Borrell RAB

Once considered a small and distracting sideline business, radio’s digital ad sales are on track to hit the $1 billion mark in 2020. Last year, local stations generated $804 million in digital ad revenue, a 15% increase over 2017. The 2019 forecast is for 18% growth to $949 million before radio reaches its first billion-dollar digital sales year in 2020.

The new numbers, released Tuesday, are from the seventh annual Radio Advertising Bureau-commissioned study conducted by ad-tracking firm Borrell Associates.

“Management opinions about station strategy are improving, more stations are including digital products in sales pitches, and more radio customers are buying digital advertising from radio sellers,” the RAB and Borrell conclude in the 46-page report.

While digital revenues continue to grow at a double-digit clip, the annual benchmarking report shows they still represent less than one-tenth of total ad revenue – even as they seem to take a disproportionate share of a station’s attention. “That may be because 97% of radio advertisers are buying digital media with traditional media when launching campaigns,” according to the report’s executive summary. “Digital offerings might actually be helping stations sell – and keep – radio advertisers.”

While over-the-air ad sales still represent the bulk of radio revenue, on-air revenue has stagnated as advertisers flock to digital media. Radio has responded with an array of digital ad options, from more precisely targeted streaming audio ads to online banner and video ads. Stations are also monetizing their social followings and radio’s largest companies have made significant investments in podcasting platforms.

Now, after several years of single-digit percentages, digital revenues will reach 10.7% of the average station’s ad revenue this year, a validation for the industry’s digital efforts. The average station brought in $256,321 in digital revenue in 2018, and the average market cluster billed $1.15 million.

But averages are just that – some stations are outperforming their peers while others are behind the curve. The Borrell research shows that top-performing market clusters get three to five times the market share of peer stations. “These stations are selling a smorgasbord of digital products, including SEO, social media management, and even website design,” the report notes.

And while the forecast is for an average of 18% growth this year, some stations are aiming for between 30% and 40% more digital revenue. In its survey of radio managers at the end of 2018, the RAB and Borrell found half of respondents said they were budgeting growth of 20% or more, compared with only one-third of the respondents budgeting for that sort of growth last year.

“Digital has been integrated into all facets of broadcast radio’s offering both in programming and sales, and the results are definitely paying off,” RAB president & CEO Erica Farber said in announcing the results. “As radio continues to provide integrated marketing solutions to its advertisers, we expect to see continued growth.”

Advertisers Look For Something New

Entitled “Radio’s Digital Sales Inch Closer to $1 Billion,” the report found that nearly half of radio buyers (46%) are planning on buying something new. While there was no overwhelming choice, video ads garnered more attention than anything else. Nine percent of radio buyers said they plan to start buying digital streaming video marketing. At the time the survey was in the field, 27% of radio buyers were already using digital video marketing, indicating that more than one-third of radio buyers are ripe for buying video spots in 2019. Other forms that were relatively popular included texting, search marketing, and podcasting.

The report analyzed online ad revenue from 3,121 radio stations, as well as survey responses from 1,715 local radio buyers and of 132 radio managers.

Among other findings:

  • 97% of radio advertisers buy digital advertising with traditional forms of advertising in their marketing campaigns, up from 85% a year ago.
  • 25% of the average station’s radio customers buy digital advertising from the station.
  • Streaming-video advertising is gaining high interest. Among radio buyers, 27% already buy it and 9% more plan to start.
  • Attitudes toward digital strategies have improved. Managers who believe their station’s strategy is good have grown from 49% to 72% over five years.
  • 57% of stations report that they include digital products with every sales pitch.
  • Depending on market size, the average radio cluster gets between 1.0% to 6.6% of the addressable digital market. But so-called best-practice market clusters get four to five times that.

“Broadcast radio has been focused on digital’s integration into its overall offerings and as this year’s study reveals, we continue to see growth and attributable results,” Farber said. “RAB’s digital training offerings are also evolving to meet the industry’s needs and provide the training necessary for sellers and marketers today.”

The full report is available to RAB members on Live webinars featuring the survey results presented by the RAB and Gordon Borrell are available on February 12 or February 14 for free to RAB members and survey participants.