Gordon Borrell

One of the more outspoken voices for a strong radio Net presence is Gordon Borrell, founder of the Borrell & Associates, which monitors and spots the trends in Net advertising revenue. Borrell's perspective comes from his considerable experience, having spent 22 years at Landmark Communications, where he rose from a reporter and editor of The Virginian-Pilot in Norfolk to Landmark's VP/New Media. Over 20 years ago, Borrell launched interactive ventures for Landmark and helped the company establish the first TV and newspaper websites. Here, he explains why radio should get its Net operations in a much higher gear.

What were you doing before you started the research company?

I worked for Landmark Communications for 22 years. I started out as a reporter at the Virginia Pilot newspaper ...and the last position I held was as a VP, where I headed up all of the newspapers' online operations.

What made you decide to start a research company?

I saw the Internet becoming an integral part of the media landscape. In the mid-'90s, I was heavily involved in a lot of Net systems at Landmark ... and I could tell it would become a significant part of the media business. Yet there were - and still are -- a lot of cynics who dismiss almost anything new ... and that attitude were manipulating the newspapers and radio's view of the Internet.

I thought it would be a mistake for them go away and turn their backs on it, but they needed research to prove that a significant thing was happening. So I thought a company that provides research, particularly about local advertising, would show them how local advertisers will spend money on the Internet. There has always been a very strong need for local advertising research; that's why I started Borrell & Associates.

I would imagine starting a research company from scratch would require quite an investment of time and finances. How were you able to get the company off the ground?

To be successful, you need to create and offer a tremendous amount of reliable research, which can be pretty costly to generate from scratch. In 2004, we bought another company that provided basic research; we folded that into what we needed to do. Collecting information on local advertising is very difficult but extremely valuable. It's difficult to get it right; fortunately we have people who enjoy doing that.

Having read your blogs, I noticed that you think radio hasn't done enough to exploit online sales. Could you elaborate on that?

If you take all the local media companies and judge them on what they're doing to generate online revenue, the only medium that's behind radio now is outdoor. Even the cable guys have a fire under them. Although a few radio stations have gotten into this aggressively, by and large radio has taken a lackadaisical approach to the Internet. Almost everyone sees it as way to put station info on the web, sell advertising around it ... and then they wash their hands of it. There's a lot more to it if they really want to generate revenue from it. They're losing out on a huge amount of opportunities because they're not acting aggressively enough. Look at it this way: TV and newspapers are generating upwards of $3.5 billion off the web. Radio makes only $300 million.

Yet in past Power Player interviews, more than a couple radio group heads asserted that they still don't see Net revenue as a significant revenue stream. What are they missing?

They don't realize that this is a very similar situation to the '50s. At that time, did radio see the new innovation called television as an immediate revenue enhancer? Not initially. TV wasn't bringing in large local advertising money at first; in fact back then TV was hemorrhaging money and radio was subsidizing it. Fast forward to today ... and look at the lack of foresight. Today radio needs to pay the same attention to the Net as they did to TV in the '50s. A lesson needs to be learned; you can't turn your back on a new medium - especially now, because you can't just be a radio station anymore. The army teaches you to be all you can be, yet radio is squandering its strengths and assets by failing to aggressively get into the Net and transform itself in a new media world.

How is radio not capitalizing on its strengths and assets to optimize Net revenue?

Currently radio is continuing to do what everybody else has done -- drive traffic to the website and sell advertising on it -- but it's more complicated than that. They need to use their powers of promotion, which is more powerful than TV, by getting into the Yellow Pages business and the classified ads business, among other things. There are stations actually doing things like that now. A Long Island group is now in the coupon business, competing with newspapers. People download and print coupons off their stations' websites. Unfortunately, rather than do things like that, which grow their customer base, most radio companies just try to generate more money from existing radio customers. They need to go out and compete with the newspapers - by offering classifieds without the printing costs - and take more advantage of their video capabilities.

Why do you think radio has been slow to embrace an aggressive Net strategy?

I realize that it's easy for consultants to say things like this, while the CEOs have to implement it, which is the hard part. I can talk to people and they'll nod their heads like bobblehead dolls, but after I leave they'll go back to their "day jobs."

At the end of the day, the responsibility lies with the CEOs and the boards of directors. You need to commit a good $100,000, if not more, to do this - and do it right. Radio still gets good margins and profit; they need to earmark some of that to grow their Net business instead of scaling back to protect their margin. Those on the boards and the CEOs have lacked the foresight and drive to move forward. I know there are some very smart people at those companies, but a lot their efforts are largely being used to find more ways to save money on the expense side.

It takes a long time to see an investment like this pay off. A CEO can't say, "Here's the money; after 12 months I expect this to generate a profit." It takes time to educate the in-house staff, to hire the right people and create the proper organizational structure. You need to view it as an entirely new business, where it takes a good 18 months to two years just to see any return on investment. For most good businesses, it can take anywhere from 18 months to three years to turn a profit.

What do you say to stations that seem to be satisfied with their "multi-taskers" who are operating the websites? How do you convince them that it's by investing more into it, they can generate considerably more local revenue?

The key word is "considerably;" their websites can't generate considerable revenue on their own. You need resources, including people who are dedicated solely to grow new ventures. As it is, you can do some things to generate a few hundred thousand dollars and cover your expenses -- pick the low hanging fruit like banner ads, half-price gift certificates and in-stream audio commercials. You might be the best at that, but even then you'd just be the tallest of pygmies. I'm talking about the difference between a cluster generating hundreds of thousands and millions of dollars. And you can't accomplish that with your existing staff.

My worry is that they still think they can grow this business without hiring more people because their existing people can do it. Yes, they can do it, but can they do it well? Do they know what optimizes revenue on the Net? You're talking about a different language and technology.

How does one find the right people to create a successful web presence?

A lot of that is trial and error, too. There are those who think you just bring in someone with purple hair and piercings and they'll create something great to look at. But you can't just get any guy off the street just because he knows html and be in business. Frankly, odds are he'll create a lot crap that looks great, but has no hope of generating revenue

On top of knowing their stuff, whoever you hire has to fit in with your culture. There's a lot of education involved in hiring the right people. The GM, sales manager and PD need to know what look for; they should talk to consultants and people in similar hiring positions at other stations -- and go to the RAB. It s all very complicated; it's not as easy as it was in 1920, when all you had to do was buy a license, a transmitter and bingo! You were in business.

What do you need to educate your IT staff on when it comes to revamping the station website to generate more revenue?

The greatest litmus test is as if someone put a big sign on the wall that asks, "What's the ROI?" Say you want to develop a Facebook page and stream audio onto it ... what's the ROI? I guarantee there will be a lot of backpedaling, but that's what a station needs to do to optimize revenue.

Essentially the GM - or whoever heads up the Internet initiative -- becomes a CFO, who takes a hard line in his financial view of the Net. A website can be like a giant toy box, where the kids want to play with it all. You need someone with a strict financial sense to be in charge.

So it comes back to aggressively investing in the web operations. Will the improving economic situation prompt them to reinvest 2010's increased revenue into their Internet strategy?

I actually think it won't take much. We're already seeing see couple of leaders - Cox Radio and a couple Citadel stations, for example - that have aggressive Net strategies and it's starting to work for them. But there's an outside economic pressure out there, too. When radio companies see everyone else investing more heavily in the Internet and doing real well, they'll eventually realize that their future can be benefited by investing in the Net ... and they'll bite the bullet and spend the money.

When you talk to potential radio clients, what can you do to get them to adopt that mindset?

The most effective way to do it is to give them a great sense of historical perspective in a way that almost embarrasses them into realizing how reticent they've been. I cite those before them who seized similar opportunities in the 1920s and 50s - and those who dropped the ball. It gets them motivated to do this.