Gordon Borrell

Gordon Borrell has been analyzing the business of radio for around 16 years, through good times and bad. And through it all, he has kept his finger on the pulse of the advertising community to help radio better serve them - and the industry itself. Here, Borrell analyzes the advertising environment for radio in 2018, and what radio has to do to succeed.

What's the biggest challenge facing radio in 2018?

The biggest challenge is that you've got a very crowded marketplace where advertisers have far more options than they had 20, 10 or even five years ago. Which means you need to tell your story better. When people get accustomed to having all these choices to get their news, information and music, radio groups' biggest challenge is gaining a voice that tells a story as well, if not better than all the competitors.

Do you feel radio is keeping up with the pace of change?

The best ones are treading water. The investment required to keep up with change is being set by Google and Facebook, who plow 25% and 15% of their gross revenue, respectively, into R&D. What radio group can say it does that? At best they might spend a little money to develop or acquire a streaming-audio app or podcasting software, but that's a buggy whip-perfecting exercise. At the ground level, the biggest and most effective investment might be in training and re-training the sales staff to understand and work with, not against, the new marketing needs of clients.

A lot of players on the radio side keep trying to sell's radio dominance in reach as a way to attract advertisers, but judging by the revenue figures, it doesn't seem to be making much of a positive impact. Why aren't advertisers being persuaded to advertise more?

Reach works for a much smaller segment of advertisers than most people realize. Maybe the largest, more sophisticated advertisers are still attracted to reach, but what we're finding now is that the vast majority are interested in targeted advertising and not reaching a mass audience. They want to go after a very specific target who would likely buy the product or service. So reaching 98% of an audience is just kind of interesting; the real question is will the audience buy a particular product, and the answer usually is no ... just a small percentage of them will. There's this swift movement towards targeted advertising; that's what digital media taught us. So while reach is still important, it's not important in the classic sense of "the larger the audience, the better."

So what can radio do to better reach a target audience?

It's hard to single out one thing that radio should do, because the advertiser needs a cornucopia of things. They might need specifically placed on-air spots; it might be banner ads in support of a direct-mail piece or e-mail piece. They key is to serve advertisers in as many ways as possible. You can't sell them newspaper ads unless you also own a newspaper, but you can help them with social media and deliver something on the web, generate audience extension with a banner ad that's targeted in a way to complement the radio spot. I don't think radio can do one single thing in digital to reach a targeted audience; websites and streams reach a very limited audience and there's nothing they can do to expand their own audience. If that's the case, you've got to find a way to reach an audience who's not on their website or listening to the stream.

In that light, what's radio's biggest frustration?

As I mentioned before, the biggest frustration is all the competition they face as they try to sell the story of radio as a powerful medium, compared to social media, newspapers and direct mail. The industry truly needs to transform radio sellers into marketing experts. That's really what advertisers looking for -- trusted marketing advisors. Advertisers are pitched to buy ads in a local newspaper, the Yellow Pages, TV stations and social media. Suddenly radio is thrown into an environment where advertisers need a lot of advice -- marketing advice that's not just about radio spots, but what they should do with their Pinterest page and how to take care of a bad review on Yelp. If radio sales reps aren't able to offer good advice on those issues, they are marginalized to just being a sales rep, and advertisers will only go to them when they want to buy radio advertising.

There's an interesting stat in a survey we did last year of 1,278 radio advertisers. Of the people who are buying radio advertising, 75% of them are also buying digital and radio advertising together. Only 24% are using radio advertising by itself, so the vast majority of them want some type of digital media integrated with a radio campaign. Radio reps need to have a great deal of savviness when it comes to radio advertising and its integration with other media campaigns.

Sounds like radio should educate their sales staffs with marketing insight.

Yes; if you look at the responses in our survey of local advertisers, these local business are crying out for help. They're confused about all the choices in front of them, and they're all getting phone calls and e-mail trying to sell them search engine marketing and social media management, as well as TV and paper advertising. There should be a call for action to radio become trusted advisors and not a wolf in sheep's clothing. Saying you're going to help them only with marketing needs that have a deliberate radio advantage is disingenuous. You can't do that to business owners if you really have their interests at heart.

What's the best way to compete against the online rivals?

The best way for radio to combat them is to talk to local advertisers and help them tell their story. When you talk to advertisers, you'll hear complaints that they feel they're best-kept secret in town. They have a great business, but nobody knows about them. Radio is filled with colorful and creative storytellers to enhance their profile. That's what advertisers really need; radio's role is to help local businesses become well known and liked through their commercials on your station. What more noble cause could there be for a media company than help these small local entrepreneurs who are competing against Amazon, eBay or Apple?

Radio has long done remotes to bring its audience to clients. What more can they do?

They need to do two things. One is not lose their way or forget they have some tremendous marketing strengths that can create the best personalized relationship with their audience. In any local market, radio should have a better personal relationship than local papers, local TV stations and certainly more than any direct mail company. Radio is personal, and personal is social, and social is real powerful. Radio shouldn't lose sight of that; it can develop a warm, fuzzy feeling with the advertiser.

Number two is radio needs to understand the broader marketing environment and stop fighting or denigrating other media. Instead, integrate radio advertising with what works in direct mail or Facebook. The moment you say, "Don't advertise there for whatever reason," the client might agree with that or more likely, go "Oh he's biased," which undercuts your credibility.

Has radio been effectively using its star on-air talent to optimize the business side?

Not necessarily. There was a movement starting in the '70s to have programming and newsrooms separate from the entire enterprise; each was a completely separate church. That's hurt the industry because frankly, the paycheck for the PD comes from advertising, so you have to understand who the master is. I don't want to take it too far, but in today's world, your livelihood depends on advertising. You don't have to be a whore to the advertisers, but you have to understand certain things can and should be done to favor the people who keep the station's lights on.

Unfortunately, we live in a world where we can't afford to keep programming and personalities completely separate from sales. Advertising fuels the station; they have to be involved. And they can be done creatively. For a LASIK surgeon, a contest for a free surgery, or maybe a morning announcer having the surgery done and talking about it on-air. It's a viable way to incorporate personalities onto the sales effort.

What's your take on the potential of podcasts as a considerable revenue source?

Podcasts are still in their very early stages of adoption and I'm sure it's growing at a high rate, but it's still a very small base. I don't think it will dominate or overtake radio live listening anytime soon. Podcasting is just basically recorded radio. I don't have lot of faith that there's enough advertising to support the whole podcasting movement, but if you go back to the early days of the radio, the '20s and '30s, one sponsor would advertise the program, such as for Jell-O for the Jack Benny Hour, and it worked because it was sold as a nationwide program. With local programming, you're talking about a different animal. It won't happen when you have to insert five to seven spots to make any money with it.

I happen to like podcasting. It's great for use in an app and digital media, but I don't have a whole lot of confidence in how much people will pay to subscribe. Significant podcast revenue is not in cards, but you can generate advertising revenue in podcasts when they're part of a programming mix, along with drivetime rotation spots, banners on the website and five social media posts each week. Maybe $5,000 can make you a premier sponsor of the podcast. I'm just not sure that as a stand-alone product, the revenue stream could support it 100%.

Looking into 2018 and the future, what are the greatest challenges radio will have to overcome?

There is a chance radio can whistle past the graveyard, I guess, but it's going to be tough. What you'll see happening is that there will be a group of radio stations that get it, understand the situation and survive, and some groups that won't. We're over-radioed right now. There are way too many radio stations out there in many markets. When you have three or four AC choices and two or three different choices for hip-hop, you're creating too many opportunities for listeners to get that specific audio content - especially when you add what's available online and on satellite. You'll find a number stations fail or be consolidated with automatic programming.

Yet there will still be groups that can maintain a pretty high level of profitability - Hubbard, Cox, Entercom ... and some others. It's still going to be quite a new struggle. As we see margins decline, it'll be hard for some stations to maintain profitability.

And how will the debt issue some radio groups face impact the potential growth for radio in 2018?

Today, if you'd ask me for a forecast of radio in 2018, will it be up or down and by how much, I could tell you, but here's the thing: Not everybody will be up or down, so whatever revenue we think will be generated collectively, I guarantee there will be groups that still do well, but it's the ones that don't that cast a pall on the industry. When people see a story about radio revenues going down, it contributes to a negative narrative that overshadows the groups that are doing just fine. What groups will be doing well this year? Those that are best connected to their communities, and especially to their advertisers.

It's just like in the newspaper industry, where the big papers become less and less relevant and are seeing double-digit declines on revenue; that brings the whole industry down, giving the impression that papers are dead. That's not true across the board. I can name a weekly paper in Utah that averages 80 pages per day and is doing just fine, thank you. And you see same thing for radio. Radio will be down overall, but it won't be hard to find groups that do well. We'll see a very uneven distinction between the successful stations and those that hardly do anything ... and sell anything.