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Analysis: When It Comes To ROI, Audio Punches Above Its Weight.

A just-released analysis of post-pandemic advertising business effects across 10 media channels and more than 140 brands — nearly 40% of those brands matched pre- and post-COVID — shows audio (including AM/FM radio, podcasts and streaming) ranks second among those 10 in short-term, and third in overall return on investment.

“Profit Ability 2: The New Business Case for Advertising,” conducted by measurement firms Gain Theory and Ebiquity in conjunction with media agencies EssenceMediacom, Mindshare, and Wavemaker UK, follows the original “Profit Ability” study in 2018, which focused on the business benefits of advertising. As reported in Westwood One’s weekly blog, the new research examined $2.2 billion in post-pandemic media spend from 2021 to 2023 to show how advertising drives profit over time by isolating the contribution of advertising from other factors that drive a business, such as pricing, distribution and seasonality.

Using ROI, which determines the profit payback from a dollar of advertising, the study shows that a dollar invested in audio will generate $3.12 of profit within one to 13 weeks, and $6.29 of profit from one week to two years, placing it second and third, respectively, in both measures among all media examined.

Additionally, when it comes to driving profit, audio generates 12% more profit than its share of the media budget, delivering 1.12% of profit volume at 1% of the budget — ranking third among media, and outscoring all digital platforms — while its profit payoff occurs equally in the short and long term.

“Audio punches above its weight in driving profit and is very well balanced in the time horizon of profit payout,” Cumulus Media/Westwood One Audio Active Group Chief Insights Officer Pierre Bouvard says. “Performance tactics like generic pay per click or online display mostly pay off in the short term (one week to 13 weeks), [while] media platforms like linear TV, broadcast video on demand, print, and out of home see the majority of their payoff in the long term (weeks 14 to year two). [With audio], half occurs within [each period].”

These breakouts are based on “Profit Ability 2’s” findings that 24% of advertising pays back in the same week, 18% of advertising profit impact occurs between week two and week 13, and 58% of advertising return occurs between week 14 and two years — referred to as “the 24%-18%-58% rule.”

“If you think the impact of your advertising will impact sales and profits mostly in the next few weeks or months, think again,” Bouvard says. “The vast majority of the sales effect of current advertising occurs four months to two years from now. Why? Few people are in the market for products and services in the short term.”

In the blog, Bouvard points out one other notable rule of advertising: the “95/5 rule,” as in only 5% of consumers are in the market at any time, suggesting a different approach for the other 95%. “Advertising needs to form around these two key strategies,” he says. “First, convert existing demand by reaching the 5% who are in the market, [which] usually takes the form of a sales event. Second, create future demand, focusing on the 95% of consumers who are not in the market, not thinking about the category, and not interested in a sales event. Often this is called brand building.”

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