While traditional media currently dominate the local ad market, a steady shift to digital will continue over the next five years.
So the key to revenue growth is selling more web space, right? Before getting too excited, let’s look at how well the strategy has worked for newspaper.
Last year, newspaper print revenue dropped about $10 billion, to about $24.8 billion. Even online revenue dropped, from $3.1 billion to $2.7 billion.
So despite investing years and millions of dollars to develop an online presence, only 10% of newspaper revenues come from their online product. Despite their efforts, nearly $22 billion of revenue has simply evaporated.
But it is hard to feel too sorry for print. In 2009, local radio revenue was only $13.2 billion. Print is all but dead and buried, and yet the medium was still able to out-bill radio by $11.6 billion in print, and another $1.4 billion online.
Isn’t radio barking up the wrong tree? Why all the focus on growing radio’s Internet revenue, when newspaper print dollars look so vulnerable?
Sure the Internet has all the attention and momentum. It’s the trendy place to advertise. Yes, one day radio may need to count on Internet dollars. However, if newspaper’s experience is any indication, radio will be trading broadcast dollars for Internet pennies.
Maybe in the short run radio should be focused more on taking newspaper’s print dollars.
One of the most theatrical moments of the traditional radio sales meeting has been the sales manager throwing a stack of newspaper ads in the middle of the conference table noting that none of the businesses are buying radio time.
Yet over the first half of this decade radio revenue as a percentage of newspaper revenue barely budged. Radio began the decade generating about 39% of newspaper’s revenue. Five years later as newspaper began to fade, radio was only at 40%.
Today radio is doing better, not because radio is growing, but because newspaper revenue is dropping faster. What would happen if radio made a concerted effort to take newspaper's money?
Radio's hyper-local Internet efforts target newspaper's online dollars, but there isn't a lot of money in it. The real money is targeting newspaper's print dollars.
In 2009, newspaper and local radio together billed $38 billion excluding network radio and online revenue. If we just pulled even with newspaper, radio would be back to the kind of money the medium was billing at the beginning of the decade. Radio won’t achieve that any time soon with online revenue.