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Online Ad Upselling Drives Growth In Cumulus Media’s Digital Business.

Cumulus Media has been investing in its digital marketing services business, and it is paying off. No part of the company had stronger growth during the first quarter, with sales of new digital products and services growing 25% as advertisers look for new ways to reach consumers online. CEO Mary Berner said that while there is no shortage of digital agencies, Cumulus is finding success by honing in on small and medium-sized businesses.

“That’s our angle,” Berner said, telling analysts on a conference call Friday the size and reach of Cumulus allows the company to do it at scale, and at a profit. “We go in and provide advertisers with unique packages that combine audio and digital advertising seamlessly. And as we do that, because we’re able to pack them together, the ROI can be better,” she said. By giving their ad sellers the ability to sell a suite of digital audio and digital marketing solutions, Cumulus says it increased total new digital marketing services customers by over 25%. That included a 12% improvement in the percentage of its previously radio-only customers turning to the company for digital marketing work.

During Q1, 17% of Cumulus revenue came from digital as it reported overall 7.3% growth in the segment with total sales of $34.4 million.

“Overall, digital continues to be an area of strong growth,” Berner told analysts. She credited that in part to the investments the company has made, including the expansion of its digital sales force and offering a suite of digital audio and digital marketing solutions as well as more low-priced entry points for advertisers that are new to the company.

“Our ability to walk the full product set into the customer’s door continues to pay off as our customers value personal relationships and our salespeople’s ability to tailor and adapt solutions that fit their particular business needs,” Berner said. “And the ability to upsell the legacy advertisers is a very large opportunity.”

The company has said in the past that its digital business is roughly evenly divided between digital marketing services, audio streaming, and podcasting, and CFO Frank Lopez-Balboa told analysts that remains true. But Cumulus has said in the past that it sees a large opportunity in what forecasters think will become a part of the digital economy. Some project providing digital services to small and mid-sized companies could become a $15 billion business in the U.S.

Podcasting ‘Starting To Rebound’

Beyond digital marketing, Berner said podcasting may have been hit with the same national headwinds the company experienced with the radio business, but that’s changing. “It’s starting to rebound,” she said. Cumulus said its podcast revenue increased by low-single digits, despite Q1 being a typically slower ad quarter. Berner said podcasting’s revenue performance continued to improve on a quarter-over-quarter basis.

Helping attract those ad dollars are more downloads. Berner said that Cumulus hit another podcast milestone recently with 47 of its shows now charting on Apple Podcasts. “That includes a dozen local podcasts, which is the most ever,” she said. “Local continues to gain traction, generally, around the power [radio] brands that we have like ‘The Ticket’ in Dallas or ‘The Bert Show’ in Atlanta. So the podcast effort is both local and national.”

Lopez-Balboa told analysts that the company’s podcast business is “pacing up nicely” in Q2, but added, “It’s too early to tell where the quarter is going to go in digital, but I expect it won’t be too dissimilar from the first-quarter results.”

National Advertising Still ‘Choppy’

The company reported overall Q1 revenue was $200.1 million, a decline of 2.7% from a year earlier. Both national spot and network business was down single-digits. “The recovery in national advertising remains very choppy as advertisers across several key categories, including mortgage, savings, and home improvement continue to cite the overall interest rate environment as a significant obstacle,” Berner said.

Consumer packaged goods insurance and pharmaceutical were its top-performing national categories. In local spot, home products and general services were the best-performing categories, while professional services and retail were the weakest.

Cumulus also had $2.2 million of political revenue in Q1 versus $4.9 million in the same period of 2020. Lopez-Balboa said the decrease reflected less competitive presidential primaries this year. “Given what is shaping up to be a heavily contested general election, accompanied by a large number of down-ballot races across our footprint, we’re expecting robust political revenue in late third and fourth quarters,” he added.

Overall, Lopez-Balboa said Q2 revenue is pacing down low single-digits. “We’re seeing an increase in demand from select advertising categories, but the macro environment continues to weigh on many others,” he said.

Late Buying In Local

Broadcasters have continued to see later ad placement and Lopez-Balboa said that is increasingly true for local clients as much as national ones. That played out in April with local spot business pacing up significantly as the month went on. “It remains to be seen if that’s going to be the same trend for the rest of the quarter. If it is, then obviously that’s good news,” he said. “The national market contains to be pretty lumpy.”

Cumulus recorded a net loss of $14.2 million for the quarter, but that was smaller than its $21.5 million loss reported last year. Cost-cutting and other efficiencies also allowed Cumulus to reduce its fixed costs by approximately $4 million. That included a mix of layoffs, cutting work with outside contractors, and renegotiating contracts.

Lopez-Balboa said as Cumulus becomes more efficient, it gets harder to find additional areas to find places to save money. One area that could still offer some opportunity is using technology to address sports production costs.

“That’s going to be a potential area of opportunity as we continue to realign the opportunity in sports,” he said. Cumulus-owned Westwood One is the play-by-play home for the NFL and NCAA basketball.

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