March 22, 2011
In part 2 of his Power Player interview, strategy and research consultant Mark Ramsey illustrates how effective digital platforms will fuel radio's future success, then delves into on hot-button topics such as HD Radio, Pandora and the need for developing - and exploiting -- star air talent
Continuing last week's discussion on investing more time, energy and resources into generating digital platform revenue, what's the best time for a station to go all-in ... before it creates a decent ROI, or after it has proven to be a significant revenue generator?
If you view what you do as something bigger than just over-the-air, you invest more energy into digital now. Look, advertising has changed over the years. At the beginning of broadcasting, over-the-air spots were viewed as sleazy. Then, if you owned the radio station and you happened to have a clinic in town and talked all day about that clinic ... that was fine, so the mode of advertising on radio has never been all one thing. It's always been a mixture of things. The mixture is varied on what's out there in your universe, because there is a lot of stuff to consider.
What kind of evidence does radio need to realize the revenue potential of digital platforms?
Gary Vaynerchuk tells a story how about how he test-marketed something for billboards, a TV campaign, a radio campaign, direct mail, plus he tweeted out an offer code. All tools were trackable; there was a different offer code for each one, so he could easily measure how many redemptions there were for the TV spots, the radio spots, the billboards ... and how many he got from tweeting out the code to his 10-15,000 followers. He got the most redemptions on the tweets, so the question becomes -- if you have a wine store in New Jersey, what do you want to do? Do you want to provide a way to build a circle of fans who can re-tweet the offer and have several times more redeem it, or put it on TV and have a fraction of that redeem? Broadcasters need to get their hands around this.
The thing is, broadcasters can do this effectively, too ... to test offers, sell landing pages and provide accountability. They can promote videos on behalf of clients and reach a ton more people than the clients could reach themselves. Why won't radio stations do this to sell product? The answer is clear -- because those stations are still thinking about selling a schedule. Yet clients can produce videos until they're blue in the face and hardly anyone will see them, but a station can do them, promote them and create an offer code that will reach many times more people. Now you've got accountability and proof.
I did something like this myself; I shot a video for a car dealer. We picked one car, created an offer code for it that would give customers $500 off the best offer. When I did that, all kinds of stations in town were calling the dealer's agency, worried that this was going on, but this was new to the agency because it didn't deal with cost per point. In fact, after I did the video, the agency guy ran out and bought a video camera!
There will come a day when clients ask their agencies, "Why are you working this way?" To create accountability, you have to force the agency to be a custodian of the clients' success and not think of them as tools for ad buys -- and I do mean "tools."
And how would one do that ... why haven't radio stations approached their ad agencies to start talking up their digital platforms?
I'm not an expert on that; talk to someone who confronts the ad agencies. All I keep hearing is how they're overworked, understaffed and going through their own turmoil because of digital. Usually, there's a new gal in the agencies who works at the digital desk. To be sure, the number dollars crossing that desk are growing. Those dollars are coming from that same pot that includes traditional media dollars.
When we talk to buyers, the conventional spot buyer, they need to recognize that even if they get 100% share of the over-the-air pool ... that pool is shrinking. There's going to be more money in the offing, but it'll be going to the digital girl's desk, which in the process will make it more accountable.
Many broadcasters get this, but they still need to function in the real the world, where their lifelines are these agencies spending dollars on which they're dependent. That's the real world now, but it won't be in the future. Digital may just be 15% of radio's business today, but before long it's going to 20% ... then 30% ... it'll come to a point where seeing it comprise 50% of a station's revenue in the next five years will not be uncommon.
Do you feel radio will eventually rely on digital revenue to the point where terrestrial spots become virtually nonexistent?
Will there be more digital revenue? Yes. But will it push out traditional spots? No. That's going to be around for a long time; there will always be a reason to get messages out to a lot of people at once, without specific targeting or engagement. They'll have to be extraordinarily well made, but I don't see that going away any time soon. The way I see it, as the pot of marketing dollars increases, that growth will go to other things ... and not to traditional spots. Do I see a need for traditional spots far into the future? You bet I do. There will always be reasons for them; it's just not going to be the only arrow in radio's quiver.
You've long had serious reservations about HD. Have your views evolved over the years?
I've been commenting about HD radio for about five years. I see it pretty much as a textbook case of mistaken priorities. The issues I've had with it are not likely to change. I hate to gloat, but many of those reasons I thought would prevent its success are scenarios that have come to pass. All I was writing about was pure behavioral marketing and consumer reality.
With that said, everything changes ... and I wrote about HD's introduction when Facebook was only available to college people, before Twitter and just four years into iPods. So a lot of that has changed since then.
The question becomes, "How have the changes worked to favor that particular technology?" I don't know if they have. Change favors technology that solves consumer problems in the moment. Did HD ever do that? No. HD was a response to satellite radio that perpetuated the radio industry's control over its bandwidth - never mind that satellite radio turned out not to be the enemy ... and consumers had a whole new batch of bandwidth with which to control their own entertainment experiences without radio's help. Just ask the simple question ... when I (the consumer) can get anything I want my way, why should I settle for the handful of things you want me to have YOUR way?
The main thing about radio is that we don't own all the channels of distribution anymore. The audience does in so many ways. Our job is to be their speedbump, not to create a new off-ramp. We can be what they want us to be as well or better than anyone else, because we have built thousands of relationships with our listeners ... and almost nobody can touch that.
Do you view Pandora as a legitimate rival to radio, to the point where radio needs to counter-program against it?
I don't know how to counter-program to a million custom-made radio stations. All you can do is understand what makes a radio station different, what makes a radio station better and what makes people further embrace it. You take that leverage and build on it.
Should radio try to be a better Pandora? Good luck with that. You can be a different Pandora. There already are companies trying to be a better Pandora. You can be a better local news outlet, a better sports station, a better source for comedy entertainment, and a better talk show host. Those things you can do better.
I notice that some in radio are trying to make hay of the fact that even as it goes for an IPO, Pandora isn't making money yet.
SiriusXM went through the same thing -- and you know how that worked out. Facebook, YouTube and Twitter ... they all went through or are going through the same thing. When you are in a car, going up a very, very steep hill, you're not going to reach the top for a while. What's different is what you want to do as you go up that hill. There are those who keep climbing and there are those who prefer to stay on a plateau. Pandora is charging up the hill. They recognize that it's not about making a profit today, but the directionality of their growth. It's all about momentum - and if everyone in their building cares about the direction of their progress, it can have a longstanding consequence.
It is due to the very fact that radio is so obsessed about immediate short-term profitability that transformational opportunities will evade the industry wholesale and indefinitely.
One last topic ... There are people who claim that the PPM, which monitors passive listening and not engaged listeners, is wrecking havoc on the success and the development of star air personalities. Which prompts this question: Could Howard Stern be as successful on terrestrial radio today, in a PPM world, as he was in the diary world?
I think he could be as successful today and to your larger point, I think quite the contrary. Creating star personalities is the thing that radio needs the most right now -- as long as the star personality's show is designed to deliver. Look at AOL. It has tremendous reach and it's investing in star personalities ... what do they know that we don't know? Why does AOL have Adam Carolla and Kevin Smith -- and we don't? How did that happen? Part of the reason is we require so much from our talent - three to four hours a day, five days a week. What kind of talent can do that? It turns out that very few personalities can do that, because we're asking for too much.
Are you suggesting that programmers should shorten morning shows and other on-air shifts?
Not necessarily shorter air shifts. When you have a star, the content needs to be done in way that sustains interest and entertainment. Everyone talks about how good The Daily Show is -- it's on five days a week for 30 minutes a day -- but they have a staff of about 20 writers to create content. That's what makes the whole thing tick. What could radio do if they invested that kind of time and resources into 30 minutes a day - and if they don't invest that much time and resources, why should the show run four hours?
And by the way, look at what AOL is paying the talent -- and I mean the A-list talent -- high six figures, low seven figures. Plenty of morning shows get more than that. Another thing to consider: AOL's entertainment engages you when you want to be engaged. Why? Because AOL's reach is different; it's in the business of connecting consumers to advertisers; it's not in the business running spots, which is what we do for the most part. And if you offer content that's not unique and compelling, just how are you going to compete in a world where a Pandora can just mimic or automate your music?