Jan 15, 2012 Jan 22, 2012 Jan 29, 2012 Feb 05, 2012 Feb 12, 2012 Feb 19, 2012 Feb 26, 2012 Mar 04, 2012 Mar 11, 2012 Mar 18, 2012 Mar 25, 2012 Apr 01, 2012 Apr 08, 2012 Apr 15, 2012 Apr 22, 2012 Apr 29, 2012 May 06, 2012 May 13, 2012 May 20, 2012 May 27, 2012 Jun 03, 2012 Jun 10, 2012 Jun 17, 2012 Jun 24, 2012 Jul 01, 2012 Jul 08, 2012 Jul 15, 2012 Jul 22, 2012 Jul 29, 2012 Aug 05, 2012 Aug 12, 2012 Aug 19, 2012 Aug 26, 2012 Sep 02, 2012 Sep 09, 2012 Sep 16, 2012 Sep 23, 2012

fizy

karnaval

power fm

powerturk

Spectrum Medya Labs İnternet Hizmetleri A.Ş. Büyükdere Caddesi No. 23 CEM İş Merkezi Kat 4 İstanbul, Turkey 34361 Tel: + 90 368 6200 © 2012-2013 All Rights Reserved

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