With the official announcement that Apple is joining the digital radio space, a New Music Seminar panel of digital radio experts welcomed that news saying it validates their operations and services.

While label executives are high on the proposed Apple streaming service because it will come with a buy button, Pandora senior VP of ad sales Steven Kritzman pointed out that Pandora already comes with a buy button, and “we are the single largest driver of sales to iTunes.”

But as the panel moved on, the conversation switched to the hurtles of generating targeted advertising in the digital space.

As advertising revenues grow in the digital radio space, the money paying for it is coming out of the brand’s online budget, said Sara Beth Donovan, VP and director of media at Mint & Hoke Communications Group. Now, with Pandora having ratings behind it, advertisers will now have the ability to make online advertising buys out of the radio advertising bucket, instead of the bucket of revenue devoted for online spends. But you need to be careful because once you do it from whichever bucket you use, you might be stuck with that arrangement for digital radio going forward.

With digital radio growing in cars, it will eventually be necessary for the digital advertising buckets and the radio advertising buckets to speak to one another at the bigger agencies, she added. A key issue is to see how digital radio can replicate some of their direct engagement that they have with terrestrial radio, like how will remote broadcast translate online. But on the flip side, digital radio will improve on the ability to micro-target audiences, while there is still a lot of waste in terrestrial radio ad buys.

Nevertheless, EVP of digital sales at Clear Channel Rick Song acknowledged that, “We are still in the nascent stages of audio-based targeting technology.”

Next Big Sound CEO Alex White pointed out that before targeted advertising can be effective, a lot of data still needs to be cleaned up. For example, Next Big Sound found that the No. 1 market for radio streaming was in the center of the country and “we said that can’t be right.” When Next Big Sound looked into it, one of the choices for listeners to identify themselves was “Anywhere USA,” which is how that answer came about. Other things to be determined about the in-car experience is whether there will be one operating system eventually winning out, noted Spotify U.S. head of sales Brian Benedik.

Beyond that, there is the whole concept of the still-developing, connected home listening experience, which refers to having the ability to take your home listening experience with you wherever you go, whether that’s in the car, the airplane or at work.

Pandora senior VP of sales Steven Kritzman said selling against the connected home listening experience can eventually happen, but for now each connected device is practically its own operating system. But eventually markets will know “if you can sell them the right message on the right device at the right time.”

Certainly, one of the new emerging trends in digital radio is pre-roll video advertising, which can work well when listening through computers and mobile devices, but not as well when listening in the car. Nevertheless, Clear Channel’s Song says his company is seeing amazing engagement with pre-roll video advertising.

Panelists cited auto insurance, quick-service restaurants, technology companies. and financial industry players as key advertisers so far. [Billboard.biz]