Taking flight: Sky Radio Network's business model has helped it ride out the turbulence in advertising market as it targets business travelers.

When the advertising market hit the skids after the Sept. 11, 2001 terrorist attacks Marc Holland realized his Sky Radio Network would be in deep trouble unless he changed his strategy.

Advertisers which once fueled the company's dynamic growth were now backing away from additional advertising.

"I just thought 'Could anything worse happen to our country and our business?' It was a terrible time for everyone," he said.

"But as it often happens here, we adjusted our business model and instead of selling 10 minutes of time, we said 'let's sell one or two minutes.'"

The change helped as the company's sales improved to those of a year earlier and have continued to grow even as the ad market remained sluggish.

Posting sales of $3.5 million last year and growing to a projected $5 million this year, Sky Radio is poised to grow to $7.5 million in 2004, Holland predicted.

A provider of radio programming for all the major airlines in the U.S., Sky Radio Network's business model is for advertisers to pay the network for its interview segments while larger advertisers provide sponsorship for entire programs relating to their business segments.

The network, in turn, pays the airlines a fee while it collects advertising charges of between $1,300 to $10,000 from its clients.

"It's a pretty unique business model that seems to work well for them," said David Hoffman, a marketing consultant with Hoffman Associates in Los Angeles.

Sky Network's programs range from interviews of top CEOs like Steve Forbes and Donald Trump to company spotlights such as IBM and Red Hat and issues-related programs that focus on industry trends and initiatives.

While advertising revenue for media companies has been shrinking the last two years, Sky Radio has managed to grow the company by touting its unique target audience--business people who travel and travel often.

"USA Today has a $85,000 page rate and the Wall Street Journal has a $125,000 a page rate, but we ask $5,000 to get on the air and target business people," Holland said.

Such marketing seems to appeal to companies seeking to reach a specific business audience.

"That's because companies are cutting back in general advertising spending to better targeted and more affordable ad campaigns," Hoffman said.

"They're selling small ads, but many more of them and that's the big element."

Targeted audience

While companies cut spending in newspapers, television and magazines, they've moved on to Sky Radio and others that send their messages to targeted audience, Hoffman explained.

Holland estimated about five people per flight listen to his programs, which turns into roughly 432,000 people per month traveling into an average of 86,550 flights each month in the U.S., he said.

Established in 1996 with a core group of four people, the company began offering its radio services to American Airlines. It was an ignored market, Holland felt that good marketing along with a good business model would get him far, he figured.

And he was right. The company soon signed on with all the major carriers like Delta, United, Southwest and others as Sky Network collected $750,000 in sales that first year, thanks mostly to technology firms eager to advertise their high-end technology in a rapidly-growing tech market.

But when that sector began to drop and eventually crash in 2001, Sky Radio began taking on clients in other industries, such as General Motors, the U.S. Postal Service, Knight Ridder and others.

"We're like an audio press release that companies can use to target their specific audience and that's what makes us attractive to so many companies out there," Holland said.

Distribution challenges

Each week Sky Radio produces a handful of segments that are then delivered on compact disk to the airlines operating out of various hubs which then distribute the disk to each aircraft around the country.

"It's a monumental task when you think about it, but it gets done and it works," Holland said.

"We outsource that side of things because my philosophy is that if something isn't a core business, I'm not going to do it and CD duplication isn't part of our business."

The company's partnerships have also brought more attention to the service through ad banners touting the network to business travelers. Likewise, Sky Radio has traded ad space with Forbes and Entrepreneur magazines in separate deals, giving it a higher profile aimed at business travelers.

Today, Holland is also developing video programs for the airlines, focusing on travel and activities particular cities have to offer. The first such production being developed is "Travel a la Mode," spotlighting Southern California.

Holland promises more shows will follow after the initial show debuts in January.

Spotlight

Sky Radio Network

Year Founded: 1996

Employees in 1996: 4

Employees in 2003: 21

Revenues in 1996: $750,000

Revenues in 2003 (projected): $5 million

Goal: To provide cost effective business-to-business advertising.

Driving Force: Growing demand for low-cost targeted advertising.