We spoke with entrepreneur Joey Flores on his digital music company Earbits, how artists can leverage the platform, where he thinks the music industry is heading, and what his experience was like at Y Combinator.

Joey Flores is the CEO and c0-founder of Los Angeles based Earbits, a performance marketing platform for music products and a Y Combinator alumni company. He was formerly the director of business development for Affiliate Fuel, where he helped grow the startup’s annual revenue to $48 million  prior to its 2005 acquisition by Experian. Earbits represents the combination of his extensive online marketing experience and the commitment he and his team have for music and artists.  Earbits can be followed at @earbits.

What is Earbits?

Earbits is a marketing platform for the music industry disguised as online radio.  Instead of using music to sell ads for cars and fast food, we help our 260 record labels and 4,300 high quality artists acquire fans, market their new releases, and promote their live events.  It’s an effortless way for our clients to advertise themselves and it makes discovering new music as easy as turning on the radio.  Basically, Earbits is online radio achieving it’s full potential.

What inspired you to create it and what pain point are you solving?

I’ve been working in performance-based marketing for over 13 years.  At one point I was managing 20 people and $60 million in advertising for a top ten internet advertiser.  About that time I met my future co-founder, Yotam Rosenbaum, and he and I put together a great, original band here in Los Angeles.  When I suggested that we record an album Yotam was hesitant because he had already produced a couple of albums and said that marketing music is just too difficult.  He didn’t want another album sitting on the shelf collecting dust.  With all of my usual professional confidence I told him that I would take care of marketing.

Two years later we had spent about $70,000 recording and promoting our album.  We had used fliers, posters, Facebook advertising, Ripple TV, Google Adwords, Sonicbids, a publicist, and plenty of other archaic solutions.  We even hired someone to “friend” people for a few hours every day.  Most importantly, every great musician we spoke to had done the same things with similarly dismal results.

One day, Yotam and I were stuck in traffic on the way to San Diego.  I was getting burnt out at work and we were both discouraged about our promotional efforts with the band, so Yotam asked me how we could do the same kind of marketing that I do at my day job, but in music.  After explaining how the platforms I used at work, Adwords, etc, worked, Yotam pointed out that those things won’t work for music because people have to hear music, and it has to be delivered to them in an easy format.  Within an hour we were going nuts over the idea of turning radio into an ad platform.  We wanted to build something where the music sells itself, and artists and labels don’t have to do anything.  We wouldn’t promise that “anyone can be discovered”.  We would build a high quality music platform designed specifically to help the best sounding bands acquire fans and market themselves, and we would do it in radio form.

It took 2.5 years for us to finally move forward, and it’s been a little over two since we founded the company.  Now, we have generated over 50,000 Facebook fans for our clients, have over 260 record labels on board, and artists are telling us that we are the most effective marketing solution they’ve ever used.  Yesterday someone tweeted that being on Earbits made them feel famous.  It’s awesome.

What’s the business model?

We sell airtime packages and other promotional consideration to artists, record labels and concert promoters.  They buy a set amount of “spins”, which means that someone listened to their music for over 30 seconds.  Then, we give them tools to customize the way they drive value from their airtime, such as the ability to collect email addresses, promote a download, or point people to their YouTube channel.  We’re generating Facebook fans and clicks on their ads at rates that are unheard of on other platforms, and these are qualified people that already heard their music.

Eventually, we will have a bid model that is affected by the audience’s response to your music.  It will be cheaper to buy airtime for songs that the audience loves, which means that revenue and the listening experience both get better over time.

How are you different from the other online radio and streaming services?

Earbits is 100% focused on music discovery and bringing bands and fans closer together.  Listeners are going to hear a lot of great music that they haven’t heard anywhere else.  When they fall in love with something they hear, they will immediately find several ways to connect with that band or support them.  We also have a lot of social features to let you share your discoveries with friends.

There’s several things you won’t find on Earbits, and that’s ads, commercials or listening restrictions.  You can listen all day long, skip as much as you want, share with your friends, and you don’t even need to register for our website.

You’re Y Combinator alumni. What did you learn from that experience?

I learned and am still learning an incredible amount from Y Combinator.  They provide great speakers and panels that help you learn all kinds of important lessons of entrepreneurship, which I am still going to a year later.  The feedback from the partners is invaluable, and they’re all experts in different things.  You will get incredible technology advice from Paul Buchheit, while Sam Altman is a resident expert in fundraising.  That said, I think the most important lesson I’ve learned from Y Combinator is the importance of having a strong support network.  The alumni network of YC is the most powerful tool they have at their disposal, and it has been a game changer for us.  It makes me realize the value of having great people in your corner, and I think building a strong network of people who can help you is crucial to any founder, particularly first time founders.

Where do you think the music business is heading over the next 2-5 years?

That’s a tough question because there is so much innovation that could happen, but the real innovation needs to happen on the business side.  Startups are going to continue to fail because they keep ignoring the inherent problems in their business models and focusing too much on creating cool products.  There are no shortage of cool products in music.  Pandora is a killer product.  Spotify is a great product.  But neither one of them is an innovative business and there is no data to support the idea that they’ll be successful just because they get bigger.

Other than that, radio listening will continue to move online, particularly as the internet becomes a standard feature in cars and people demand a more personalized, custom experience than FM radio can provide.  The head of music is going to widen, with a lot more great bands building successful careers because of the internet and the fact that consumers can start having more choice.  The work that labels do for their bands is going to change quite a bit and be more about, how can you help market me, and less about distribution.  I’m pretty excited to say that these last three are not really speculation because they’re already happening and Earbits is in the perfect position to be a leader in pushing all of these things forward.  Basically, the music business is headed to Earbitsville – population everybody.