All posts by Paul Jacobs

It’s Time To Go All-In With Digital Revenue: 5 To-Do Items For 2017

Paul JacobsBy: Paul Jacobs, President
jacapps, Bingham Farms, MI

It seems that virtually every day, someone writes a blog post or gives a speech outlining what radio needs to do to ward off threats that are off on the horizon. Radio faces many challenges, and it’s hard to come up with clear solutions that can be executed at the local level.

You’re not going to conjure up a competitive option to Spotify, nor are you in a position to negotiate with the car companies to ensure that radio will maintain its prime spot in the dashboard.

There’s a lot that’s out of your control.

But digital revenue is a significant opportunity for the radio business that is tangible and has a low barrier of entry. Every station can participate whether you’re in a big market or in an unrated one. On top of that, the shift of local dollars to digital is happening quickly and local radio stations can be in position to capitalize on it.

Whenever I visit with a new sales staff, I start the meeting with a simple question:

“How many of you would like to make more money this year than last year?”

It’s a loaded question, and of course, every single hand in the room goes straight up. These are salespeople and we all know what motivates them. But I then follow it up with a simple statement that stops the room dead:

“Then stop selling radio.”

Before I give them a chance to start pushing back, I then explain the obvious: radio revenue is flat, and there’s no projection of substantial growth on the near-term horizon.

So, if a radio station wants to grow its revenue, the only solution is to diversify the approach and go all-in to re-structure the sales effort. This translates to instituting a higher level of sales expertise, as well as digital product development in order to take advantage of where local dollars are heading.

BIA/Kelsey just released their local revenue forecast and you can sum it up in one word: DIGITAL.

Here’s how they start off the report:

If there was any doubt that the future of local advertising is digital, the latest local ad revenue forecast from BIA/Kelsey confirms that revenue from local-focused online ads will exceed that of traditional ads aimed at local audiences by 2018.

Please note that in the pie chart below, we aren’t talking about national data – this is where local dollars are going – the dollars that your sales team fights for every day. And if their main focus is on traditional spot business without a strong digital effort, then sadly, it’s not a fair fight.

jacobs-111516

Here are three key points from the study:

  • Advertising in local traditional media is forecast to fall 2.4% from 2016 to 2017
  • During this same time period, local digital advertising, including mobile, will increase by 13.5%
  • And while radio is taking a nice 9.6% of local over-the-air revenue, it’s digital haul is less than 1%

Click here for the rest of the study.

With this information in hand, here are five things to consider implementing in order to take advantage of the digital shifting of dollars:

1. It starts at the top – As someone who owns a mobile company, I have learned that a digital enterprise works very differently from a traditional business like broadcast radio. It has different rules, language, sensibility and culture.

In order to compete in this arena, your digital program can’t be an add-on feature. It requires commitment from top management of the station (or the company). Sales managers either need to become well-versed in the digital space or a Digital Sales Manager – possibly someone from outside of the radio industry – should be brought in. And it requires its own goals and P&L in order to provide accountability throughout the organization.

2. Create a digital sales culture – Clients who make decisions about digital media work by different rules and metrics than traditional media buyers. They use different language and assess value using different metrics. In many cases, it’s not even the traditional spot media buyer your AE is used to pitching. Nielsen doesn’t have currency in this world. While radio focuses on reach and frequency, the digital scorecard is based on measurable ROI. Traditional radio salespeople aspire to deliver hundreds of thousands of listeners in the hope that some of them respond to an ad. In the digital space, hundreds of listeners that take the desired action may be considered a success.

This culture shift requires a review of the way sales commissions and bonuses are paid, leading to the achievement of real digital revenue goals in order to increase compensation.

3. Create digital products – Making banners available for sales does not constitute a comprehensive digital strategy. They are weak advertisements that have the lowest value to clients. In order to generate significant digital dollars, we encourage you to invest in the creation of digital products. These are programs outside of your normal broadcast efforts.

For example, there is a major surge of interest in podcasting, and revenue has followed. We are working with many different clients on the creation of a local podcast strategy and are available to speak with you. There are many different approaches that we have studied and we have an in-house expert – Seth Resler – here to help.

It is also time to truly take advantage of the mobile revolution. BIA/Kelsey finds that mobile revenue has surpassed radio, yet most radio stations have an app. The problem is, too many stations are trying to sell mobile like it’s radio, with banners and ad insertions instead of by developing true digital opportunities in their apps.

Mobile presents so many other opportunities for radio. Stations should consider creating local guides (think Yelp). Hometown bar or restaurant guides with local listings create a scalable revenue opportunity through sponsorships and participation fees. Your mobile app should be able to accommodate multiple sponsorship and content enhancement opportunities that can be monetized.

jacapps has been in the app business for over eight years. We understand this space and no matter if we’ve developed your app or not, let’s get on the phone and discuss the multitude of ways your station can generate mobile revenue.

4. Change the scorecard – Historically, the only currency that truly matters in radio is audience ratings. It’s always been that way and not a whole lot has changed. Advertising revenue is dependent on ratings performance, so when asked to promote a stream or a mobile app, many programmers understandably balk. The success of their careers is based on ratings, not clicks. The same holds true for most air personalities, and by association, GMs and Sales Managers. I haven’t spoken to too many of our clients who enthusiastically share the number of podcast or mobile app downloads they have, or their streaming ranking on ComScore.

Realizing that radio cannot abandon its major source of revenue and the ratings results that pay the bills, it is still logical that in order to focus on growth, the definition of success needs to expand and evolve. Bonuses need to be broadened to reflect digital engagement and growth. Sales goals need to encompass all potential revenue channels. Research studies must include questions about digital and not just the music styles a station “owns” or its perceptions among the other stations on the dial.

The way radio does business is deeply entrenched. But the foundation that scales to produce revenue is shifting. A mindset change in radio won’t be immediate, but it is imperative in order to maximize this opportunity.

5. Modify job descriptions – Hiring salespeople with great contacts among traditional media buyers is no longer sufficient. Yes, these relationships are important, but marketing has devolved into a commodity-based relationship. Programmatic buying is removing the importance of selling, connections and relationships. And spot radio revenue is flat. The case for change writes itself.

In 2017, it’s time to review all job descriptions, especially on the sales side of the building. We are living in a digital world and salespeople who refuse to adapt will eventually go the way of the dinosaur – or the buggy whip maker. The status quo will cost your station revenue growth opportunities.

But it doesn’t end in the cubicles. Programmers and GMs that don’t understand or grasp the potential of digital also minimize the opportunity.

Job descriptions at all levels of the operation require reassessment. This is about changing a long-standing culture built around traditional radio. That’s the industry I joined back in the 1970s (yes, the ‘70s). But that world has changed and it’s necessary to think differently when hiring and setting expectations. There’s no going back.

This shouldn’t be taken as another think piece on what radio should do. It’s about what radio must do. If your station or company is already down this path, go all-in. If you haven’t, get started yesterday. This is where the dollars are moving and where growth lies. It’s not a theory. It’s not a bet. It’s reality.

I am available to speak with you about this in greater detail to identify ways your operation can take advantage of this opportunity. I hope 2016 was a successful year for you and your station and look forward to even greater success in the new year.

Editor’s Note: The views and opinions of the above article do not necessarily reflect those of the MAB. Contact the MAB for information on the MAB’s official editorial policy.