• by Pat Higbie , Op-Ed Contributor, February 17, 2016

In January, Harmelin Media released a forecast for 2016 that predicts a 5.2% rise in U.S. advertising spend. That is good news after the anemic 1.9% growth in 2015. However, broadcast radio will note this commentary on the forecast: “Radio advertising spending is forecast to be flat in 2016 despite all the anticipated election money.”

What would the forecast be without election year spending? A decline?

Like any forecast, you may be able to criticize it for methodology or other shortcomings, but history is on its side. RAB data show flat broadcast radio revenues for the past several years.

The only growth has come from off-air and digital properties. A recent analysis of this trend last year concluded that when you account for inflation, total industry revenue has actually contracted by 6.7%. This correlates closely with a 7.4% decline in time spent listening to broadcast radio over the past five years.

The Silver Lining For Radio

However, this is not an entirely doom and gloom story.

Radio’s core broadcast assets remain meaningful, and there is a bright spot in both RAB data and broad industry trends: Digital advertising revenue is growing fast and mobile is the biggest component.

Radio broadcasters reported $889 million in digital revenue for 2014 with a five-year 58% growth and eMarketer put the 2015 U.S. Internet radio advertising market at $2.75 billion. That was up from $2 billion a year earlier.

This is an opportunity for broadcasters that shift their perspective of thinking about digital audio as niche add-on to their live station transmission. Although many radio sales professionals treat digital and mobile properties as freebie incentives for broadcast spot advertisers, it really should be presented as a premium ad format. Industry revenue growth is locked up in the underdeveloped and under-appreciated digital mobile assets.

Why Digital Mobile Is Premium

Digital mobile ad inventory is a premium asset because mobile audio provides more value to advertisers. Mobile audio advertising is:

1. Measurable –  You can show advertisers exactly what was delivered, when and to whom.
2. Interactive – A recent interactive audio ad campaign for a Boston radio station enabled listeners to respond to the ad by voice and it automatically brought up a map to AutoZone’s nearest auto parts store. Another interactive ad for SafeLite connected a phone call. Instant conversion isn’t an option in the one-way terrestrial broadcast.
3. Successful – The two interactive audio ad campaigns mentioned above drove 4%-6% conversion rates. These represent conversion rates 20 times higher than visual mobile ad formats.

It means mobile audio apps can effectively compete for U.S. mobile ad spending that eMarketer estimates will be $42 billion in 2016. That is almost three times larger than the entire U.S. radio spot and network advertising revenue combined.

What Do The Trends Tell Us? Go Digital. Go Mobile.

Since many broadcasters are not investing in their mobile apps, the pure play Internet radio services are picking up listeners and revenue. However, several innovative broadcasters such as Entercom are distributing their radio content through mobile apps on demand. This opens up an entirely new revenue source that represents both expanded inventory and access to new advertising dollars.

There is increasing competition for consumer attention with the rise of online video and audio streaming. There is also a rapid shift in consumer listening habits to mobile devices. Radio still has tremendous audience reach, but all of the growth in listening time and advertising revenue is driven by mobile.

Broadcasters should have digital offerings to protect against audience erosion, but also as a source of revenue growth. This doesn’t have to be a negative trend line for broadcasters. Their current audience, listener knowledge and programming expertise can ensure digital audio listeners remain radio listeners.

However, this will require a change in perspective. Mobile is a premium asset for broadcast radio. It’s time to treat it that way.