(By Paul Cramer) We’re now living in an “on-demand” economy where we can get what we want, when we want it, anywhere we want it. Technology has allowed for the near-immediate provision of goods and services, thereby virtually connecting demand with supply. This need for immediacy has subsumed industries from shipping (same-day delivery), to transportation (Uber/Lyft), to labor (freelancers), to, of course, media.
This “Uber-fication” of society has made it possible to fulfill human desires with ease and convenience. It’s also enabled consumers to be more fickle and to brand-switch near-instantly when they have a poor user experience. The consumer now has an unprecedented amount of control.
What does this all mean for ad-supported radio? Interruptive advertising models are challenged to create great user experiences in an on-demand, curatable world. Consumers are doing their best to tune out ads and get just the content they want. The advent of the DVR made it easy to start skipping ads for TV viewers. Ad-blocking software has made it easy to block display ads online. While radio’s ads can’t be skipped (yet), the captive audience of years past, relegated to switching between six presets on the dashboard, can now switch to hundreds of choices with significantly less commercial interruption and more choice.
For those who don’t desire any commercial interruption, subscription-based alternatives are steadily growing. In fact, 2017 marked the first time that the number of consumers subscribing to music streaming services topped 100 million, according to MIDiA Research. That means more consumers pay for streaming music services than pay for Netflix! Those 100 million subscribers to streaming music services have likely not abandoned ad-supported radio entirely, but they certainly contribute to TSL erosion for the stations they cume.
How, then, can ad-supported radio continue to protect its revenue model while not driving away more listeners? Spotloads have already been trimmed considerably compared to the early years following the Telecom Act, yet they still easily weigh in at 600-800 percent more spots per hour than ad-supported Internet radio. It’s not possible to add more avails, yet trimming the log to raise rates is problematic due to the pricing elasticity of demand. The answer to reducing spotloads while maintaining and/or growing revenue may lie in one of terrestrial radio’s unique assets: the local personality’s power of persuasion.
Radio is no stranger to personality endorsements. In fact, some of the earliest advertising on radio consisted of the announcer doing live reads and endorsements. The endorsement continues to be a powerful tool, as radio personalities enjoy a special relationship with their audience. They are often trusted, relatable, and opinion leaders. They have a great ability to influence the audience and shape purchase intent through their deep connections and on-air conversations. This interweaving of sponsored messaging within appropriate programming is known as “native advertising.”
Some of the best-known types of native advertising include product placement, which has been used in movies and TV shows. Similarly, a radio personality talking about how they never have to worry about what’s for dinner because they’ve signed up for Blue Apron’s meal-kit delivery service is product placement or native advertising. When subtly woven into contextually relevant storytelling, native advertising can be more credible than a spot, as it is not perceived as “advertising.”
As consumers, we value third-party validation, whether that is word-of-mouth referrals or reading product reviews online. There is a certain credibility and authenticity to hearing the morning show host talk about the amazing experience she had this weekend at a local spa, or the pm drive jock talk about the coolest new gadget he got. Additionally, it helps create a much better user/listener experience than interruptive stop sets, as the native “ad” need not sound like an ad at all, but rather, like it’s just part of the show.
Until now, it’s been hard to build a consistent transactional business around native advertising in radio due to a lack of transparency in campaign performance and metrics. That is now changing due to advances in technology, namely the confluence of artificial intelligence and natural language processing. This is turning what is said on air into actionable intelligence, enabling third-party measurement and validation for spoken-word native advertising. If spoken-word native advertising is to grow as an advertising channel, real-time performance metrics are critical in a world where “visibility” and “attribution” are becoming the norm for agencies and brands.
In the past, it’s been hard to quantify and measure native advertising and on-air product placement. With the advent of third-party validated proof of performance and measurement solutions will come the growth of spoken-word native advertising as a premium, recurring revenue stream that can be measured across multiple stations and multiple distribution platforms.
This ad format need not be reserved for national advertisers and agencies alone, but can be a new advertising vehicle for local direct clients as well. As more advertisers begin to embrace spoken-word native advertising, it ends up being a “win-win-win” as the listener’s user experience is improved through non-interruptive advertising, the advertiser gets premium placement with an engaged audience, and ad-supported radio cultivates a new, nonintrusive revenue stream.
Paul Cramer is Managing Director, Enterprise Radio Solutions @ Veritone Media and can be reached at firstname.lastname@example.org