• by Jack Loechner , Staff Writer @mp_research, March 3, 2014

According to a new report issued by Borrell Associates on behalf of the Radio Advertising Bureau, with a digital revenue increase of 15% in 2013, radio is poised to grow 22% this year, surpassing the half-billion mark in digital advertising for the first time. The report, Benchmarking: Local Radio Stations’ Online Revenues, states that the average station made $166,490 in digital advertising, or about 3% of its total revenue. 

Along with detailed benchmarking, the report offers insights into what radio managers are thinking with regard to their digital ventures.  The majority of managers (62%) believe their sales reps are talking to the wrong buyers when trying to sell digital and an overwhelming majority (92%) believes that more training would help boost digital sales at their stations.

Gordon Borrell, CEO of Borrell Associates, says "… three-fourths of the managers say they believe digital sales hold a lot of growth potential… (with) clear suggestions on how to tap it… “

Overall, radio sellers closed $426.3 million in local online advertising last year according to the report. They expect the number to hit $520 million this year as many radio groups expand into selling fast-growing digital services.  Those services, popular among local marketers, include app development, Search Engine Optimization (SEO) and social media and email management. Based on the report, one-third of station groups have expanded into those offerings.

As the economy improves, local businesses have begun increasing their overall ad spending. It may be up as much as 11% this year. But the love affair with digital media continues at a more frenetic rate, says the report. Spending on digital media is expected to outpace overall advertising growth nearly fourfold. Surveys conducted last year with small and medium-size businesses showed that SMBs are hopeful:

• 64% are “very” or “somewhat” optimistic about near-term (12 months) improvement to the local economy
• Some have dropped out of newspapers altogether. The percentage who buy print newspaper advertising declined from 87% in 2011 to 71% in the latest survey
• Digital spending continues to rise significantly. In 2011 digital share of ad budgets was 15%; in the latest survey, SMBs reported 19%. This equates to a 33% increase in digital ad budgets in two years
• More than 83% use Facebook, vs. 64% two years ago, and hold keen interest in promoting their pages. Radio drives more “likes” and comments than TV, newspapers or cable advertising
• Last year local businesses across the U.S. spent $24.7 billion on digital advertising, up 32% over 2012. Based on our ongoing SMB surveys, the report is forecasting this year’s growth at 42%, to $35.2 billion

More than three-fourths of all local advertising is controlled by so-called legacy media companies (radio, TV, newspapers, etc.), including half of all digital advertising, says the report. In any local market, half of all digital advertising is sold by someone who works for a newspaper, radio, TV, cable, or yellow pages company. The legion of 85,000 local ad sales reps, including 16,000 selling radio spots, holds a great deal of value to Silicon Valley.

Overall, radio sellers closed $426.3 million in local online advertising. Based on the survey in January of local managers and sales reps at more than 2,010 stations, we’re forecasting 22% growth this year. If that occurs, radio’s digital sales will exceed the half-billion mark for the first time. 

Radio’s Local Online Ad Revenues

• 2010    $285.6
• 2011    $303.7
• 2012    $370.7
• 2013    $426.3
• 2014(F)    $520.1

Source: Borrell Associated, February 2014

The average radio station made slightly less than 3% of its total revenue from digital advertising last year. That equated to $166,490 for the average station and $715,790 for the average four-station cluster. Some companies with more aggressive digital efforts make closer to 5% of total gross revenue from digital sales.

Fewer than 2% of the stations in the study continue to report no Internet revenues at all. The highest digital revenue reported by a single station last year exceeded $4 million. The next highest was $2.2 million.

$24.7 Billion In Local Digital Advertising Was Shared In 2013 

• Pure Play   56%
• Newspapers   19
• Broadcast TV   10
• Directories   9
• Magazine/other print   3
• Radio   2
• Cable/satellite   1

Source: Borrell Associated, February 2014

The table shows average per-station revenue across various market sizes, using Digital Marketing Regions (DMRs), which closely correlate with Core Business Statistical Areas (CBSAs). DMRs are local-market designations created in 2012 to define geographies of digital ad-spending by businesses located within a certain region.

The last question in the survey was intended to deliver a solid recommendation as to how sales might be improved. Respondents ranked five initiatives on a scale of 1 to 5, with 1 being the most important. When other survey results are considered, the ranking takes on a more urgent meaning. In an earlier question, 92% told us more sales training was needed, and the final question in our survey underscores the need. “Training the staff” was selected by nearly half of the respondents as the most important way to improve digital sales. About one-fifth of selected “hiring online-only reps” and another one-fifth selected “better internal digital leadership.”

• 62% believe reps talk to the wrong buyers when trying to sell digital.
• 52% believe digital sales suffer because reps have to sell radio.
• 32% believe radio sales suffer because reps have to sell digital.
• 42% rated their sales team’s ability to sell digital as poor.
• 92% believe more digital sales training is needed.

The research presented in this report indicates an overwhelming need to train radio reps about digital products, concludes the report. Digital media spawns new applications and features on a regular basis, which means training can become obsolete quickly. The research also indicates a sensitivity to expecting too much from reps; one-third of managers felt that radio sales suffered because reps had to sell digital advertising.

For more about the study, please visit here.