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Digital-Broadcast Combo Propels Q3 Ad Recovery At iHeartMedia.

The strong growth potential of its digital business and the ongoing recovery of its radio business were top themes for iHeartMedia during its third quarter call with investors Thursday. The company reported revenue grew 25% year over year to $928 million.

The Digital Audio Group continued its torrid pace with a 77% year-over-year revenue gain. It is also growing in importance to the overall enterprise, with billings that are about a third the size of the larger Multiplatform Group, thanks to revenues that more than doubled over the last five quarters. Management told investors they expect Digital Audio Group billings to catch up and surpass the Multiplatform Group, thanks in part to the runaway growth of podcasting, which saw revenue soar 184% in the quarter. Attracted to it and other high growth assets like streaming audio, advertisers continue to pour more money into digital audio.

“Our podcast business continues to reach new levels for revenue, profitability, listenership and downloads,” Chairman and CEO Bob Pittman said. Meanwhile, non-podcast digital advertising, including streaming, display advertising and digital services, grew 51% year over year.

‘Well On Way’ To 2019 Levels

The Multiplatform Group, which includes iHeart’s 850 radio stations, assorted networks, and the Katz Media Group rep firm, saw revenues grow 19% year over year. Compared to Q3 2019, that’s down 17%, continuing a sequential improvement from -21% in Q2 and -26% in Q1. Pittman said the numbers prove the division is “well on their way to recovering to 2019 levels, and that they will continue to grow.”

While broadcast revenues rose 20% year-over-year, billings from SmartAudio sales – which sells the same broadcast inventory using data and digital ad tech – jumped 43%. That demonstrates the appeal to advertisers of buying traditional media in the same way they buy digital media, President, COO and CFO Rich Bressler said. As iHeart continues to add new technologies and data capabilities, Bressler said they expect to the SmartAudio product will pull revenue from digital and TV ad budgets.

Network revenues increased 8%, including a 2% year-over-year uptick at Premiere Networks, which Bressler said was less impacted by COVID, and a 14% increase at the Total Traffic & Weather Network.

Narrowing the gap with its pre-COVID numbers, iHeart says its third quarter 2021 revenue is now 98% of its Q3 2019 revenue and that it remains on track to hit 2019 earnings levels by the end of 2021.

Along with growing revenue, the company saw is profit margins improve to 32% for the Multiplatform Group and to 33% for the Digital Audio Group.

Expanding Audio Pie

Stepping back to give investors a broader look at the entire audio ecosystem, Pittman noted that 75% of audio listening goes to broadcast radio and 25% to streaming services like Spotify and Apple Music. In addition to a size advantage, higher commercial spotloads are more acceptable on broadcast radio than on streaming services, Pittman said. “Commercials are native content on radio, but they are interruptions to the music collection.”

As new listening platforms are added, the size of the audio pie is increasing to the point where it now accounts for 31% of media time, according to a recent study by WARC, while TV consumption has fallen to 24%. With 40% of TV viewers classified as light TV viewers, Pittman argued that TV as an advertising medium now faces “a significant reach gap,” one that broadcast radio is “uniquely capable of filling” since it reaches 90% of light TV viewers. However, only 9% of advertising spend currently goes to audio, suggesting that some advertisers have been slow to react to this new reality.

Post-Cookie Ad World

As new privacy safeguards have the digital ad world preparing for life without cookies and mobile IDs, Pittman said the company is well positioned to benefit from what will be a significant change in digital ad targeting. With all the first party data the company has collected on iHeartRadio users, combined with investments in data, analytics and technology, it can now target “cohorts” or like-minded groups such as auto buyers or new parents – across audio platforms. “We believe that cohorts are replacing one-to-one marketing, and we think we are well positioned for the shift toward data-infused ad buys due to the changes in privacy restrictions and other factors,” Pitman said. “We see the world moving past one-to-one targeting, past cookies, past mobile IDs and toward premium platforms that are brand safe, measurable, and that have real scale like ours.”

Turning to other financial metrics, expenses increased 17% in Q3, mainly from the return of employee bonuses and increased headcount in the Digital Audio Group.“Last year, the vast majority of our employees did not get paid a bonus,” Bressler reminded investors. He also touched on “the accelerated consolidation of our real estate footprint,” in which the company is downsizing and consolidating station facilities as it transitions to a new hybrid workplace model that has been dubbed a “New Work Environment.”

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