SpiralFrog Finally Leaps, Hopes To Be Music To Advertisers' Ears

SPIRALFROG, A CLOSELY WATCHED FREE, ad-supported music download
service in development for the past several years, goes live today in
North America with the mission of saving the music industry, and
making advertisers the heroes in the process. With a new management
team in place, including former Universal McCann honcho George Hayes
as its new vice president of marketing and sales, SpiralFrog hopes to
leap over entrenched music retailers like Apple's iTunes, and
subscription services like Napster and Rhapsody, and to mitigate a sea
of illicit and illegal download services that are currently the bulk
of the marketplace. "Our competitor is piracy," Joe Mohen, chairman
and founder of SpiralFrog said recently during a press briefing in the
penthouse suite of the trendy Night Hotel in New York's Time Square.
Citing research that only one out of every 40 music downloads
currently is paid for, Mohen says SpiralFrog's simple, ad-supported
model offers a solution for all of the music industry's stakeholders -
both content owners and consumers - and provides advertisers with a
way of tapping difficult to reach, savvy young Internet users.

With a target audience of adults 18-34, but an anticipated average
user age in the 20s, SpiralFrog hopes to emerge as an alternative to
illicit music services by offering young music fans an easy,
unobtrusive way of downloading music and video tracks with no risk of
computer viruses, spyware, or potential legal repercussions.

About two-thirds of the advertising revenues SpiralFrog derives from
the sale of advertising on its site are paid directly to the music
business - about a half to record labels and performing artists, and
about 17% to various music rights societies and publishers.

"The advertiser is kind of the hero here," said Hayes, who was a
senior media executive at McCann-Erickson and Universal McCann before
joining SpiralFrog. Coincidentally, Hayes appointment followed the
departure of previous Universal McCann alum Robin Kent as CEO of
SprialFrog early this year. Before joining SpiralFrog, Kent was CEO of
Universal McCann. In April, Kent launched Rebel Digital, a new
advertising consultancy focused on the digital music space that hopes
to find new ways for marketers to integrate their brands with the
digital music marketplace.

"This couldn't have worked three years ago. It couldn't have worked
two years ago," said SpiralFrog's Mohen, referring to the evolution of
the music download industry, the Internet, and the marketing goals of
brand marketers that he claims have come together in a way that makes
the market ripe for ad-supported music services.

The emergence of robust broadband penetration, the transformation of
digital music distribution, and the need for marketers to find
alternative ways of reaching young consumers is the perfect confluence
of factors, he claimed.

The core of SpiralFrog's strategy relies on a simple, clean music
downloading interface that is easy-to-use and is not intrusive to
users. Ads are displayed as they would be on a typical Internet page,
and marketers pay for the privilege of exposing themselves to
consumers while they are researching music of downloading tracks on
SpiralFrog's site. The downloads contain no embedded advertising, or
pre-rolls, and no data tracking mechanisms, but require consumers to
re-license their music by re-visiting SpiralFrog's site at least every
couple of months.

Mel Schrieberg, SpiralFrog's current CEO, said the typical music
consumer spends 70% of his or her time researching songs, and only
about 30% actually downloading music.

SpiralFrog's team declined to disclose advertising costs, but Mohen
said they would be "competitive with traditional media" and Hayes said
they would be based on a "negotiated CPM." In additional to
conventional display ads, Hayes said SpiralFrog hopes to work with
marketers and agencies to develop special advertising formats and
custom targets.

Generally, however, SpiralFrog plans to reach the younger segment of
the music download community, which is the reason for its name, a
made-up term Mohen said was conceived to "appeal to a 19-year-old, but
would turn off a 50-year-old."

Subscription sites like Napster and Rhapsody, he said, are aimed at
the 40-year-old crowd, while market leader iTunes is aimed at
consumers with ample discretionary income. SpiralFrog, by contrast, is
aimed at "people who have more time and less money," said Mohen. "And
they're used to getting it for free," Hayes added.

One thing they won't be getting via SpiralFrog, though, is the ability
to play their downloads on iPods, or to manage them via Apple's iTunes
library. SpiralFrog does not support Apple's formats, though it is
compatible with more than 80 devices that utilize Microsoft's media
rights management system, including most personal computers.

With today's launch, SpiralFrog claims about 800,000 music tracks vs.
iTunes 5 million, but Mohen claims the service will be up to 2 million
free music tracks by the end of the year. Among the labels working
with SpiralFrog are industry leader Universal Music Group, which
includes artists such as U2 and 50 Cent.

Assuming the free, ad-supported music model works, Mohen said
SpiralFrog would move into the television and film download
marketplace with a similar model.

"Certainly, that is one of our strategic directions. This is the
first," he said.

Ultimately, SpiralFrog's success will depend on how quickly consumers
embrace its ad-supported model. Hayes said the company has plans for
consumer marketing, but that the initial rollout would depend on
public relations and word-of-mouth publicity.

"But you won't miss us," he promised.