The buzz this week has been about Convergence, especially that “connected car” session. But a couple thousand miles away, Gordon Borrell was holding a much larger gathering of media companies. Saga’s Steve Goldstein (pictured) writes today’s guest post with a look back at the Borrell event with some added perspective about where radio fits into the bigger scheme of media things. -FJ
The seminal moment for anyone in the radio business attending the Borrell Local Online Advertising Conference in New York last week had to be the admonition of the moderator during a session reviewing digital benchmarks of local media companies. After telling the gathering that the best performing media companies are now deriving 25% of their revenue from digital efforts he pauses and says, “if you are in the radio business, it will be much, much, lower: around 2-5%.”
Ouch.
The Borrell conference is a gathering of top local legacy media companies in the throes of transformation, including Gannett, Meredith, Lin, Gatehouse, Yellow Pages, Deseret and digital disruptors like AutoTrader, Facebook, Pandora, Yelp, and ReachLocal.
I have been attending this conference for a few years and radio’s presence has been shockingly poor. That’s too bad because local money is on the move to a myriad of new choices. And radio, if it moves along with the tide, is surprisingly well positioned to take advantage of the migration.
A few big takeaways:
• Grabbing digital dollars – Media companies are setting up local interactive agencies to capture digital dollars. SEO, multi-platform marketing, etc. In other words, local TV and newspaper companies are transforming themselves into local digital media companies. Gatehouse Media is adding 500 customers a month with their Propel Marketing agency. Gannett has over 11,000 digital clients. Cox Media is building their own digital platform using their many assets.
• Flying too low – Marketing guru Seth Godin flat out told attendees: “The game that local media played for 70 years is now over.” In a mediascape marked by abundance, wealth will be created by connection and a more intimate rapport with customers. “Local media used to mean I can walk there; now local means people like me.” Godin is critical of local media’s lack of product innovation (people don’t want the newspaper online even though the newspaper companies keep trying variations, and local TV newscasts don’t translate well either).
He says that media companies are “flying too low” and not taking enough chances: “The cost of failure keeps going down.” He reminds us that we have the great sales staffs and “megaphones” and should lead before the “pure-plays” grab too much. Godin says “The future is ridiculous…It’s a revolution, (and) we can’t win just by polishing and perfecting what we have previously done.”
• People are becoming digital omnivores – That’s such a great term. Consumers are now always online using different devices. Tablets are the fastest growing electronic item … ever. The user-base of various services including Pandora, Facebook and Yelp has migrated rapidly to mobile. Brands need strategies for each platform.
• Watch out for the disruptors – There are some big companies grabbing big local dollars, and your sales staff may not be focused on them. ReachLocal has $455 million in annual sales and 500 sales reps in U.S. markets. YP (Yellow Pages) has lots of challenges to be sure, but they have retrained 3,800 sellers to create digital solutions for SMBs. Pandora has sales reps in 25 markets – guess whose dollars they are going after?
- Yelp $150M
- Pandora $300M
- YP.com $1,000M
- Groupon $1,090M
- AutoTrader$1,176M
• Merchants are bombarded – According to Borrell data, a local business sees 16 local sales people per month. No wonder they are confused and often unhappy. They need guidance and don’t necessarily have the sophistication or the time. As it has always been, local is sold – not bought. They’ll do business with people who they trust.
• Mobile – It’s “game on” in this space. Overall, 125 million Americans have smartphones and another 50 million are using tablets. The advertising model has not been so clear or easy but mobile advertising is already at $15.8 billion with even more in promotional dollars. It’s so clearly where things are moving. McDonald’s is buying time-specific mobile – right before lunch, and 25% of all Facebook interactions are already mobile.
While more radio companies are focusing efforts on digital (there were two forward thinking radio CEOs at this year’s Borrell Conference), radio is looking small in this world. The head of the Mobile Marketing Association said local media has to get beyond the “we hired a guy” solution. Radio is having its pocket picked in a local media world that has become a whole lot more complex.
Right now, radio captures only about 2% of local interactive dollars. Sad, actually. The interactive pile is getting higher. The radio pile is the same or lower.
Again, think Godin: “We are flying too low.”
This is a conference radio should be all over in 2014.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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I would contend that radio’s share of digital dollars is not only appropriate, it’s probably overstated, as a lot of that money is really based on terrestrial components of an ad buy that are packaged with and billed as digital.
Radio has little to offer digitally because its primarily in the music business and digital music is a money loser. I’ve said this before and am restating it. The music industry seems to feel that its future is linked to making it impossible to make money streaming digital music, while it appears that the radio industry’s future is tied up in being able to do so.
The music industry understands their position and its importance and has a huge lobbying effort to support it, while the radio business is much more focused on cell phone chips and a terrestrial performance royalty that IMO has much more to do with radio’s past than the digital one which represents radio’s future.
I know I’m restating previous posts, but I think the people making decisions about radio’s digital future are too out of touch with the digital world to maintain perspective. If radio “got it”, they would be lobbying at least as hard as the music industry for its future and they aren’t. Radio still claims that local connections are its biggest attribute, yet many, perhaps most companies won’t let a local station embed something as simple as a widget without corporate approval. One major company won’t do ANYTHING digitally unless they decide corporately to roll it out for the ENTIRE CHAIN.
This isn’t the way to build a digital future or to be local. Until radio figures out the digital puzzle, 2% is appropriate.
Bob, that type of thinking is what’s kept radio in a digital straitjacket. The discussion is only about music if you view the Internet opportunity from a radio perspective. What Steve is describing in his column is competitors who have broken out of the newspaper, yellow pages or TV straitjacket and envisioned a much broader opportunity that goes beyond what their core product is about. They’re leveraging their brands, promotional and sales capabilities, and market knowledge, to grow their businesses beyond a radio station with a website. I agree that Job 1 is squeezing every digital dime out of your current radio advertising customers. What Steve is talking about is the optional — and more exciting — Job 2: Growing the business beyond radio listeners/customers and creating an altogether new business. Here’s a great example: http://www.chapelboro.com, a small AM/FM station (WCHL) in Chapel Hill that created a new opportunity, not related to its stations, and now gets a double-digit percentage of its total gross revenue from digital ad sales. Is this company a “radio station”? It was a few years ago when it had a station and a website. Today, it’s a “media company.” That’s the transformation opportunity that a lot of stations are missing.
Good post, Steve. Thanks for sharing.
For comparative purposes, here’s another perspective. According to an estimate by ABI Research, Smartphone apps will generate $16.4 billion this year or about what US commercial radio billed in 2012. Tablet apps are on track to produce another $8.8 billion this year. From a cold start about five years ago to what may end up being over $25 billion in revenues this year.
Bob – – ARE we in the music business? Looking around my radio station I do not see Taylor Swift, The Foo Fighters, or Adele on the payroll. I tend to think THEY are in the music business. We are in the business of (in a small part) assembling what the music business does with a creative presentation. More specifically, we are in the *entertainment business.*
The “jukebox” mentality of radio is one of the thing Godin is referring to when he says the “70 year game… is over.”
“Innovate our product” is the best call to arms I’ve heard in a long time. Indeed… “we can’t win just by polishing and perfecting what we have previously done.”
Bob, Gordon, Johnny…I come back from the Michigan Assoc. of Broadcasters, I give Goldstein a guest shot, and all hell breaks loose in my “comments” section.
Seriously, great to see give-and-take in this space. We can learn a great deal from each other’s experiences here, and thanks again to Steve for the insightful look at the Borrell conference. And thanks to all of you for taking the time to comment.
Good column –
Of all the digital plays you list of who is going after what — Autotrader.com is the largest in revenue – and the most diverse in approach. Autotrader.com is owned by Cox – the company that is quite successful in media. They are also a very large owner of some other unexpected businesses that they have applied sound business and marketing execution toward. That is innovation.
Think Different. Seth has a good point as far as he goes – but we need to stop solving the “advertising” problem. There is money to be EARNED in solving problems. For our communities, business, listeners, web viewers, etc.
The content and creative folks are key to making those solutions. Why would a business with a long term view choose now as a time to eliminate talent? If you are shutting down the business, I suppose…
The smart phone business is making money for Verizon and AT&T. And Apple. And Samsung. That will change in the years to come, just like everything else. The economics of competition and margins will turn any current innovation into a commodity, unless it is protected by monopoly or more innovation.
Monopoly can have a big short term payday. Innovation sure seems like a lot more fun.
Scott, thanks for the insights and the comments. You are correct that it’s always been about serving our three most important constituencies – listeners, advertisers, and the communities that we live and work in. Somehow doing that tends to take care of many problems.
Appreciate you taking the time and reading our blog.
Thanks for the kind comments everyone. And thanks to Gordon for pulling together an information packed if not anxiety inducing conference.
In addition to this site, my email has been buzzing all day. There is no doubt newspaper companies have pivoted more aggressively after losing a collective $40 billion. Radio has not had the same destruction and maybe therefore less urgency, But there is a sink hole out there. I like radios’s chances in a changed local media environment. But it won’t happen without investment and experimentation.
Thanks for the forum Fred.
Steve, thanks so much for the great post, sparking insightful comments from many people. Come back again soon!