Digital audio advertising rocketed up 23% to $2.25 billion last year, per the Interactive Advertising Bureau (IAB). Now a new survey issued Tuesday (Oct. 8) by Borrell Associates reveals that local ad agencies are driving this double-digit growth. Local agencies are nearly seven times more likely to be buying digital/streaming audio, compared with direct ad buyers (those not using agencies.)
The survey of 446 local ad agencies shows what they're buying, how it's changing, and what's fueling their decision-making.
Nearly half (44%) of local agencies buy streaming audio compared to just 6% of local direct buyers. Why the huge disparity? Borrell VP of Research Corey Elliott suggests the direct buyers simply don’t know how to buy digital audio. “If you go into a restaurant and ask the owner how to buy a local radio ad – they will probably have some idea. Ask them how to buy a podcast sponsorship and they’ll ask you if you want fries with your order,” Elliott quips.
Although 44% looks good, it’s actually No. 15 on the list. “Now 44% is healthy for how relatively young digital audio is – so you have to assume some of that participation is the ‘shiny new thing’ effect,” Elliott surmises.
If your station also offers digital/streaming video advertising, you have another leg up with local agencies. They’re five times more likely to buy digital video ads than local direct ad buyers. In fact, local agencies are more likely to be buying all types of media, including radio.
Radio Second Most Popular With Agencies
In a strong report card for radio, the Borrell study finds agencies are nearly twice as likely to buy AM/FM than are local buyers that don’t use agencies. As Inside Radio reported Tuesday, radio is the second most popular form of marketing for agencies among 22 types of media the survey inquired about. More than three fourths (77%) of agencies use radio, second only to social media at 82%. That compares with 44% of direct advertisers who buy radio.
What’s making radio so attractive to agencies? “There seems to be a feeling that radio holds a unique place just inside the top of the funnel. It’s used for brand awareness – which is usually meant to be pretty broad, but it has the benefit of a more narrowly defined audience,” Elliott explains. “That, and radio is one of the last traditional media types to be disrupted by digital.”
While agencies are “rushing at greater speeds to streaming audio and video advertising,” Borrell CEO Gordon Borrell says “their love affair with TV and radio hasn’t ended; they appear to be just dating around.”
Local ad agencies are buying digital audio to exploit the unique advantages it has, such as precise targeting and attribution. Nearly 7 in 10 (69%) of agencies that buy digital audio say they do so “to reach a specific demographic” while 57% invest “to generate leads/boost conversions/drive sales.” Educating consumers (44%), gaining organic search traffic or time spent on site (30%) and to increase word of mouth (30%) were secondary reasons.
The survey also probed what agencies prefer in digital audio ad units. Pre-recorded spots, dynamically inserted into streamed media, (78%) eclipsed programmatic ad buys (53%), branded or sponsored content (49%) and native ads (44%). The survey found smart speaker adoption is low among agencies.
Digital Drives Agency Profits
One reason why digital continues to grow at such a rapid clip may have to do with the fact that it is the most profitable for agencies. Two thirds of those surveyed believe digital media advertising delivers more profit for their agencies, while one-third selected traditional types.
When it comes to the average number of media types purchased by agencies, digital and non-digital were in a dead heat with agencies purchasing an average of six media types for each.
“What works for agencies is clearly a mix of traditional media with its vast reach and top-of-the-funnel branding capabilities, and digital media with its itchy-fingered audience and accountability,” Borrell said. “One looks and feels good to their end clients –the advertisers. The other helps them prove to clients that the big checks they’re writing are a good investment.”
Traditional media is best for spreading the word and getting consumers to think about a brand. Two-thirds (66%) of respondents cited traditional forms of media among the top five for creating brand awareness, while 55% identified traditional media for building brand consideration.
Digital media, on the other hand, is preferred for campaigns requiring immediate action. More than half (52%) of survey participants chose digital to drive sales and revenue, and 79% called out digital to provide data to deliver higher ROI.
A total of 2,288 direct buyers and 446 agency reps completed the survey, which was in the field from April through July 2019. The average annual booking per agency client was $2.4 million. – Paul Heine