Free All Media, an Atlanta-based start-up, is the latest company to propose an ad-supported music downloading service. The company, which just announced its first seed round of funding Wednesday and expects to begin public beta testing by December, hopes to differentiate itself from flameouts like SpiralFrog with a unique advertising model that asks users to participate more directly in choosing the ads they'll see.
The company's CEO, Richard Nailling, explained how the company's Web site, Free All Music, will work. Users will select an MP3 they want to download and a sponsor they'd like to "buy" that MP3 for them. They will then watch a video advertisement, between 15 and 18 seconds in length, from that advertiser. Once the ad is completed, they'll be free to download the file, a 256kbps MP3 with no copy restrictions. No further advertisements will be served for that download.
But here's the unique part--Free All Music will then use the downloader's handle in other banner ads for that sponsor, which Free All Music will place around the Web using an (as yet undisclosed) third-party ad network, as well as through its own ad network, which will focus on music-oriented sites. In other words, you might be visiting CNET and see "MattR just downloaded 'Angry Chair' by Alice in Chains...sponsored by Converse." In this way, Free All Music will be able to sell multiple ads per download and perhaps earn enough money to cover the license fee for each song.
There's a catch, of course: users will only be able to download as many songs as Free All Music can sell sponsorships for. At launch, the company is aiming for what Nailling calls "typical iTunes behavior," which is 15 songs per month, spread over three sessions. If the site takes off and advertisers buy more space, the song allowance will increase.
The key to success will be whether the company can get all four major labels and enough indies on board to make for a competitive selection of music. So far, the company claims it's signed up one major label (unnamed), and is aiming for the "full digital catalog" from each label, giving it full parity with iTunes and sites like Amazon MP3.
Would you be willing to sit through an 18-second video ad in exchange for a perfectly legal and guaranteed legitimate MP3? Or will you stick with file-trading networks?
Correction at 7:13 a.m. PDT October 1: This post incorrectly stated the number of free songs that Free All Music aims to offer at launch. The site plans to offer 15 free downloads per month, spread over three sessions.
PLUS A Q & A With CEO Richard Nailling
Free All Media has secured seed funding to launch its FreeAllMusic.com ad supported free digital music service in late 2009. The initial round includes founding investor, Scott Barber, CEO of Reform Records, and Free All Media’s CEO Richard Nailling. FreeAllMusic.com will offer ad supported songs without DRM for free download.
The fact that neither of the top execs come from the music industry could offer fresh perspective. CEO Nailling worked in Hollywood in TV and interactive and #2 Brian McCourt helped fund the original "Blair Witch Project" and is a long-time brand sales veteran and consultant.
In an exclusive interview, CEO Richard Nailling explained how FreeAllMusic.com differs from other free music sites:
Q: Are the downloads ad supported?
NAILLING: Yes, each individual download is sponsored (purchased for the user) by a brand. The chosen sponsor owns 100% of the download sequence on our site.
Q: How are the ads positioned or added?
NAILLING: One (required) video Ad (15-30 sec.) will be shown on our site to the user before the song is downloaded. No more ad viewing is required or contained in the song file itself. While the song is downloading the user will also be exposed (exclusively) to other clickable display ad units from that brand sponsor. User-informed promotional ads outside FAM are also part of the display ad package for advertisers, but our FAM user does not see those ads.
Q: Have any major labels signed on?
NAILLING: We have one major label signed and intend to have all four majors signed by our launch date.
Q: How have publishers reacted?
NAILLING: We are not a streaming site. Downloads only. Publishing is covered in our label deals.
Q: Do you see Spotify and other streaming services as competition?
NAILLING: We are building a free site that works for both advertisers and consumers. In the major streaming models advertising is looked upon as the ‘necessary solution’ for funding the free model while they try to convince users to pay. In addition, streaming audio sites are not a truly effective medium for digital advertisers. People don’t watch banner ads while they stream music.
Downloaders are much more willing to watch and be engaged with advertising in return for the content.
We’re a site that people will visit to get (permanent unrestricted ownership) of the hits for free, and they’ll trade a little of their attention as part of the deal. We will make it easy for our users to get a weekly dose of the top 20 hits (in their favorite genre) and get free, legal ownership of those tunes in an easy and entertaining way.
Free All Music is a new digital music startup that plans to make money by getting people to watch ads in exchange for track downloads. If it sounds familiar, that’s because it’s the business model that startups like SpiralFrog tried and failed at—all while blowing through tens of millions of dollars. But Free All Media managed to get some investors to buy in to its business model; the startup has raised a seed round of funding that an SEC filing shows was worth at least $990,000.
CEO Richard Nailing said he and co-founder Brian McCourt invested nearly $1.5 million of their own money since the Atlanta-based startup was founded in mid-2008, but wouldn’t comment on the amount of this new round, which was led by private investors. The team thinks its music site will succeed because it’s monetized on a cost-per-action (CPA) vs. cost-per-impression (CPM) basis; users have to watch a 15-second online video ad for every DRM-free track they want to download. Nice premise—but there are a few reasons why the site has a steep uphill battle.
—Interaction vs. Scale: Any site that wants to attract advertisers needs to prove it can build a large user base first, but Nailing’s sales pitch was about user interaction vs. scale. Free All Media will charge advertisers on a cost-per-download basis and users get to pick which ads they watch. AdPerk, a startup launched in 2007, tried the same model, but gave ad viewers mini-subscriptions to various magazines instead of music. (It seemingly hasn’t gained much traction since then).
—Some display: Free All Media will also promote the site through search and social media ads, and Nailing said the company will supplement brands’ CPA buys with impressions. After a user downloads a track, the company will promote that download in a banner ad somewhere else on the web.
—Privacy: But that sounds like Beacon, the ad platform Facebook tried and got lambasted by users for. To avoid a backlash, Nailing said users need to give the site permission to publicize their downloads when they first sign up. “You agree that you’ll be cookied, we can store your preferences and that we can use your registered user name in the banners,” he said. “It’s part of the fair trade.”
—Licensing : Nailing said the company had just closed its first deal with a “major” label, and was in late-stage negotiations with “three others;” some of the funding was used for up-front payments for the licensing deals. This is one of the biggest hurdles that a music startup has to face—cutting licensing deals that don’t wind up bleeding it dry. Free All Media seems to have come up with a patchwork of solutions that it hopes will be able to solve the problems that have plagued other digital music startups.