Why Digital Hasn’t Killed The Radio Star

Print is dying. TV is changing. But in the face of digital competition, advertising spend on good old AM/FM radio remains strong.

As the no. 1 reach medium in the US, radio reaches 90% of the population, according to Edison Research’s Share of Ear, a quarterly study of consumer audio habits. Adults average 16 minutes with Pandora and 7 minutes with Spotify daily, compared with 2 hours on broadcast radio.

For advertisers, radio is a $17 billion market that reaches consumers en masse, on the go, with local and timely offers. Given that 86% of Americans drive to work and broadcast radio accounts for 70% of in-car listenership, radio still holds the deepest penetration of the audio market, Edison reported. Digital audio streaming, by contrast, is a $1 billion market, with more than half of listening done at home.

“Of all of the listening that’s done in the car, radio really owns that space,” said Diana Anderson, SVP of network audio activation at Carat. “We spend about 85% on terrestrial AM/FM radio and 15% at the high end on digital audio.”

Advertisers also continue to see a high return on investment with radio, Anderson said, at an average of 6 to 1.

Despite radio’s success story, digital is still transforming the broadcast experience, as radio abble in programmatic buying and 360-degree digital marketing strategies to stay relevant.

Programmatic Push

Radio buying is becoming more targeted and efficient.

Last year, programmatic radio platform Jelli hooked up with broadcast giant iHeartMedia to create a programmatic private marketplace (PMP) for its 858 network stations. Advertisers can buy iHeartMedia’s broadcast inventory – and its quarter of a billion listeners – through Jelli’s demand-side platform.

iHeartMedia targets users with “Smart Audio Audiences,” which are segments fueled by data from its digital assets, including a streaming app, an artist-focused radio station and an on-demand streaming service.

“We’ve built out a platform to deal with the fact that people are buying audiences,” said Brian Kaminsky, president of programmatic and data operations at iHeartMedia. “We took digital assets and said, ‘This is a great proxy for our broadcast listeners, a great panel we can use to understand radio in a more sophisticated way.’”

Better targeting could shift more money to broadcast radio, which has remained relatively flat over the past few years, said Mike Doherty, CEO of Jelli. More than half of spend through Jelli last year came from budgets that shifted from other mediums, including digital.

Carat’s Anderson isn’t so sure. While programmatic radio is exciting, it doesn’t yet have enough scale to significantly increase spend, she said; iHeartMedia and Jelli are the only platforms with programmatic capabilities. Mainstream DSPs, such as The Trade Desk and AppNexus, have programmatic audio buying capabilities for digital, but not broadcast.

Programmatic also lacks the ability to buy on local stations, often most popular with listeners.

“As far as data, there’s not enough scale right now to do very data-driven buys,” Anderson said. “We’re hoping there will be a lot more scale on a local level by the end of Q2.”

Programmatic can’t scale until more broadcast networks open their inventory to exchanges. But networks like mid-size broadcast company Entercom fear programmatic will compromise the local listening experience.

“The hard part is aggregating very specific station data and making assumptions nationally,” said Ruth Gaviria, CMO at Entercom. “We don’t want to be in a situation where a consumer is served the same ad five times.”

Digital Support

Programmatic is still taking off, but most broadcasters have by now begun using digital platforms as extensions of the radio experience.

Entercom, for example, created websites for each of its 120 broadcast stations, where users can engage with DJs and talk show hosts through video and social feeds to drive deeper connections with programming. Entercom also launched digital streams of content broadcasted on each of its radio stations. For Kansas City’s The Buzz 95.6 FM, the added streaming component doubled station listenership.

“The listener desires to continue to listen in a traditional manner, have a personal connection with that on-air personality, listen to curated and local experiences in real time and get a mobile, digital experience that complements it,” Gaviria said.

Westwood One, owned by broadcast radio giant Cumulus Media, sees radio budgets diversifying to support these digital executions, said its chief insights officer, Pierre Bouvard.

“The digital piece is growing pretty dramatically,” he said. “Growth isn’t as much as it used to be on AM/FM [radio], as advertisers spend more on the digital stuff that AM/FM has to sell.”

For iHeartMedia, digital data informs more targeted broadcast media plans, Kaminsky said.

“We’ve used data to create a set of insights into how our broadcast users behave, which you can only get from a digital platform,” he said. “We take our digital information on registered users and device IDs, match that up to their social profiles, layer third-party data sets and model that back onto the stations that drove people to the digital platforms in the first place.”

The Auto Wrench

Broadcast radio has remained strong, largely thanks to in-car listenership. Although cars are becoming smarter and more connected, Jelli’s Doherty doesn’t see that as a threat – at least not yet.

“We just haven’t made it easy enough yet for your average consumer to use streaming in a way that they need to use radio,” he said, referring to issues like Wi-Fi spottiness in the car. “But that will happen.”

Streaming audio was up 12% last year in overall share of audio listenership, according to Edison. And in-car streaming will inevitably grow, but it currently lacks radio’s local component that keeps listeners tuning in for their favorite shows, Bouvard said.

“A local radio station gives you traffic, sports, weather, great music, funny DJs and talks about your town,” he said. “Spotify has these robotic music playlists, which are awesome, but there’s no one telling you what happened at the Giants game last night.”

This post was syndicated from Ad Exchanger.