In our first article in this series I wrote about the advertising effectiveness of Broadcast and Cable TV in marketing today. In this article, the discussion will center on the advertising effectiveness of Broadcast or Terrestrial Radio [link to http://en.wikipedia.org/wiki/Radio ]. This venerable medium has been around since the 1920s on a commercial basis and has survived the onslaught of TV for advertising dollars and survived. It has survived the advent of Satellite Radio [http://www.siriusxm.com/ ] and survived. But now it must content with the Internet and that is proving challenging.
First a disclaimer: I am a student of Radio. I began as a “jack of all trades” at age 15. I wrote copy, helped wherever I could in the station and even did a Saturday night radio show during my summer vacations. I went on to ownership and was the first to broadcast the Classic Rock format [http://en.wikipedia.org/wiki/Classic_rock ]which I debuted under the authorship and guidance of the now famous Fred Jacobs [http://www.jacobsmedia.com/ ]…although others claim the title, they never did it with commercial success, so really, we were first to debut it as a complete format.
I LOVE Radio…but times have changed. In the “good old days”…we never thought that when we were in them…only the Federal Communications Commission [http://www.fcc.gov/ ]could approve the broadcast of a radio station in the United States. And, its decisions as to whether to approve a new license or not were based almost 100% on engineering considerations: was there room on the dial (i.e. in the spectrum)? This meant there were only so many stations per market and you always knew who your competitors were. In other words, there was a barrier to the means of distribution.
Now enter the Internet. And, even as importantly, now enter the iPod. [ http://www.apple.com/ipod/ ] What is it they say about competition…it lowers the price and gives people more choice? Well that is exactly what has happened to your local radio stations along with the fact that during the 90s the industry went through some deregulation and as a consequence stations traded hands like crazy and multiples of value went through the roof. Now the industry is paying dearly for it as listeners have abandoned over-the-air Radio for their iPods, Satellite and Internet Radio. Remember when a car was a “Radio On Wheels.” Not anymore…as the music may be coming from a variety of sources.
So as an advertiser you now see the fragmentation that has hit the Broadcast Radio stations in your market. Of course, under normal economic conditions, the law of “supply and demand” would be that with fewer listeners the price of their commercials would decrease. Not necessarily…remember all of they buying and selling of the 90s? Those high multiples translated into lots of debt. Debt that has to be serviced, so commercial time still has to remain high to pay off the debt.
So how do they accomplish this? Most radio stations today still charge as much as they can get for their commercials…generally at a higher CPM [http://www.clickz.com/static/cpm-calculator ]than they are worth…but to offset the inability to raise rates to pay off their debt, they run lots of commercials in a row. There are stations in Detroit that run nine commercials in a row. Now I have research that shows after only three commercials you have lost the majority of your listeners, so you might ask yourself who is listening after nine commercials in a row? Sad. Really sad as this is a medium that has survived almost 100 years.
So, if you are tempted to buy time on your local station, find out how many commercials is plays in a row, as well as their CPM. Then compare it with digital media. The cost difference will be staggering especially when you consider your commercial just might be ninth in that commercial break.
The author, Bob Ottaway, is President and Founder of Ottaway Digital. Established in 1999, it has been a pioneer in SEO, digital advertising & social media since 2006.