Advertiser to Radio Industry: It's 2010
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Two more high-profile morning shows have bit the dust: "Dave, Shelly and Chainsaw" at 101 KGB, San Diego, and "Deminski and Doyle" from Detroit's WCSX-FM. More will follow. There just isn't enough advertising revenue to cover the costs associated with being "big time." It's not that the dollars aren't there but that advertising options have grown. The ability to limit access to the masses, which traditional media controlled, is gone. Ad dollars are moving to new media.
Surprised? Please, don't be. This shift has been coming for a decade, and only those wearing blinders - or holding out hope it was all a fad - did not have time to prepare for a new world order in advertising.
Here's an article to open eyes wider: Google's business chief targets ad revolution at the Financial times. It outlines a simple thought from Google's President of Sales Operations and Business Development, Nikesh Arora: "The whole idea of online advertising is going to go away in the next few years," he says. "We'll stop talking about online advertising and talk about advertising. Radio, print, TV are all getting distributed over [internet protocol], so those distinctions will vanish at some point in time."
Here's how this concept affects the radio industry, as we know it. The simplicity of gathering an audience and selling it to a local advertiser is subjugated by a demand to pay for an action from that audience. There's no difference in a radio station running an ad on air or as a banner online, except that the banner (or online audio ad) will provide the advertiser with the number of people responding.
Those times when the ad runs without a response - on air or online - will no longer be counted as bona fide use of the advertising vehicle. Said another way, branding is going comatose for all but the very large advertisers.
2010 will be a year that advertisers awaken to the "response factor." Since the radio industry has done nothing to prepare, those expensive morning shows are going the way of buggy whips.
This is economics, simple math on a much smaller CPM scale than anything the radio industry dreamed could happen. Run my ad on a radio station at $8 CPM? Or, run my ad online at $0.87 CPM? The latter also gives me statistics showing impressions, response, and conversions to a sale.
Be honest. As a local advertiser which would you choose if all you needed to do was spend a few hours at the Google Learning Center, Yahoo's Merchant Center, MSN's Ad Center, (Google Owned) DoubleClick, ValueClick, AdRoll, or any of dozens of internet ad-serving web sites? The audience that any of these send your way comes from the same geographic confines of your radio market ADI (if desired).
Here's the difference: Terrestrail radio has a fixed number of advertising positions. The audience may flex, but the number of openings to reach it is firm. The value used for pricing a CPM (or CPP) rate is in the limited number of chances an advertiser has to reach what Arbitron calls your "universe," the people living in a geographically-defined area.
Online, pricing is based on delivered impressions with no set maximum number of positions. Each "avail" is created when a person tunes into the stream or arrives at a page. There is no "universe"; it's a number that cannot be calculated. Inhabitants of your audience may live anywhere on the globe. (You want to reach them if selling a product or service online. If you're a local advertiser wanting to reach only those people who come from your area, you can also do that.)
Pricing on a cost-per-action freely awards to the advertiser those "branding" moments; paying for an action pays for itself or you kill the campaign.
Except for a few high CPM sites like The Wall Street Journal, an online publisher is hard-pressed to charge a sustainable rate just for reaching their audience. In this new year, the creativity and value for setting ad rates comes in how to use the numbers that are so readily available in new media.
You can't sell holes in a radio program and expect it to pay all the bills anymore! You just can't make enough money to pay high-profile talent, and the downward spiral continues.
Once again the radio industry is at a crossroads. The choice is to continue as before or to introduce things so new and exciting that they get customers talking. Only, in the world of the 2010 advertiser that conversation will be about how the campaign they just ran generated response. Proving response is now up to radio, because word is getting out that new media does offer proof.
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