• by Erik Sass  @eriksass1, November 29, 2011

Total radio advertising revenues will increase 3.5% in 2012 to just under $14.6 billion, buoyed by political advertising in a fiercely contested election year, as well as the continuing growth of digital ad revenues, according to the most recent edition of BIA/Kelsey’s quarterly “Investing In Radio” market report.

This follows a lackluster 2011: BIA/Kelsey is estimating that total radio ad revenues will increase just 1.2% to $14.1 billion this year.

The BIA/Kelsey forecast, according to vice president Mark Fratrik, reflects that “it's been a year of nominal growth for the radio industry, as advertisers remain cautious about spending their ad dollars in this sluggish economy."  However, he stated that a more significant increase in the average value of station transactions “underscores radio's continuing ability to effectively reach and monetize local audiences via its proven business model. This is a positive situation, considering the considerable dollars at stake during next year's election.”

Radio is also enjoying substantial growth in digital ad revenues, which are set to grow 18.3% from $405 million in 2010 to $479 million in 2011, then an additional 15% to $551 million in 2012.

By 2015, BIA/Kelsey expects digital revenues to reach $758 million, compared to $16.6 billion for over-the-air revenues. This works out to a cumulative annual growth rate of 13.4% for digital revenues over the next four years. In this forecast, in proportional terms, digital revenues will increase from 2.8% of total radio revenues in 2011 to about 4.4% in 2015.

The continued rise in digital revenues will be driven partly by the growing popularity of daily deals, according to BIA/Kelsey Vice President Peter Krasilovsky, who stated: “Local radio stations are a natural participant in the deals space… Stations typically participate in deals with links to their Web sites, or in partnership with other deals sites.”