Borrell Study Forecasts Slow Online Revenue Growth For Radio

9th Annual Report

BORRELL ASSOCIATES has released their 9th Annual Benchmarking Report: Benchmarking Local Online Media, A 2010 Revenue Survey. In it, BORRELL concludes the economic downturn over the past three years has forged a new landscape for local online media.

It's less than a stellar outlook for radio, as BORRELL writes, "Radio stations continued to deliver lackluster performance in Internet sales. Outside of local cable companies and magazines, radio performed the worst among all legacy media companies. It captured $282 million, or 2.1% of all local online advertising spent in 2010. Two-thirds of that revenue came from untargeted banners and streaming audio, derived from fees tacked onto on-air commercials that are simulcast via the stations’ live-streaming website."

Online Not Showing Up In Many Radio Financial Reports

Continued BORRELL, "A testimony to the industry’s lack of attention to the Internet opportunity can be found in the quarterly and annual reports and presentations by industry executives. Whereas newspaper, yellow pages and TV companies tout the growth of their local interactive revenues, the subject is barely mentioned by companies such as CLEAR CHANNEL, BEASLEY BROADCASTING and SAGA COMMUNICATIONS. CUMULUS, the second-largest radio group, and CITADEL snub their Internet ventures by failing to mention them at all in their annual reports."

"Some radio groups, however, are forging ahead with a strategy to diversify their revenue via online
advertising and are eager to show the results," adds BORRELL. "CBS RADIO has joined forced with its TV stations to create a single website in many of its 28 TV markets. It also powers audio feeds to YAHOO’s Launchcast and AOL radio. In a presentation earlier this year, CBS said it saw its combined radio-TV operations as a $500 million online advertising opportunity. CBS Local plans to diversify its online revenues from its current base of 97% banner advertising and streaming audio commercials to just 60 % from those sources within two years. It foresees the other 40% of online revenues coming from lead-generation fees, local deals, directory listings, search advertising and e-commerce."

Salem And Radio One Are Doing It Right, Says Borrell

BORRELL is high on two broadcasters work on the web. "Two other leaders in the radio-interactive space lend support to our theory that the niche approach beats the mass-media approach when it comes to attracting advertisers," they write. "Christian-oriented SALEM COMMUNICATIONS and Urban radio specialist RADIO ONE have apparently discovered that secret. Whereas the average radio group gets 3.7% of its gross revenues from online advertising, SALEM gets 9.7% and RADIO ONE 6.7%. Both groups have adopted an aggressive approach to driving online sales through separate Internet divisions and websites. SALEM operates sites such as Biblestudytools.com, Christianity.com and GodTube.com, while RADIO ONE operates BlackAmericaweb.com, BlackPlanet.com, and TheUrbanDaily.com. They also have a vast network of local websites affiliated with their local radio stations."

The conclusion BORRELL draws isn't bright for radio. "Radio’s outlook for online revenue growth is dim," they forecast. "Radio sites lean heavily on static banners and audio streaming as key revenue sources. Both are forecast to decline. Also, we have seen no big partnerships being made with the pure-play companies like YAHOO, GROUPON, ZILLOW, or LOCAL.COM that could significantly drive online revenues. Thus we are forecasting milquetoast growth over the next five years. Because that growth will not keep pace with market expansion, we believe that radio's share of local online advertising will slip below 2%."

Radio Has Issues With Small And Medium-Sized Businesses

Another report from BORRELL ASSOCIATES looks at selling to small and medium businesses (SMBs), calling them "everybody’s new best friends."

Writes BORRELL, "Smaller businesses control 83% of all local advertising -- but that’s only
because there are so many of them, not because they’re big spenders. The average small business spent just $11,740 on advertising in 2010, about $2,300 of it online."

BORRELL asked SMBs, "Thinking of your total advertising budget, as compared with 2010, do you think your spending will grow, stay the same, or shrink?" Radio was mentioned by 65% of respondents, with 15% saying their radio budget would grow, 38% saying it would remain the same and 11% planning to shrink it. Radio was behind Online/Digital (53%), Direct Mail (24%) and Newspapers (16%) for growth.

Radio didn't fare too well when SMBs forecast where their budget might shrink. 24% said they would cut Directory spending, 18% planned to cut Newspapers, 15% would use less of Other Local Print Publications and 11% said radio would get less.

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