Tag Archives: Borrell Associates

Thinning the Herd

Thinning the HerdGordon Borrell recently hosted a webinar that hit on the highlights of his #LOAC2019 (Local Advertising Conference) held in New York City. The shocker, for me and many others came when Gordon said the future for media expenditures would be a process of “thinning the herd.”

Media Overpopulation

To put things in perspective, Gordon shared how an over-populated media landscape is impacting local advertisers.

  • 1,300 daily newspapers, 6,500 weeklies
  • 4,700 printed directory books
  • 4,665 AM radio stations, 6,757 commercial FM radio stations
  • 1,760 Class A TV stations
  • More than 1,000 cable systems with local sales staffs
  • 660,000 podcasts were actively produced in 2018
  • 495 NEW TV shows were introduced last year in addition to what’s already on
  • PLUS, local ad sales are taking place on Facebook, Google and Amazon

Another way of looking at this media explosion, is that a TV market now has an average of 126 local media entities. To view a recording of the webinar, contact Corey Elliott HERE

Action – Reaction

So, how are the people who buy advertising responding to this media abundance?

Gordon identified three trends:

  • They are increasing buying for types of media, from 5.5 to 8 different ones
  • They are decreasing the number of companies from which they buy advertising, from 5 to 3.5 companies
  • 90% of their media buys are being made with companies who can bundle traditional and digital advertising

Facebook – Google – Amazon

When a new Ollie’s store opened in Winchester, Virginia, my Facebook newsfeed was peppered with announcements. During the fall elections, politicians also used lots of Facebook ads to try and get elected.

I can’t go on Google or Amazon looking for something without being followed around the internet with ads for that very thing.

eMarketer says that in 2018, Google and Facebook took 60% of the total digital ad spend. Amazon was third with 6.8% but is predicted to grow it’s share by more than 50% in 2019.

Think about that, these three companies will rake in over 68% of the digital advertising dollars spent this year.

eMarketer also says that by 2023, they expect digital advertising to account for 66% of total media spend.

Post-Capitalist Society

About ten years ago, my good friend John Parikhal recommended I read Peter Drucker’s book “Post -Capitalist Society.” Wikipedia summarizes Drucker’s thesis this way:

“The book states that the “First World Nations” and in particular the United States have entered a Post-capitalism system of production where the capital is no longer present because it doesn’t belong to one person or family but to a series of organizations such as insurance companies, banks, etc. Because of this, normal citizens become virtually owners of the great American enterprises, being owners of the capital, therefore, not destroying but overcoming the capitalism. The book foresees that the post-capitalist society will become a society of organizations where every organization will be highly specialized in its particular field.”

Sound like what we are witnessing in today’s world?

Accountable Capitalism Act

Recently, Senator Elizabeth Warren introduced a bill in Congress called the “Accountable Capitalism Act.” It targets what Warren says is the root of the country’s “fundamental economic problems.” You can read the Boston Globe story on the bill HERE

In essence, we have moved from a time when corporations cared about where they lived to one where only increasing shareholder value matter.

I remember a time when the insurance companies of Hartford, Connecticut were once heavily invested in the good of Hartford. I grew up in a GE city. General Electric made a positive impact on things and participated in growth and prosperity of the area.

In the 1980s, things changed. Corporations shifted from caring about both employees and investors, to only investors. The record profits went all to investors, and the people who worked hard to produce those profits didn’t get a share of them.

Increasing Shareholder Value

I first wrote about how the concept of “increasing shareholder value” was a dumb idea three years ago. You can read that article HERE

Real American capitalism was when both company and worker did well together.

Senator Warren has also raised many eyebrows with another plan that proposes to break up some of the largest US tech companies, like Amazon, Google and Facebook. Based on the trends in digital advertising, those of us in broadcasting would probably agree with Warren.

In essence, Warren says that high tech has created an unfair playing field. They control the platform, have full access to all the data, and then can either unfairly compete with companies, buy them out entirely or run them out of business. It reminds me of the type of things people said as Walmart covered America with their form of brick & mortar retailing.

Get Bigger or Get Out

Cox Media has recently begun liquidating its radio, television, newspaper and other media properties. The company’s leadership has determined that scale will be a determining factor in the future, and they either need to get bigger or get out. Cox has chosen the latter.

Current Trends

It would appear that in reading the tea leaves for ad supported media, that everything is currently headed in the direction of fewer entities owning all the media outlets, and advertisers buying their media on those platforms that can bundle it all together.

“Monopolies are a corruption of the marketplace. Breaking them up — allow[s] entrepreneurs to enter the market, giving consumers more choices, and giv[es] workers more jobs…”

-Adam Green, cofounder, Progressive Change Campaign Committee

I know there are many radio folks who saw the Telcom Act of 1996 as the beginning of the end of commercial radio as we knew it. That act is what caused Wall Street to enter the broadcasting business and apply their dumb idea of “increasing shareholder value” to another industry. It was the beginning of the consolidation of radio and we all know how that’s turned out.

 

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Reflecting on Radio Show 2016

60The radio show was close to home this year, just down the road from my university, in Music City USA, Nashville, Tennessee. Plus, the Tennessee Association of Broadcasters decided to roll their annual convention into an opening event at the Radio Show. So as soon as I finished my morning class, I was on the road to Nashville.

Tennessee Association of Broadcasters Kick-off

Whit Adamson, President/CEO of the TAB, put together an amazing opening reception and event inside the Country Music Hall of Fame. We were welcomed by TN Governor Bill Haslam who declared it “Radio Week” in the State of Tennessee. Then the Mayor of Nashville, Megan Barry, gave us a warm welcome to Nashville where she declared it “Radio Week” in Music City. The “red carpet” was fully rolled out for the radio industry and attendance would set a new record for the Radio Show.

Pillsbury’s Broadcast Finance Forecast Leadership Breakfast

The good news is radio is the “King of Audio.” The bad news is that revenue growth for radio underperformed ad spending post-recession. Radio’s 7% share of all advertising is predicted to decline to 6% by 2019. Why? Digital ad spend will grow significantly (40%) by 2019. And radio will struggle to reach mobile users.

The big takeaways from this session were: Investors want to see new growth catalysts like NextRadio, more event revenue and growth in digital/mobile ad revenues. Investors want no more than 3 to 4 times leverage with more industry consolidation. All of this investors feel will yield more “free cash flow.”

Investors worry about audience fragmentation and Millennial reach, radio’s competition in the car dashboard, the challenges coming from digital/internet, continued uncertainty over royalties and excessive leverage.

Focusing on Your Career Future

The room here was filled with young people. Radio mentors from all areas (except engineering) met with tables full of students and recent graduates to talk about the many opportunities available in today’s radio industry. The mood was once of excitement and enthusiasm.

Brittney Quarles and John Focke both would share their personal radio journeys with students as they shared advice such as: “the industry is small, don’t burn any bridges” and “find a champion for you and your talents” and “be careful who you share your dreams with.” The right mentors are essential to your career.

Beyond Basics – The Prosperous, Professional You

John Bates, Elizabeth Burton and Heather Monahan led a session in how to reach beyond your limits and build a better “Brand You.”

John Bates shared “3 ways to inspire and connect”: 1) logic is not the way, 2) human eyes connect you to another person and 3) be authentic. For example, people don’t connect with your successes, but your messes. You message is your mess. But above all else, “Make A Difference.”

Elizabeth Burton drilled down the importance of your online brand and that today your online activities build your reputation.

Heather Monahan told us that people take only 10-seconds to make an opinion about you when they first meet you. 50% of communication is nonverbal and your attitude is everything. And if you want to know what your personal brand is, ask others this question: “What value do I bring to you?”

The Digital Dash – Improving the Consumer Experience

Fred Jacobs, Steve Newberry and Scott Burnell (from Ford) all shared their perspective on radio in the car. The first big thing is car manufacturers don’t call it a radio in the dash anymore (and probably haven’t for some time) but “the center stack.” Into this part of the dashboard, everything a car owner wants can be accessed.

Steve Newberry (former NAB joint board chairman) really brought the whole issue home with his analysis of the technology revolution by saying there are two kinds of events: disruptive and modifying. Disruptive events would be things like television and FM radio. Modifying events would be things like cassette tapes, CDs and MP3s. Disruptive events change the landscape and prevent an entity from doing things the way they’ve always been done. Television stole radio’s programming and added pictures and radio had to reinvent itself with new kinds of programs. Modifying events such as records being replaced by cassettes and 8-track tape, then CDs replacing both of those to be replaced by MP3s merely modified the way people listened to their own music libraries but not how they used radio. The new digital/internet connected world is a disruptive event and radio needs to once again adapt to this revolution in communication. The future is bright if radio is agile and adapts.

Perception vs. Reality – The True Power of Radio

My first Arbitron rep was Pierre Bouvard. He’s a fountain of information. His presentation on “7 Things Brands Have Completely Wrong About Radio” tells the story in great detail and shows the challenges faced by radio sales people today.

Podcasting

Steve Goldstein did an amazing presentation on podcasting by starting out with this Thomas Edison quote from 1922 “The radio craze will die out in time.”

Today mobile is eating the world. 20% of audio listening comes from the smartphone. For radio, podcasting is all about retention, growth and relevance.

Podcasting is no longer niche. It delivers the demos advertisers want. Podcasting is different than broadcasting. There’s money to be made in podcasting and radio has the perfect megaphone to promote podcasts to its audience. That’s radio’s “secret sauce” that podcasters wish they had access to.

Radio – The Local Media Company of the Future

Gordon Borrell and his research company are doing some incredible studies on the future of advertising. He immediately got the audience’s attention when he said in the last ten years $56 Billion has disappeared in advertising expenditures.

Banner ads are dead. But digital is not.

Local advertising growth is forecast to increase 7.6%, but non-digital will see a 6.9% decline in ad spend and digital will see a 22.4% increase in ad spend. In fact, 2017 is the year that digital advertising will eclipse all traditional media.

Borrell said when advertisers cut ad spend in one medium they spend it in another medium. Radio will continue to be bought, but only those stations who have well-trained representatives that understand the realities of today’s advertising and can put together a total marketing plan that goes beyond simply radio spots. Advertisers will partner with any media company who has reps that listen.

The good news is traditional media – like radio – is still necessary to drive digital advertising goals and deliver maximum digital R.O.I. (Return On Investment).  You can see Gordon’s full PowerPoint deck here.

Final Thought

The mood in the halls and in the sessions at this year’s Radio Show was very upbeat. The things being discussed and presented did not shy away from the realities all ad supported media face.

Anyone who attended came away with lots of action steps that need to be implemented immediately.

Radio currently is the #1 Reach & Frequency medium in the United States of America.

There’s no time to waste. It’s time to roll up our sleeves and “Make A Difference.”

Radio’s future depends on it.

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Radio Doesn’t Get Any Respect

24I remember the first radio station I worked for doing an experiment with one of their best clients, a men’s clothing store, to prove the power of radio advertising. Back in the 60s the dominant advertising vehicle in my hometown was the newspaper. This clothing store used both radio and newspaper, but felt it was the paper that drove their sales.

What the radio station did was create an imaginary character, a store mascot, using radio’s “theater of the mind.” The plan was to have the store’s clerks ask listeners where they learned about the store’s character when they shopped the store. This imaginary character was only featured in radio advertising.

What shoppers gleefully told the clerks when asked where they learned of their store’s mascot was “in the newspaper.” Virtually no one said they heard about the character on the radio.

What the store learned was how powerful their radio ads really were. What the radio station learned was how BIG the problem was in the perception of the customer as to what influenced their shopping decisions.

Fast-forward to today. Sean Luce moderated a panel at Radio Ink’s Convergence 15 conference in San Jose in May 2015. Sean shared the radio industry’s gross revenue estimates as compiled by Borrell Associates for 2008 ($14.9 billion), projected 2015 ($10.6 billion) and the projected 2019 ($9.5 billion). For an advertising medium that today can claim not only the best advertising frequency for advertiser messages, but now claim to be number one in reach in America too, this is a very disconcerting trend line.

Meanwhile, the online industry’s gross revenue looks like this for the same period of time: 2008 ($12.2 billion), projected 2015 ($50 billion) and the projected 2019 ($94 billion). Yikes!

As Mark Twain remarked, “History doesn’t always repeat itself, but it does rhyme,” I believe what we are seeing is the problem my hometown radio experienced in the 60s only now instead of the newspaper getting all the credit it’s Google or some other online search algorithm or App.

People learn of your product or business over-the-air and then make a mental note to find out more later. They don’t need to remember your phone number (most can’t anyway, so why do radio ads still include them?). They don’t need to remember much of anything but your name. And the next opportunity they have to go online they Google your name to learn more. And Google gets the credit.

Great radio ads will engage the listener, cause them to see themselves doing or using the product or service you envision. Effective ads will stimulate people to know more and they immediately go online and Google you. (Google is now 18 years old. Google dot com was registered in September 1997. It just seems like it’s been around forever.)

Sophisticated advertisers will know what kind of traffic they were getting before they began their radio campaign and when the traffic through online increases they automatically credit your radio station, right? Wrong.

Unfortunately, doing things like “tell them you heard it on WXXX” or “mention this ad and get 10% off” are ineffective because so many variations on these types of Pavlov-type tricks are only confusing and annoying radio listeners.

Radio is intrusive advertising that, used effectively, tells stories, builds brands and makes your business something people will want to go online and search for.

Create radio ads that are unique, like Bud Lite’s “Real Men of Genius” (http://budlight.whipnet.com/) and you will never have to ask if they heard about you on the radio. And maybe that’s the real problem. Radio’s copywriting. It can’t be an afterthought done by your sales reps or one-armed-paperhanging production person who’s banging out spots for multiple stations and the web. Creating great radio commercial content is a specialized skill (don’t try this at home) and done right will not only benefit your advertisers, but your radio station’s TSL and the advertising rates you can charge for your service.

It’s time radio spent as much time worrying about the content of everything that isn’t considered entertainment as it does its personalities, its records, its news/talk programming.

We don’t have a minute to waste.

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Combined or Separate?

When I started in radio sales, the company I went to work for after leaving programming and operations ran an AM/FM combo that simulcast all of their programming. Selling for these two stations meant every spot sold was heard on both broadcast bands. (Piece of cake)

Then one day, the owner announced the signals were being split apart. The AM station would program an entirely different format from the FM station, but the sales team would be selling both separately programmed radio stations. (A two layer cake)

Anyone who has some history in the radio business will tell you the answer to the age old question of whether it’s better to field two separate sales teams for an AM/FM combo versus having one sales team. In fact they will give you a definitive answer: “it depends.” (Did someone leave my cake out in the rain?)

Before the radio industry could wrap their brain around this puzzle regarding sales staffing, along comes the Telcom Act of 1996 and companies now own clusters of radio stations. It was now possible for a cluster to number 5 or more radio stations serving a metro. (My cake is melting, melting. Did I mention I never really understood the lyrics to MacArthur Park?)

One brave company in Florida announced they were going with the single sales force concept for their nine station cluster. That got my attention as I was now in management. Well you can imagine I wanted to catch up with these folks at the next RAB Managing Sales Conference to find out how it was going. I did. I asked. The answer they gave me? “Oh well.” “Oh well?” I asked puzzled. They then explained it was very difficult to find radio sales person who could manage selling multiple formats (music, talk, sports, etc). They maybe had one person on their rather large sales team that could do it. A couple could handle maybe 50% of the cluster at the same time, but the rest maybe two radio stations in the cluster at most. The result was they abandoned the idea of one sales team selling everything.

Closer to home, I launched a print program at a cluster I was managing that had an AM station, an FM station and an LMA’d FM station. We had separate a separate sales team selling the LMA’d FM station and a combo sales team selling the owned AM/FM stations. It was decided that all sales people would now sell the new print program. I should explain the print program was actually two components. It was a quarterly coupon book distributed in five different mailing zones in the metro and then there was a calendar that was sold in all the mailing zones on an annual basis.

So, my sales force was now responsible for selling radio spots (and promotions) where you saw the advertiser today and he started in the next couple of days. A print coupon book where you saw the advertiser today and the ad would come out in the next quarter. And an ad in a calendar you sold today and it came out next year.

So how did that work out? Fabulously, actually. Till it didn’t.

What we would learn is it was a good way to launch and put immediate new revenue on the books. Over time the print program re-trained our radio sellers; which was an unintended consequence. They soon learned when an advertiser said they didn’t want radio ads; they had found themselves a print customer.

After an ownership change, I made the decision to break away our print program into a separate entity with its own management and sales people.

So it was no surprise when Borrell Research came out with their latest research study this week “2015 UPDATE: Assessing Local Digital Sales Forces” and it said that those companies that had sales people who were digitally focused produced more digital revenue than those that had one sales team selling everything. You can find the full report clicking on the hyper-link.

Quoting from Borrell’s Executive Summary: “The result is stark: Those with digital-only sellers report far greater confidence in their staff’s ability to understand market trends and clients’ digital needs, and they generate four times as much digital revenue. For instance, two different newspapers, each with a total of 22 sales reps, reported $7 million in digital sales last year and $360,000 in digital sales. The difference? One had seven digital-only reps; the other had none.

But before you get the idea that I’m taking the position separate is best, it really depends…..depends on the skill level of your sales people and their embracing of new technology and new ideas.

When I was starting out in radio sales I got to see and hear a lot of great sales trainers. One that I really liked was Don Beverage. Don would categorize sellers in one of four ways. They were “Commercial Visitors,” “Product-Oriented Peddlers,” “Problem Solvers,” or “Sustaining Resources.” See the snake in the wood pile when it comes to answering the question “Combined or Separate?”

If your sales team is made up of first three types of sellers, separate your sales force. If they are level four sales people, “Sustaining Resources” then you might win with a combined force.   But here’s one more twist. The very best sellers will be “Problem Solvers” with some of their clients and “Sustaining Resources” with others. Even Don Beverage was quick to point out that reaching the level of “Sustaining Resource” was being in rarified air.

So you know a “Sustaining Resource” level of selling is when the client believes in you so much that they pick up the phone and call you in BEFORE they take the first step in the advertising/marketing program. YOU are part of the team that will create and design the strategy and then plan out the tactical steps to get to the finish line and win.

So there you have it. Put on MacArthur Park by Richard Harris and spend the 7-minutes, 25-seconds and ponder what’s best for your operation.

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What Radio Could Learn from Vladimir Putin’s Dilemma

History never really repeats itself, but it often does rhyme with the past.

For the radio industry, today’s Internet is a challenge not unlike what the industry faced when TV began to take off in the 1950s. For Putin, the plummeting price of a barrel of oil is reminiscent of what happened in 1985 when the Saudis stopped protecting oil prices and focused instead on share of market. Then, as now, the Saudis decision is putting Russia in a corner.

Russia is dependent on oil and gas. The radio industry is dependent on the sale of radio commercials.

52% of Russia’s revenues and over 70% of its exports are oil and gas. 78% of radio’s revenues come from the sale of radio commercials.

See the similarity?

Gordon Borrell will be holding his 2015 Local Online Advertising Conference in New York City this coming March (https://www.borrellassociates.com/loac2015/) and the key note speaker will be investment banker Jim Dolan. In a comment promoting this conference, Dolan has been quoted as saying that valuations for companies with a strong digital presence will be much higher than for any company relying on legacy platforms for 50% of more of their income. (http://rbr.com/boring-in-on-digital/)

For Putin, 25 years after the last time the Saudis turned wide open their oil spigots the lessons not learned from past history have put this leader into corner. Radio has the lessons learned from the birth of TV.

Again quoting Dolan, “I think the smartest thing that legacy media managers can do is plow all of their free cash flow into digital products and services….it’s too late to knit a digital parachute when you’re falling off the cliff.”

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