Borrell Sees Growing Opportunities – And Competition – For Radio’s Digital Service Businesses.
Today, 64% of media companies operate a digital agency with a dedicated staff with Hubbard Radio’s 2060 Digital, Townsquare Interactive and Salem Media Group’s Salem Surround among those created by radio companies to work with clients regardless of whether they buy radio ads or not. The opportunities for these units continue to expand. A new report from Borrell Associates estimates $748 billion will be spent on digital services this year.
“Businesses now spend more than twice as much on digital marketing services as they do on advertising, which has existed for generations,” it says. “Considering that the digital services industry didn’t exist a generation ago, its growth has been extraordinary.”
The most money that will be spent is on web hosting services, which companies are expected to spend $159.1 million on this year. Search engine optimization or SEO is second at $101.8 million. It is followed by website design at $84.1 million and social media management at $70.6 million.
“While web hosting is usually the largest expense and typically accounts for one-fourth of total budgets, it’s not always the case,” says the report. “Also, the top three types of spending after hosting vary. For instance, real estate brokerage firms, agents, and developers spend their second-largest amount on SEO, while car dealerships spend it on video production.”
For reps looking to enlist clients, the richest opportunity likely lies with the local real estate agent. Not only is the house market overheated, but Borrell says real estate is the largest category for spending on digital services at $42 billion. Auto dealers and dealer groups are the second largest at $38.9 billion. And while the auto category is the top spending for online video production, restaurants and bars focus their digital spending more on web design, social media, and SEO. Borrell says during the pandemic, eating and drinking establishments have tapped into the social conservations to allow customers to dine out virtually. They have also needed to do more mundane tasks such as frequently update their hours of operation, delivery options, seating limitations, mask requirements, and online ordering.
Radio stations are audio experts, but Borrell’s data suggests positioning a cluster’s digital capabilities beyond that may be well-advised. That’s because Borrell’s Local Advertiser Survey conducted last fall found 11% of local advertisers said they expect to buy online audio or podcast advertising in 2021. That is up slightly from the 10% who said they used online audio in 2020. And of the one in ten that did place ads on a streaming service or podcast last year, the survey says they spent an average of $27,073.
“Though headlines make it appear podcasting is booming everywhere, it’s more of a national phenomenon. At the local level, streaming audio and podcasting continues to see low utilization,” says the report.
Yet the numbers also point to an opportunity for radio’s digital services teams. Borrell says 27% of those audio users said they developed and posted their own podcast last year with nearly half reporting they had someone on their own staff manage the project.
Borrell estimates local media companies operated 2,500 digital agencies across the U.S. last year and it expects that number to peak at about 2,600 this year. “Media agencies are likely to have reached a saturation point, with nearly two-thirds of all local media entities operating one and the other one-third not interested in doing so,” it says.
The report also says others, especially those without significant digital offerings, are likely to shut down, continuing a decade-long trend. But in their place, it expects to see more boutique niche agencies open in the coming years focused on specific services.
As competition heats up from independent agencies, many of whom will compete by creating category-specific or product-specific niches, Borrell says digital sales teams that have the best chance of succeeding are those that are scaling their business into a strategic competitive advantage by being able to serve both large and small customers with a broad array of product offerings.
“Media-sponsored digital agencies are likely to compete via differentiation,” its report predicts. “They will be experts at delivering marketing messages across multiple platforms – not just digital – to targeted audiences within a specific geographic area.” By doing so, Borrell thinks their revenues are likely to be “far larger” than the $3.3 million that the average independent digital agency bills today.
Read the full Scaling Digital Agencies report and register for a July 21 webinar on its findings HERE.