Stitcher, the Pandora of Talk, Works to Make Internet Radio Easier

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Sometimes we don’t realize what was so great about a traditional medium until a new one comes along and tries to take its place. Consider radio. Web-based radio has been around since the 1990s, and this year marks the 10th anniversary of the technology behind podcasting.

Yet old-fashioned broadcast radio is still a $17 billion business in the U.S., with a gigantic audience—there are at least 216 million regular listeners across the country’s 275 leading metropolitan areas, according to Arbitron.

It turns out that one of the things people love about terrestrial radio is that you can just turn it on and it’s there. You don’t have to fire up a mobile app, type a search term, pick a program from a long list, or wait while a file downloads or a live stream buffers.

“When you listen to radio it’s basically like pressing an ‘Entertain Me’ button,” says San Francisco-based serial entrepreneur Noah Shanok. And until someone makes Internet radio just as easy to use as traditional radio, Shanok thinks, its audience will probably stay relatively small.

Making Internet radio fun and easy is exactly what his company, Stitcher, is out to do. The company makes mobile and Web apps that help people access and discover on-demand Internet radio, from NPR to NASCAR—everything but music, which the startup leaves to companies like Pandora and Spotify.

Stitcher on the iPhone

Stitcher on the iPhone

Shanok hit on the idea after a stint as the host of a comedy podcast called Houndbite, which turned out to have a much more limited audience than he’d expected.

“It was clear there was no possible way we were ever going to reach as many people as we would want, because you have to do all this stuff in order to listen,” he says. “But we realized that if we could get this to be a personalized ‘press-the-entertain-me-button’ medium, we would basically have a better product than terrestrial radio.”

With $20 million in venture backing from Benchmark, NEA, New Atlantic Ventures, and notable angel investors like Ron Conway, the four-year-old startup in downtown San Francisco has probably done more than any other firm to bring talk radio and podcasting into the smartphone era. (Shanok actually prefers the term “on-demand radio,” to distinguish Stitcher’s streaming model from traditional podcast apps, where an audio file is usually downloaded in its entirety before it’s played.)

Stitcher’s Android, iPhone, and iPad apps have been downloaded 8 million times, and Apple featured it as one of the company’s five favorite news apps of 2011.

But clearly, Stitcher is still just getting started as a business. It’s in what Shanok calls the “nascent phase” of building an advertising revenue stream around banner ads and combination audio-and-display ads, à la Pandora (NYSE: P), and it’s still working on making the Stitcher app as easy to use as, say, a car radio. “We have come a tremendously long way, and we are seeing it in our growth metrics, but there are still definitely barriers,” Shanok says.

One of those is the automobile, where at least half of all radio listening occurs. To entice people away from the pre-programmed stations on their car radios, in-car listening systems need to be extremely simple. That’s why Stitcher has partnerships with Ford, GM, BMW, and other companies to make its app interoperable with in-car voice command systems such as Ford Sync.

“You can get into a Ford right now and say to it, ‘Launch Stitcher and play Radiolab’ and it will do so,” Shanok says. “So we are breaking down the steps needed to have a lean-back, ‘Entertain Me’ experience.”

Shanok is a former Wall Street bond trader whose career took a turn toward the Internet around 2000, when he became founding vice president of sales at StubHub, the online marketplace for reselling event tickets that was acquired by eBay in 2007 for $310 million. After the brief Houndbite experiment—which Shanok calls “America’s Funniest Home Videos, but for audio”—he started Stitcher with technical co-founder Peter deVroede, a veteran media software developer.

StubHub and Stitcher “were very similar in that it was an absolute certainty to me that this was a better way of doing things,” Shanok says. “In the case of StubHub, there needed to be a secondary market for tickets with transparency, and the Internet was a great way to do that. The same with Stitcher—it’s an absolute certainty that the Internet is a better way of delivering the audio content people want to hear.”

The two companies had one other thing in common: they were both founded during economic downturns. That’s “the best time to start a company, if you can be smart and prudent with resources,” Shanok says, because it forces founders to be “heads-down focused on the product.”

But the first version of Stitcher, released for the iPhone in 2008, was pretty basic. “Without downloading, you could listen to a couple thousand shows, and you could search for shows and also create your own favorites playlist,” Shanok says.

Because the first couple of generations of iPhones on the AT&T network had limited broadband capabilities, Stitcher also did a lot of work to compress its audio streams down to a bitrate that allowed reliable streaming even in areas with poor connectivity. Shanok says the app still has a very light bandwidth footprint today.

Stitcher for the Web

Stitcher for the Web

In the years since then, Stitcher has focused on adding more content to its catalog, expanding beyond the iPhone, and building in personalization and recommendation systems that help listeners find more on-demand shows they might like. The company borrowed some key ideas from Oakland, CA-based Pandora, including the idea of continuous-play “stations” seeded around particular shows, and thumbs-up and thumbs-down buttons that help the app figure out what sorts of shows to include in each station.

This year, Stitcher also added a “smart station” feature that scans a user’s existing stations and puts together a customized playlist including both old favorites and new surprises listeners might like. Shanok says the company has been “shocked” so far by its user statistics on the feature, which show that people keep listening to the new shows Stitcher recommends. “People come for a specific piece of content or set of shows, they listen to those for a while, and then for whatever reason on a given day they decide to press Smart Station, and lo and behold, it’s something they really like,” he says.

By the way, the company is called “Stitcher” for a reason: the stations are stitched together algorithmically from many shows or segments of shows. In other words, creating a station on Stitcher is not like subscribing to a specific podcast in iTunes or other podcasting apps. I was confused and frustrated about this as an early user, until I finally got it through my head that this is part of Stitcher’s strategy for simplifying the Internet radio experience. It’s basically Pandora for talk radio—you pick your station and then just listen to whatever it plays.

To compete with terrestrial radio, the experience has to be this hands-off, Shanok says. (If you really want to listen to consecutive episodes of a specific podcast, you’re much better off using Apple’s own Podcasts app or something like Vemedio’s Instacast app.)

In addition to its Ford and GM partnerships, Stitcher works on Sonos home audio systems. And this fall, the startup introduced a Web app that lets users access their existing stations through a browser on a PC or laptop, thus becoming “one of a number of mobile-first companies that have been coming full circle to a Web experience,” says Shanok.

As it adds platforms, the company is working to make sure users don’t get lost. Playback is synchronized so that you can “start a show in the office on your computer, get into your Internet-enabled car and listen while you drive to the grocery store, and then listen on your mobile device, then get home and listen on your tablet. It’s absolutely seamless.”

Stitcher earns money by showing display ads, which appear on your smartphone screen. Eventually, they’ll also appear within the Web app. The company has run “a number of very successful tests” of ads that combine audio and display elements, a format pioneered by Pandora. “The combination allows you to do some really cool, fun stuff” like surveys or games, Shanok says. For instance, an advertiser could ask, “Who do you think is going to be MVP of the Super Bowl? Click now on your screen.’”

But Shanok says these advertising programs are in the “beginning stages” and that the company is still working on building its own ad sales force. “There is no doubt that the dollars are there,” he says. “Terrestrial radio advertising is a $15 billion a year business, and 35 percent of that is talk radio. If you look at the growth in revenue at companies like Pandora, it’s quite fast. So, there isn’t a question about the viability of it.”

It may help that Stitcher’s users are an attractive lot for advertisers: mostly affluent, educated professionals in the 30-to-60 age bracket. But at the same time, Shanok says, “we have teenagers listening to shows about motocross and 75-year-olds listening to shows about knitting and people in rural areas listening to shows about bass fishing.” (Not to mention people in urban areas who wish they could go bass fishing.) “The mix of folks is only going to become more broad as we continue to break down the barriers to listening.”

It may be a while yet before listening to on-demand Internet radio is as easy as flicking on the radio. Then again, more and more people don’t even have old-fashioned radios. Until I got an emergency radio for my earthquake kit last month, the only radio I owned was the one in my car, and Arbitron says radio ownership is on a gradual decline across the U.S.—it fell from 96 percent in 2001 to 93 percent in 2011.

Radio-like experiences are sure to be part of the media mix on the Internet far into the future, whether they’re delivered via smartphones, tablets, PCs, or brain implants, and on the talk-radio side of the equation, Stitcher seems to be building a lead. Shanok, at least, is confident: “We believe what we’re doing will replace the radio dial at some point.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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