Internet Displaces Radio As Fourth Biggest Ad Medium

by Erik Sass, Aug 31, 2007, 7:15 AM

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Internet ad revenues are set to pass radio's for the first time, according to eMarketer, a firm that tracks and analyzes spending trends across various media. EMarketer is pegging Internet ad spending at $21.7 billion, compared to $20.4 billion for radio.

eMarketer's report comes as the Internet already has surpassed outdoor ad spending, and as a recent report from equity firm Veronis Suhler Stevenson predicts that the Internet will displace television as the No. 1 ad medium by 2011.

While this news is unlikely to cheer radio advertisers, it's more a testament to the feverish rate of Net growth than any secular downturn in radio. In fact, radio is also expected to grow modestly in 2007, with a 1.5% increase. Total radio revenues grew 1% in the first quarter of 2007, according to the Radio Advertising Bureau, due mostly to a 1% increase in local revenues and a 10% increase in non-spot. Second-quarter figures aren't yet available.

Still, radio's predicted 1.5% growth rate looks decidedly sluggish next to expected online revenue growth of 22% in 2007. And it's the second major medium to be passed by the Internet.

The Internet first eclipsed outdoor in 2000, when revenues totaled $8 billion, compared to $5.24 billion for outdoor. Outdoor is a success story in its own right, with 8% annual growth rates--but trails the Internet, with total revenues of $6.8 billion in 2006, versus $16.9 billion for online.

In a sign of the Internet's importance, online revenues are a key growth area for radio. According to eMarketer's Ben Macklin, various kinds of Internet advertising will be "principal drivers for radio advertising growth" in future.

Indeed, radio broadcasters and ad sales networks have moved quickly in recent months to bulk up their online sales capabilities. In July, Katz Media Group acquired Net Radio Sales, renamed Katz Net Radio Sales--allowing advertisers to deliver ads across a variety of audio and Web-based platforms, including hundreds of station Web sites in its digital network. The company also provides a variety of interactive ads to station Web sites.

Also in July, Ronning Lipset Radio announced that it had partnered with Corstarr to use its Adcor technology for delivering Internet radio ads. Adcor allows broadcasters to set up multiple radio channels and deliver ads across one or all of them, targeting audiences by demographic characteristics and daypart.

Finally, TargetSpot has signed up a slew of big radio broadcasters for its online service, which allows advertisers to create and place streaming audio ads synced with banner displays on radio Web sites. TargetSpot's list of partners includes CBS, Entercom and Warp Radio.

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