Radio Waves: What the Current Radio Landscape Means for DR Radio Advertisers1 May, 2008 By: Response Contributor Response
Don't look now, but there are some exciting new developments in the radio industry — an industry not known for a lot of change. Take a look at these developments that will have a long-term impact on direct response advertisers.
The possible merger between satellite radio providers XM and Sirius: The Justice Department recently approved the merger, but as of this writing, the Federal Communications Commission (FCC) has not yet made a ruling. If the merger does go through, we expect a consolidation of airtime inventories and fewer available spots. Theoretically, this could be offset by a larger audience reach. We don't anticipate a significant upward movement in rates without some offsetting benefit to radio advertisers. Sources inside the companies say that if the merger is approved, it will be several years before the technology for integrating their signals is ready.
If the merger does not go through, both companies will be fighting for survival because — while both have shown good revenue growth — neither has been able to translate that to bottom-line profit. Satellite radio is a profitable channel for DR advertisers, so we're rooting for the merger to be finalized.
Bain Capital's pending purchase of Clear Channel: Bain has not only pursued Clear Channel, but also some related assets in the Internet radio and mobile direct-to-consumer spaces. Will Bain ditch Clear Channel's approach and return to offering more 60-second spot inventory? When it launched this initiative, Clear Channel moved to mostly 30-second spots while not adjusting pricing accordingly. This move might have boosted short-term profits for Clear Channel, but it didn't help paying customers because 30-second spots don't work as well as 60-second spots.
Bain's involvement will mean stronger management and more visionary leadership for the radio industry. This may be most noticeable in the arena of integrating Web and streaming technologies with current radio capabilities, which could allow radio to offer advertisers more effectiveness in reaching and eliciting a response from potential customers.
Arbitron and the PPM: Many in the radio industry are angered by Arbitron's new Personal People Meter (PPM), which tracks radio listening electronically and passively. PPM is intended to replace the diary system, which relied on listeners to remember and write down their radio listening. In many cases, PPM is showing lower listener numbers than the paper diaries did, which is having a negative impact on station pricing power.
Some stations don't want to show advertisers demo-specific numbers because they believe Arbitron's numbers are so far below the actual audience sizes. Arbitron has indicated that some sample sizes may be too small, and is pledging improved data collection.
For DR advertisers, this is a mixed bag. In one sense, it doesn't have much of an impact because we already know, through our own data, what rate is profitable for a particular schedule. Additionally, we always test, and there is nothing more reliable than directly collecting your own real-time cost-per-lead (CPL) and cost-per-order (CPO) data.
Google and GoogleAudio: Google Audio, a radio advertising offering, remains nascent and still has many issues to address. The most primary of those is the trackability of advertising results. GoogleAudio recently unveiled an online tracking tool meant to do for radio advertisers what its pay-per-click analysis tool does for online advertisers. But a closer look revealed its shortcomings, specifically the inability to attribute Web traffic or sales specifically to radio advertising verses other marketing efforts. GoogleAudio remains a viable option for small, local, infrequent or inconsistent advertisers who want to explore radio advertising.
HD radio: We hesitate to mention high-definition (HD) radio, which includes a move from analog to digital signals, because it's not clear exactly what value this technology will be adding for radio advertisers. However, the radio industry is strongly promoting this new technology in both on-air ads, as well as online and retail.
While it's difficult to see when or how these developments will play out, the radio industry will ultimately create more value for direct response advertisers.
Jeff Small is CEO and Brett Astor is vice president of Strategic Media Inc. Together, they have more than 20 years of experience in direct response advertising. Learn more about profitable direct response radio advertising strategies at www.strategicmediainc.com or by calling (207) 871-9958.