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Borrell: Half Of Local Ad Buyers, 78% Of Local Agencies Use Radio.

Roughly half of local direct ad buyers (49%) and three fourths of local ad agencies (78%) are purchasing AM/FM radio advertising, according to Borrell Associates’ latest survey of 2,318 local ad buyers and ad agencies.

Among local direct buyers, only social media (65%) and event/sponsorships (54%) are more widely used among the 19 types of advertising included in the survey, which was fielded from March-May 2023. Among agency buyers, AM/FM radio tied for first place with social media for the most used media channel.

The biannual research, solicited through the client/prospect lists of media companies, included two separate surveys: one of direct buyers with 1,983 respondents and one of ad agencies with 359 respondents.

While radio scored within the top three for usage, it ranked sixth in spending rate – the average local direct radio buyer invested $34,167 in the medium annually. That placed radio in the High Adoption, Low Spending quadrant of Borrell’s Ad Usage & Spending Matrix, offering more evidence that what Nielsen has consistently shown to be the top reach medium is underutilized by advertisers. Conversely, broadcast TV and cable TV appear in the Low Adoption, High Spending quadrant. Search engine marketing (used by 46% of local direct respondents with an average annual investment of $71,393) was the only ad type to make the High, Adoption, High Spending quadrant.

Meanwhile, 15% of local direct ad buyers said they are buying streaming audio, investing an average of $18,307 in the channel, which includes digital pureplays, the online streams of broadcast radio stations, and podcasts. While podcasting and streaming audio usage continues to grow, most streaming ad dollars are placed by ad agencies, not local direct ad buyers. “Very few local advertisers are buying any type of streaming audio ads but that doesn't mean it's not effective,” Borrell Associates CEO Gordon Borrell said Thursday during a webinar presentation of the results. “It just means it hasn't really caught on and there probably isn't a great deal of local targeted geographic programming for an advertiser to purchase. But the agencies are pretty hot on it.”

Opportunity: Underinvested Advertisers

Local direct ad buyers spend an average of $128,300 annually on all advertising, or about 4.6% of their gross revenue. Yet well over 50% of respondents are spending less than 2% of their gross revenue on advertising. Borrell called that an opportunity for media sellers. “It's remarkable to me they can stay in business spending less than 2% of gross revenues on advertising. That’s probably why their business is shrinking, or at least flatlined,” he said. “It's a big opportunity here to convince advertisers that you are a marketing expert, you have some information that can help them, and advertising is an investment that is going to help their business grow.”

To get a handle on what ad types are hot (and not) this year, the survey asked ad buyers which channels they planned to increase or start buying and which ones they intend to trim or eliminate. Social media, search engine marketing, banner ads and event/sponsorships topped the “hot list.” Newspapers, outdoor, printed directories, and magazines had the dubious distinction of dominating the “not list” among local direct buyers.

Radio came in the middle with a more or less equal number of direct buyers who planned to increase/start buying it as those who intend to trim/eliminate. Borrell Executive VP Corey Elliot said this implies advertiser churn is occurring at radio. “You have as many people leaving as you have coming in,” he said.

The high placement of events/sponsorships signals blue sky for radio and other media that produce events. “We think a lot of folks have forgotten this event sponsorship opportunity,” Borrell said. “Advertisers are telling us they love it and they're willing to spend a significant amount of money on it – over $20,000 a year on sponsoring events.”

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