What the Current Radio
Landscape Means For DR
By Brett Astor and Jeff Small
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 in-
ventory? When it launched this initiative, Clear Chan-
nel 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
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 track-ability 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. ■