Entercom Goes Avant-Garde

You thought you'd seen every conceivable form of advertising already. Well, maybe you have. But you still haven't heard it all.

A small start-up company by the name of TargetSpot has come up with a way to inject targeted audio advertising into streaming Web broadcasts. The first appearance of this platform will be on websites run by Entercom (NYSE: ETM), the fifth-largest radio network in the nation.

TargetSpot isn't the only company looking to increase the revenue-generating power of online sound bites. Mighty Google (Nasdaq: GOOG) has a well-known interest in terrestrial radio that should cut both ways for the online giant. And both Yahoo! (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT) could use another piece of the online advertising puzzle as they play catch-up to the Big G.

For Entercom, this is a small step today. Its streaming audio properties don't pull in much revenue at all right now, so any improvement from the TargetSpot deal should be evident fairly quickly. If successful, it could open the door for other radio giants, but also provide relief for smaller Web-based media operations.

New copyright regulations have tripled the royalty rates for online radio stations, making it very hard for services like Pandora or Slacker to stay in business. Adding just a touch of hard-to-miss advertising a la standard FM radio stations might give these guys a fighting chance, should their efforts to overturn the new regulations fail.

Of course, TargetSpot itself could become an acquisition target if all goes well. The aforementioned players have all shown their willingness to buy what they can't (or would rather not) develop themselves, so there could be a big payday ahead for the entrepreneurs here. If not, it's at least a litmus test of how well traditional and new-wave advertising strategies can work together, and will spur the industry at large to work just a bit harder for our attention.

For further Foolishness:

• 2006 in Review: Entercom
• Go, Go, Google Hybrid!
• Inside Yahoo!'s Shopping List

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Fool contributor Anders Bylund is a Google shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure will make your day, every day.