Radio Industry Math - One Formula Does Make a Difference
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It's hard to get away from numbers. They are the basis for all transactions or measurements. When it gets down to determining success in the radio industry, numbers are the only way to prove whether you are winning or losing. They are such a pure form of truth that doing without numbers and math means you're flying by gut instinct. In some cases this is not too terribly bad, such as in letting a good radio programmer use gut instinct to program.
Radio has used numbers to determine ratings since the early sixties. It used numbers long before that to determine how much an advertiser would pay for a segment of time to relay their message to the people in a radio station's audience.
Now we have PPM, which is heralded as radio's better-than-before abstraction in presenting audience numbers. But, despite these numbers being used to determine cost and audience size, in the radio industry there is still no way to confirm that the numbers presented are accurate - though the radio industry puts blind faith in them being accurate.
In his latest "From the Corner Office" posting, Greater Media CEO Peter Smyth raised a headline or three in radio trade publications with his suggestion that the radio industry needs to consider using another set of numbers for "Radio Reinvention." His suggestion for pulling radio out of the mud is to follow the American Association of Advertising Agencies' "Reinvention Project." Mr. Smyth suggests "that all media be bought, sold and negotiated on an apples-to-apples standard --- cost per thousand (CPM)."
Multiple times over the course of the last few years radio has been reinvented in words only - like last October with the introduction of "Radio Communicators Group," or with John Hogan's "Less is More." Neither proved workable, so I'm not going to get too excited about this announcement by Peter Smyth.
While Mr. Smyth refers to radio's need to switch from selling radio by CPP, the smart media buyer has been buying media by CPM comparison for a long time. The reason is simple; turning CPP into CPM is a short math step away. Radio may have been selling by CPP, but successful media buyers have been turning all buys into CPM for a long time.
We've been talking about CPM here at Audio Graphics since 1997 when I first issued warnings that the internet was going to cause CPM to tumble like rocks in a fast moving stream. The results of tracking numbers are demonstrated by this graph outlining another radio intiative that seems to have gone nowhere.
To help you understand just how far the radio industry needs to go to catch up to the real number crunchers in new media, take a look at the following spreadsheets and charts I use to track a variety of business elements. Note: I have purposely made these unreadable to cover the company represented here. But also note that these are only a few of the dozen or so spreadsheets used to keep tabs on, literally, every aspect of business. More businesses are doing this each day.
Unless the radio industry decides to get more deeply involved in using this form of accountability - tracking numbers, turning CPP into CPM - you'll see revenue and interest in using radio diminish further.
We do tip our hat to Peter Smyth for bringing attention to the need for an apples-to-apples comparison. But, like many other new ideas bantered about in the radio industry, this may never come to pass. Or, it will be tried for a few weeks and then quickly pass into oblivion.
Turning a CPP into a CPM is not difficult. It's just nowhere near as forward-thinking as Mr. Smyth claims it to be.
The difficult part is getting those who control how radio responds to advertiser demands to accept that they must quit looking for the easy out in these difficult times. Had a move been made ten years ago, it may have been easier. The delay only means radio is now running to catch up with the pack. Having a lightbulb moment back then would have made the pain less bearable today.
First move is to learn that CPP is only a step away from CPM. Secondly, don't just talk about doing it. Start implementing math and spreadsheet analytics today. One formula can make a difference.
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