Radio’s Other BIG Web Opportunity

The pot of gold radio is chasing with its digital assets is forecast to hit $35.2 billion this year.  But that’s only the advertising piece of the local online marketplace. Borrell Associates data shows there’s a much larger opportunity beyond just selling banner ads and streaming audio and video.


The bigger digital prize, Borrell says, is in providing digital services to local businesses.   Local businesses will pay $260 billion this year to vendors to manage their online presence, according to Borrell.  “That’s where the money is,” CEO Gordon Borrell said during a recent webinar.  In fact, local businesses spend 10-times more on digital services than they do on digital advertising. “Digital advertising is really just a thin slice of everything spent by local businesses on digital marketing,” Borrell says.


Although Borrell identified 18 types of digital services, just four account for three fourths of all digital services spending for companies with less than 250 employees.  They’re what the company describes as the “digital basics:” web hosting, online agency/exchange fees (money collected for selling advertising on someone else’s site), Search Engine Optimization and web design and maintenance.  “As you’re prospecting, the smaller the business, the more likely they are to spend almost all of their money in those four categories,” Borrell says.


Although some radio companies have reported solid gains from selling social media and email management services, Borrell found there isn’t much money in those categories — each represents only 0.2% of the digital services spend. Others, such as South Central Communications, have found success going beyond selling just the “digital basics” into areas like website development.  “It’s not very profitable but they believe it’s a gateway product for getting more business,” Borrell says.


A growing number of radio companies are tapping into digital services as a new revenue stream, including Entercom, Hubbard Radio, NextMedia and Beasley Broadcast Group.   A January survey conducted by Borrell for the Radio Advertising Bureau found one out of three stations is selling digital services.  In some cases, companies have found that selling digital services produces higher margins than ad sales do.  The dominant category in what’s expected to total $260 billion in digital services spending this year is general merchandise stores.  The category, which includes department stores, big box retailers, warehouse club stores and country general stores, spends four times as much as the No. 2 category, which is all other business locations.


Other significant spenders include schools, employment services, hospitals and restaurants.   But Gordon Borrell cautions against prospecting “the smallest of the smalls.”  Local businesses that employ fewer than 10 people, such as locksmiths, barber shops and RV dealers, are ones to steer clear of, he says. Packaging up digital services for clients is said to be an important part of a successful digital services strategy.  “The real lesson is this isn’t sold in piecemeal,” Borrell says. “It is all bundled.”

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