Audio advertisements have been largely one-sided: The advertiser speaks and consumers listen. Startup Xapp Media wants to change that with interactive audio ads.
Through an SDK, Xapp Media enables brands to create voice-activated ads that mobile users can respond to with commands like “call now” or “send coupon.” NPR was the first publisher to try out the ad unit in March with Lumber Liquidators as its first advertiser.
Last month, Xapp Media raised $3 million in seed funding. AdExchanger spoke with CEO Pat Higbie and Chairman Frank Raines. Raines is also a former chairman and CEO of Fannie Mae.
AdExchanger: How did you get into the online radio ad business?
FRANK RAINES: Pat and I had been co-investors in a firm, Xtone Inc., that offered Siri-like capabilities. Pat was an executive [EVP of business and development] there. And for the past year and a half, we’ve been focused on bringing interactivity to the online audio listening experience and so we created Xapp Media.
PAT HIGBIE: We were looking for an opportunity where voice technology could be used in an effective way. What we found was there were more opportunities on the monetization side, rather than trying to compete with companies that already have Internet radio applications. That’s how we ended up on the ad tech side. We’re focused on helping the Internet radio industry increase the value of every ad that plays.
Is Xtone the underlying technology?
RAINES: No, there’s no connection with Xtone technology at all. Xapp Media built its own technology.
What sets Xapp Media apart from other Internet radio companies like Pandora and Spotify?
RAINES: We’re not competitive with Pandora and Spotify. We want to work with Pandora and Spotify and anybody else who has any kind of Internet radio content. The big problem in Internet radio is that no one is able to make money. Pandora has grown large but they have such a high cost for royalties that they can’t make money.
There’s also so much competition that they can’t increase their ad load without people switching to another Internet radio service.
How does Xapp Media solve that problem?
RAINES: What we bring is the ability to make money off the ad load that you already have. We bring this responsiveness to audio advertising that allows people to interact instantly and conveniently with an ad.
With regular audio ads, you have to remember the phone number or name of the company when you’re driving. In the case of a Xapp ad, you can say, “Call now” when prompted and it’ll make that call while you’re driving. It works through Bluetooth so it’s also hands-free.
When do you activate the microphone?
RAINES: The first time someone tries to use the app, it will request the use of the microphone and the microphone is only open during certain windows when the ad plays. The listener is always prompted when the microphone is open.
On your website, it says Xapp Media is not an ad network. Do you have any plans to introduce a real-time bidding programmatic solution?
RAINES: If this ad unit becomes popular, it will be available through every medium. It’ll be sold for premium slots and someday it will become programmatic, but that would require signing up a lot of users and advertisers down the road.
How is NPR using the Xapp ad unit?
HIGBIE: NPR has been rolling out this capability to their listeners and they now have five or six different advertisers running campaigns using Xapp ads. We expect that as they develop additional apps, they’ll also use us as a monetization tool there.
One thing that NPR has looked at is combining the Xapp ads feature with content so that they can have sponsored content. If they have special coverage of an event for example, they could have a brand sponsor that coverage and people can choose to listen to it using their voice. So they’re using our technology both for monetization and for granting access to content.
What performance metrics do you use?
HIGBIE: We measure total responses and that’s broken down into the number of voice responses vs. touch responses and we’ll be adding other metrics beyond that. Within Xapp ads you can have the first level of engagement where a listener just gets more information and then an actual action, like a phone call or downloading an app.
Are there any standard measurements for audio ads?
HIGBIE: The Interactive Advertising Bureau is working on a standardized template for digital audio advertising. We’re involved in a committee that’s working to define those standards. In the past, audio advertising had no way to easily interact with consumers, so this is a new space and we’re trying to build a set of standards. The way the standards process works is there are different stakeholders that provide input, so it’s too early to predict when the standards will be put in place.
What kind of user info does a Xapp ad collect?
RAINES: What we provide is the interaction data. We provide the number of impressions served, whether or not there was any interaction with that ad, the nature of the interaction and you can combine that with the publisher’s demographic data.
Are you also noting device types or device IDs?
RAINES: We know what type of device it is, whether it’s in the foreground or the background, which is highly relevant for audio ads, and at this point we don’t collect location data.
HIGBIE: Apple restricts developers from using device IDs to identify individuals, but they provide IDs for publishers and advertisers that we’re able to collect, but can only use on an aggregated basis.
How many publishers are on your network?
RAINES: NPR is the only one we’ve announced but we’re working with several other publishers that we’ll announce when we’re ready.
What have you applied from your experience at Fannie Mae to Xapp Media?
RAINES: Even though Fannie Mae was a financial company, about 2,000 people there were technologists and we focused on using technology to improve the responsiveness of the mortgage system.
We wanted to reduce the time it took to get approved for a mortgage down to a matter of minutes from a matter of weeks. And so I learned about the power of using the system to improve pre-existing capabilities. To do that, you needed to link a variety of technologies together.
What we’ve done at Xapp Media is combine mobile technology and voice technology with the cloud. It’s very complicated to make it work but we’ve been able to make a great leap forward in audio advertising.
What’s your strategy for terrestrial radios?
RAINES: We’re working on being able to work with both live streams and terrestrial radio stations. We’re pushing the technology as far as we can push it.
