Driving Revenue-Generating Strategies Through Information and Insights - NAB Show 2014

Driving Revenue-Generating Strategies Through Information

and Insights (What Radio Execs Don’t Know Can Hurt Them)

Tom Buono CEO & Founder, BIA/Kelsey

April 2014

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Overview of Presentation

• Insights from Advertisers and Consumers

• Understanding National Advertising Trends

• Drilling Down into Local Advertising Markets

• Conclusions


Insights on the Changing Advertiser and Consumer


Question 1: How Many Different Media does the Typical SMB Use?


The Answer is…

AVERAGE NUMBER OF DIFFERENT MEDIA USED FOR ADVERTISING &

PROMOTION

Source: BIA/Kelsey LCM Wave 17 (Q3/2013); LCM Wave 16 (Q3/2012).

BIGGEST LOSERS (IN SMB USAGE):

• Directories • Cable TV • Newspapers • Outdoor


Question 2: How Active are SMBs with regards to Social Media?


Very Active and its Increasing

Source: Local Commerce Monitor” (LCM – Wave 17), BIA/Kelsey’s ongoing study of the advertising behaviors of small and medium-sized businesses (SMBs)

Social is becoming a more significant aspect of their business


Question 3: How Satisfied are SMBs with their Radio Spend?


Some are Very Satisfied

• 36% of Radio SMB Advertisers rate their performance on radio as either

Extraordinary or Excellent


What do we know about the typical SMB Advertising on Radio ?


Of this Group (that advertise on radio)

• A net 49% expect to increase their advertising spend over the next 12 months

• 48% frequently track their business leads

• 44% use Radio as their channel to purchase on-line ads

• 62% have a loyalty program

• They get 26% of their business from daily deals and promotions


Consumer Behavior is also Changing

SOME RECENT FINDINGS: Consumers use a wide variety of both traditional

and digital media to find and shop for local services and products This behavior parallels the fragmentation seen in

use of media by small businesses. Consumers are making more appointments online

for services like auto, beauty, and healthcare.


Understanding Nationwide Local Advertising

(The Pie is Bigger and the Competition is a Changing)


Radio got 11.3% of the Local Advertising Spend in 2013

We estimate Radio generated $15 Billion in Local Advertising in 2013, with a little over $500 million, coming from on-line/interactive Radio out of a Total Local Market of $133.2 Billion.

Direct Mail 27.2%

TV 15.2% Newspapers

15.8%

Radio 11.3% Print YP

3.4%

Online 9.1%

Out-Of-Home 5.6%

Magazines 2.0%

Cable TV 5.3% Internet YP

1.6%

ERPM 1.4%

Mobile 2.1%


But, Online Advertising will Exceed Radio Advertising by 2017

We estimate Radio will generate $16.9 Billion in Local Advertising in 2017, with over $900 million coming from on-line/interactive, out of a Total Local Market of $152 Billion.

Direct Mail 24.6%

TV 15.1%

Newspapers 11.5%

Radio 11.1%

Print YP 1.5%

Online 11.7%

Out-Of-Home 6.0%

Magazines 1.7%

Cable TV 5.8%

Internet YP 1.9%

ERPM 1.9% Mobile

7.1%


The Local Advertising Pie is Increasing, but Only on the Online Side

$105.3 $106.3 $104.5 $106.4 $104.9 $105.9

$27.9 $31.7 $36.2 $40.7 $46.6 $52.7

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

2013 2014 2015 2016 2017 2018

Traditional Online/Digital

US

$ B

illio

ns

Note: Numbers are rounded.

2013-2018 CAGRs:

Total Media CAGR 3.6%

Traditional Media

CAGR 0.1%

Online/Digital Media

CAGR 13.6%

$138.0

Note: Numbers are rounded.

$133.2 $140.7 $147.1 $151.5 $158.6


Local Radio is Strong in Key Verticals

Local RADIO advertising is diverse, generating over 10% of its advertising from five different verticals: Retail (18%), Financial/Insurance (17%), Restaurants (14.5%), Automotive (14%) and Technology (10%)

- VS -

DIRECT MAIL dominates ad spend by local retail advertising, garnering over 43% of total retail advertising in 2013

Despite declines in NEWSPAPER circulation, local advertising on Newspaper was $21 billion in 2013, representing 15.8% of total advertising and second only to Direct Mail

TELEVISION still dominates the local Automotive advertising vertical, as well as the local Government/Political/Religion (“GPR”) vertical

BIA/Kelsey’ Media Ad View Plus Forecast


Online Ads are Accelerating in Key Verticals ONLINE local advertising will exceed $1 billion in 2013 for six different advertising categories. Top two:

TECHNOLOGY ($2.1B) RETAIL ($1.8B)

ONLINE and MOBILE are the top growing ad channels. By 2017: REAL ESTATE will increase its online ad spend to 40.8%

AUTOMOTIVE dealers will focus on video, spending 11.4% of their $2.4 billion online ad budget on video display

Quick service RESTAURANT category (subset of restaurants) will increase its online spending from $434.4 million to $618.6 million


Drilling Down in your Local Advertising Market

(Where the Rubber meets the Road)


The Las Vegas Example: The Market

• Market Rank: 42

• Population: 2.0 million

• 30% Hispanic/10.9% Black/10.2% Asian

• 435,000 men, 419,000 Women Age 25-54

• Retail Sales: $30.5 billion


Las Vegas Radio Competition

• 46 commercial stations; 31 FM, 15 AM

• 20 stations considered viable

• $76.1 million in Radio Revenue ($4.3 million on-line)

• 4 Groups account for 77% of revenue (Lotus-23%, CBS

20%, Beasley 18%, Clear Channel 16%)


But, That is only part of the Story

There was $940 million spent on Local Advertising in Las Vegas in 2013. Radio got just 8.2% of the Total Spend. This was less than the Nationwide average of 11.1% and

Direct Mail got 26.2%

TV got 17.7%

Newspaper got 14.9%

Pure On-line got 9.2%

Mobile got 2.2%


Radio’s spend is projected to grow to $86.7 million in 2017 (slight decline to 7.8%), as the local Las Vegas Advertising Pie grows to $1.1 billion, and

Direct Mail declines from 26.2% to 23.9%

TV declines from 17.7% to 16.8%

Newspaper declines from 14.9% to 10.9%

while

Pure On-line increase from 9.2% to 12.0%

and Mobile increases from 2.2% to 7.3%***

and More Importantly…


Drilling Down into Verticals…

Radio Advertising’s $9.8 million in Las Vegas Automobile Advertising in 2013 represented 8.0% of the $123.0 million spent in Local Advertising

Cable TV 8.8%

Direct Mail 12.2%

ERPM 0.6%

Internet YP 0.6%

Magazines 2.1% Mobile

1.2% Newspaper

17.4% Online 8.2% OOH

1.9%

Print YP 1.0%

Radio 8.0%

Television 38.0%


And that…

as the Auto Spend grows to $137.7 million in 2017, Radio’s share is projected to increase to 9.0% ($12.4 million).

Cable TV 10.6% Direct Mail

8.8%

ERPM 1.0%

Internet YP 0.8%

Magazines 1.8% Mobile

5.0%

Newspaper 11.8% Online

13.1% OOH 2.1%

Print YP 0.4%

Radio 9.0%

Television 35.7%


Plus,…

for some reason Las Vegas is not a good market related to Automobile Advertising since Radio as a whole got 11.4% in 2013 and this is projected to grow to 13.1% in 2017

Cable TV 8.1% Direct Mail

9.3% ERPM 1.0%

Internet YP 0.8% Magazines

1.2%

Mobile 4.9%

Newspaper 12.8%

Online 13.0% OOH

2.3%

Print YP 0.4%

Radio 13.1%

Television 33.1%


There are Some Key Verticals to Watch

The decline in Newspaper circulation and advertising in Las Vegas creates a real opportunity for the local radio stations to develop sales strategies. 2013 2017

Automobile 17.4% 11.8% Health Care 14.7% 11.6% Real Estate 19.2% 5.7% Retail 18.9% 14.1% Restaurants 8.8% 7.1%


And Online Spending is Exploding for Certain Other Verticals in Las Vegas

Search 40.4%

Video Display

9.5%

Other Display

7.7%

Classified/Verticals 42.5%

2013: $3.5 Million

Search 39.5%

Video Display 13.6%

Other Display

5.4%

Classified/Verticals 41.5%

2017: $5.5 Million

Full Service Restaurants



Conclusions

• Changing Consumer and Advertiser Behavior and Advertising Trends in Other Local Media will Identify Opportunities and Threats in the Different Business Verticals. • National Trends are interesting, but Radio Executives must drill down into what is happening in their Entire Local Advertising Market (not just the Radio Market) • Armed with this knowledge, strategies can be developed and your Sales Force mobilized and positioned for consultative sales in Targeted Business Verticals.

Thank You

Tom Buono [email protected]

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Driving Revenue-Generating Strategies Through Information and Insights - NAB Show 2014

Presentations & Public Speaking