Local advertisers spend billions each year to reach consumers, but outside of a handful of radio-produced podcasts the industry has largely not yet capitalized on the opportunity. But that may be changing as marketers wake-up to the growing reach of online audio. In its new local ad forecast, Borrell Associates projects streaming audio ad sales will grow 17.8% this year – with only streaming video OTT services growing at a faster rate.
“Right now on a local level, it’s such a small base, so when you increase that base a little bit, you can get those high percentage numbers,” explained Corey Elliott, Borrell’s Executive VP, Local Market Intelligence.
Yet streaming audio is also forecast to grow at three-times the pace of its traditional audio sibling AM/FM radio, which Borrell expects will see growth of 5.4% among local advertisers this year.
Overall, Borrell predicts local advertising spending will increase 7.6% year-over-year in 2022. That is smaller than the 10.1% ad rebound seen last year but it is ahead of the growth the local market experienced in 2019 (+1.3%) and 2018 (+5.3%).
“We are nearing the end of a two year pendulum swing that is during the pandemic – and normal is just arriving,” said CEO Gordon Borrell during a webinar this week.
The gains for streaming audio comes as Borrell says digital media’s share of local ad dollars rose ten points during the pandemic. It estimates two-thirds (67%) of local ad spending will go to digital media this year, up from 57% in 2019.
Swing In Advertiser Attitudes
With concerns about record high inflation, soaring gas prices, the war in Ukraine, and high interest rates hanging over their heads, the mood of local advertisers has soured in recent months. Borrell’s latest survey of local advertisers shows 51% expect economic conditions for small businesses to worsen in the next six months. That compares to 35% who said that in February. And a year ago, only 19% had such a pessimistic outlook.
That change in attitude is having an impact on what local advertisers are spending. In May 2022, two in ten local advertisers told Borrell they will spend less on advertising, two in ten said more and 54% said about the same. That compares to May 2021, when 11% said less, 31% indicated more and 56% the same.
“It's going to get a little tight for the remainder of the year,” said Borrell.
Even though clients are taking a harder look at their budgets, local ad agencies tell Borrell that streaming audio is in high demand in 2022. Nearly half – 47% -- said their clients want to allocate dollars on podcasts and other streaming audio options. And 39% said the same about broadcast radio.
“They're not putting the brakes on totally like they did back in March of 2020,” Elliott said.
The media with the biggest interest according to local ad agencies are streaming video, something three-quarters of their clients are focused on, with two-thirds also putting social media ads high in their list of priorities.
One potential challenge podcasts could face if the economy takes a turn for the worse as some predict, is its pricing. Podcast CPMs average $23.33 according to Borrell, or more than three-times radio’s average $6.75 CPM, with only television more expensive on a CPM basis than podcasting.
“If you have a medium that is really, really inexpensive. It's just really easy to prove ROI on something like that,” said Borrel.
The report also showed that geographical variances are expected to be huge. Baton Rouge, which is just now starting to recover, will see 29% year-over-year growth in local ad sales according to Borrell, while San Jose will decline 5%. There are also new types of advertisers rising.
“The data that we're seeing shows that there's a changing face in local markets of advertisers,” said Borrell. “They're not the same ones that we saw seven or ten years ago.”