SpiralFrog's Joe Mohen was back in town Friday, and he reported a few new milestones. The advertiser-supported music-download service has more than doubled its registered users from 500,000 in mid-February to 1.1 million, and has increased its monthly unique visitors from 1 million in late January to more than 3 million this month. The numbers suggest that its growth is accelerating, which is a good thing, although the company is still well short of the 10-million-plus level that attracts the interest of major advertisers. The intriguing thing is that SpiralFrog is making this progress despite a number of non-trivial shortcomings, most notably the paucity of major-label content (only Universal Music Group has made its tracks available) and incompatibility with iPods.
The service has at least two things going for it: it provides music at an Internet-ready price (i.e., free), and it can target advertisements more effectively for brand advertisers (e.g., Pepsi and Chevrolet) than many competitors. Mohen likes to talk about how SpiralFrog eliminates waste for advertisers by enabling them to put their messages in front of specific age groups and zip codes. For example, a fast-food chain might want to reach 14- to 19-year-old males in urban areas. SpiralFrog, which learns users' ages, genders, zip codes and music preferences, can show an ad just to that slice of its audience. TV and radio can't. And unlike user-generated sites, SpiralFrog can assure advertisers that their pitches won't appear next to bootlegged or inappropriate content. Still, such capabilities won't be in much demand until SpiralFrog attracts a significantly larger audience. That's probably why the SpiralFrog site has attracted the same sort of advertisers as other online music sites -- e.g., AT&T, Microsoft and Classmates.com -- as opposed to the big brands that spend so much on TV commercials.
One other factor that may help SpiralFrog is that the music industry needs ad-supported services to work. In particular, it needs one or two pioneers to succeed with an on-demand service that's as compelling as free file-sharing networks, just to show how it might be done. The problem is that the labels don't really know what to charge a service that supplies music for free, and service providers don't yet know what they can afford to pay. Having erred on the side of charging too little in the pre-Internet days -- most notably, by collecting nothing from over-the-aid radio and MTV -- the labels have consistently erred on the side of charging too much online. They're willing now to let their songs be paid for by someone other than the downloader, which is an important step in the right direction. The main question how is how long it will take for the labels' estimate of the music's value to match what advertisers are willing to pay.