Why the Web Can't Be Ignored
By Gordon Borrell

My jaw dropped the other day when I read in Inside Radio a discussion of how radio operators should approach Internet advertising. The message: Don’t overestimate the Internet opportunity, don’t be distracted by it, and treat it as a brand extension.

Wow. The last time a new medium as significant as the Internet came along, the radio industry took the exact opposite approach – and won Big Time.

It was 60 years ago, and the new medium was television. Many radio stations did indeed believe in the “brand extension” idea and carried their call letters over to the broadcast TV medium. But think of how disastrous the result might have been if they were advised not to overestimate the TV opportunity, not be distracted by it, and to merely use it as a product extension.

The cold, hard facts are this: The Internet has followed the same growth patterns in terms of consumer and advertiser acceptance as television did in its first 15 years. As an advertising medium, the Internet is already larger than radio. It will approach $34 billion this year and is on a trajectory to overtake newspaper advertising within five years. In virtually all markets, the largest local Web site (typically run by a newspaper company) is now grossing more ad revenue than the largest radio station in that market. In some markets, the largest site is grossing more than the largest cluster of stations.

Don’t overestimate the Internet opportunity? That’s like telling your ten-year-old, “Listen, son, most people in our family are shorter than average, so stop watching basketball and stop wanting to eat so much.”

Here’s another cold, hard fact...and I’m truly sorry to have to tell you this. Your radio reps have a bounty on their heads. We survey more than 3,000 local Web sites every year about their revenues, expenses, number of salespeople and other revenue-related topics. The ones with the greatest market share and revenue have an interesting characteristic in common: a star-performing “former radio rep” on the sales staff. The word has spread that radio salespeople know how to sell the Internet, and newspaper and TV Web site managers have been recruiting them left and right. Radio reps know how to cold-call, how to generate new business, and how to sell reach and frequency. That’s a perfect match for Internet sales.

While the newspapers and TV stations seized a combined $3.9 billion in online ad sales last year employing a growing battalion of online-only sales reps, radio Web sites garnered a paltry $190 million using…well, radio reps.

In my humble opinion, the radio industry has forgotten its entrepreneurial history. It is underestimating this new opportunity and has been deluded into thinking its reps can simultaneously sell radio and Internet advertising. They can’t – at least not to any great extent. This problem is not unique to radio. Show me a single instance where a rep is selling two separate media and achieving a significant share of advertising in both, and I’ll buy you dinner and stand outside and watch you eat it.

Frankly, I’m surprised by your industry. Radio is an extremely creative, interactive, and niche-oriented medium. Those are the same attributes ascribed to the Internet. Radio is missing opportunities to recapture the lost youth segment online by creating localized versions of MySpace or Facebook. It is missing opportunities to leverage its entertainment expertise by creating sites like Metromix to reach a broader and entirely new audience. It is missing the opportunity to use the Internet as a publishing and broadcasting platform to dig into newspapers’ classifieds franchise, yellow pages’ directory franchise, and broadcast TV and cable’s video advertising.

In short, by viewing the Internet as a distraction and trying to manage it with internal sales teams, the radio industry is missing the boat.

--Gordon Borrell is CEO of Borrell Associates Inc. The opinions expressed are his own. He can be contacted at gborrell@borrellassociates.com.

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