Gordon Borrell has issued his latest report benchmarking local media’s digital revenues. Required reading for anyone in the local media business. Yesterday I published a transcript of Part 1 and the full video interview. Today, Part 2:
Whereas the emphasis in the radio industry seems to be “let’s communicate the value of the Nielsen numbers, let’s make the Nielsen numbers as accurate as they can be,” you’re suggesting that there’s way too much dependence on Nielsen and the traditional revenue driven by it.
Oh, absolutely, and it worries me. I think the agencies still certainly look at that data and buy – especially the bigger advertisers – but 40% of all advertising is pulled up by local or direct businesses across the country. And these guys are not buying on audience metrics. They’re less and less and less impressed by your numbers because they notice there’s a lot of fluff in them. Ad fraud extends to radio as much as digital, and television, and newspapers, and everything else. What they want is ROI. Prove it. They’ll make a decision on whether to buy based on whether it worked. So they might try it once, but they’re not gonna try it again if it doesn’t work. So it’s really incumbent on the media company to make sure whatever they’re doing works because the advertiser is informing a perception. So if it doesn’t work, I don’t care how big your audience numbers are and how much you’re rated number one. If it doesn’t really work, they’re not gonna come back.
And if the numbers are lower and even it does work, then you have the opposite problem from the agencies, right? Because you’ll get direct business but not the agencies?
Well, you know, the internet, it’s really a massive niches and it’s really taught us that you can pay a much higher CPM, say, for a Facebook ad because it’s really, really targeted, but it’s so targeted that you get a higher response rate to it. And the response is that customers actually buy. So the way we put it is that advertisers are less and less interested in an audience and they’re more and more interested in a buyer. And the thing that you see clearly is people aggregating around these digital channels, like cars.com or autotrader.com or HomeAdvisor or…these are people ready to buy something: A car, a home, home landscaping services, or things like that. The advertisers are paying premiums to be there. So, suddenly with digital, you have much, much greater ability to target. Mass means less to people. Where mass comes in is the ability to drive awareness to something in digital. If you look at the yellow pages book, if you look at some of the radio and TV advertising that’s out there, you see an awful lot of the pure play internet companies advertising. They’re driving traffic to their own specific vertical channels.
Advertisers are less and less interested in an audience and they're more and more interested in a buyer.
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What are the best practices associated with those people who really “get it” the best? What are the three or four things that you would advise a broadcaster to do to become those people?
Well, we did some research about a year and a half ago that I think was designed to say, “Here’s how you can kind of tell whether a company really gets it.” First off, the ones who get it understand that digital cannot be so tightly integrated with their core product. It really does need to have a separate staff, maybe reporting into the core structure, but separate people, separate investments. So here’s a litmus test for you. If your company has a digital initiative, does the digital initiative have its own product name or is it just W, X, Y, Z digital something or other? Does it have its own logo? Does it have a sign that is visible to the public out on the street?
So, for all these things in a lot of radio stations, it’s no, no, no, no. But you go to a company like Entercom and they’ve got a separate company, it’s called Smart Reach Digital. And you go to Hubbard Broadcasting and they’ve got 2060 Digital. 2060 Digital operates like separate agencies in each of the markets. And they’re building a new business. They’re not just empowering the radio reps to go sell a little extra digital stuff to the radio advertisers. They’re going after people who just won’t advertise in radio, which, by the way, is about 95% of any business community.
I think there have to be in-house experts that understand digital to the nth degree and, you know, could go head-to-head with anybody else the market who does nothing but sell digital advertising, who doesn’t know anything at all about radio. The leg up is that, you know more about marketing than the fool in the market just selling websites and search engine optimization.
I think you do need to have a digital product. It does need to have a separate name. Probably, at the very least, it needs to have a logo on the business card that’s separate or maybe a completely separate business card to say, “Look, yes, we have a digital marketing company, and it’s named this and this is what it does.” That’s pretty damn impressive. And that tells the advertiser, “Well, this isn’t just a radio guy who is gonna say “SEO, SEM, social media marketing, we got it all, buy from me.” This is somebody who really knows their stuff.
I also think that the product set is important. It’s not just banner ads. Banner ads are kind of going by the wayside. It’s social media management, and it’s a deep understanding of social media. I think, if you looked at your radio station’s Facebook page and the number of likes it had, and maybe compared it to a couple of others in other markets in your own market, you know, and if you have 4, 5, 10, 20 times the amount of likes or followers, you kind of get it. Somebody at your station kind of understands it. And that’s a very leverage-able people asset. People really wanna spend money with Facebook and they’re beginning to spend lots of money. On average last year, it was about $3,500 per local advertiser. It’s sure it might be $4,500 to $5,000. Some are spending tens of thousands of dollars. And they’re looking for somebody who can help them. And they’re not gonna go to a radio station that doesn’t really understand how to use Twitter or Facebook. And the numbers don’t lie. “Oh, yeah, we got a Facebook fan page. It’s got 150 followers.” Wow, you suck.
So how are you managing your own company’s internet presence, whether it’s on an app and all the different things you do or on social media, and you can’t say, “Oh, yeah, we’re there, we’re there, we’re there.” There’s a measurement for all of that. You know, how many followers do you have? How many likes do you get when you post something? How much interactivity you get? I think that’s another litmus test. How well can you do it for your own business? That’s the nectar that gets a lot of advertisers who say, “Hey, can you tell me how to do that?” Well, when when you get your reps to tell them how to do that, guess what else your reps are selling them? Radio advertising! It’s still there.
When you look at a lot of these companies that have started their own digital agencies, there are a few things that they sell and they sell a lot of and they sell well. One of them is website redesign, oddly enough, you know, that’s important. Nobody likes the way their website looks. The other is search engine optimization, which is a really, really big one. The other is social media management or reputation management, managing, you know, if somebody gives you bad reviews out there. So all of those things kind of put together can be sold as a package of digital marketing, then, again, gets amplified by radio advertising. And trust me, the cable guys are doing the same thing, and television guys are doing the same thing, and the newspaper guys are doing the same thing. So if your reps aren’t doing that, you’re seen as behind. “Oh, those are the radio guys. We’ll buy radio advertising if my newspaper rep whom we trust to do all this digital stuff recommends it.” How screwed is that? So you don’t really wanna be in that position.
Your entire business rests on a rep who goes out and talks to that florist and says stupid things. Your entire business, your great content, your great morning program, the cool announcers, the cool afternoon guys, the contest that you have, and everything, that all goes to hell if the rep can’t sell. That rep can ruin hundreds of thousand dollars of business by just turning off one advertiser who says, “I’ll never do business with them again,” and might not come back for a year or two. And that’s the really scary thing, is that I don’t think we realize how important those front line reps are to the entire industry.
So the human touch from real reps touching real customers in person remains important?
They’ve always said that local advertising is sold, it’s not bought, but that is actually changing to some degree. There are more and more advertisers buying advertising after 11:00 at night with their credit card on Google or on Facebook. But I do think they’re susceptible to influence and that they do need a certain level of touch that these pure play companies can’t give because they’re not putting people physically in the market. And I think that’s traditional media’s leg up: You’re gonna see these people at the synagogue, at the church, at the ball field, at the Kiwanis club meeting, and you’re gonna be able to interact with them. You’re gonna say, “Hey, I got something you really need to try. And trust me, I’ll see you next week on the soccer field, and you can punch me in the nose if it didn’t work. I took $10,000 of your money and I told you this stuff would work.” Google can’t do that and Facebook can’t do that. So it’s the legs of those 16,000 sales reps that work for radio stations across this country going out and spreading this message, and that is why it’s so vital to the industry that they’re properly trained, and they know how important it is to represent – not only the station – but also the advertiser.
What does your research told you about the role of podcasts in the local media mix? Where do you see this going?
I think there’s a great hope in the radio industry that podcasts will be something big. And that has somewhat confused me, but I think the reason is that it’s really easy to understand. It’s radio, you know, it’s radio on demand, that’s what it is. So it’s the easiest thing to understand and thus generate some excitement for because it’s easy for broadcasters to be in that business. Here’s the problem: None of the data that I see from local advertisers says, “Yes, I want that. Oh, that is so great, I will buy that.” So that worries me. If you’re not getting advertisers to pay for it, who are you gonna get to pay for it? Don’t be deluded into thinking people – consumers – are gonna pay you for podcasts. They’re not.
My other worry is that, as in all digital formats, the real estate for advertising is very, very limited. It just worries me that you’re just not gonna get significant dollars out of that until the business model changes. They’re becoming very popular, the audience is growing, and thus, the dollars should grow. But, I think, the availability of and the value of advertising spots within podcasts isn’t enough to really excite me and say, “Well, that’s gonna be a really big business in the next two or three or four years.” I think, it’s got a lot more maturing, a lot more development of the business model before anything significant happens from an advertising perspective.
There’s a lot of really interesting national podcasts out there that can carry some pretty heavy national dollars. But from a local station’s perspective, I think, local stations are generally gonna be pretty lost in this environment.
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