Though off-air online and experiential advertising grew modestly as a part of the overall radio revenue pie and election-related political ads increased in Q3, total radio ad revenues were down 9% to $4.97 billion for Q3 and down 10% for the month of October, according to the Radio Advertising Bureau (RAB).
For the first nine months of 2008, total radio advertising revenues were $14.8 billion, down 7% compared with the same period in 2007.
Q3 losses continue to be fueled by big declines in local and national advertising. Local for the quarter was $3.46 billion, down 10%. For the first nine months of 2008, local was down 8% to $10.44.
National advertising for Q3 was $767 million, down 12%, and $2.2 billion for the first nine months of 2008, down 11%. For the month of October, local fell 15%, while national performed better - down just 1%.
“A weakening economy will continue to be a challenge for all forms of advertising-supported media,” said David Silverman, a partner at PricewaterhouseCoopers LLP.
Off-Air Lone Bright Spot
Off-air, which includes internet revenues, was the only sector to post an increase in Q3, rising 5% to $458 million. This growth is - to a small extent - offsetting larger declines in local and national revenues. Overall off-air revenues have grown 9% in the first nine months of 2008 compared with the same period of 2007, though they still make up a relatively small percentage of the overall radio ad mix.
Spending By Category
With their own bottom lines reduced, most marketers curtailed spending across media, including radio, RAB said. Network radio did, however, see consistency from Wal-Mart (NYSE:WMT), Home Depot (NYSE:HD), and General Motors Corporate (NYSE:GM) (including its divisions). Wal-Mart was the retail sector’s top-spending advertiser with nearly $42.7 million invested through Q3.
Radio also experienced growth in several key industry categories, particularly insurance and restaurants, in the local and national sectors.
- The insurance category was the most durable for Radio in 2008, up 16.0% in Q3 and up 18.4% for the year.
- Top advertisers GEICO, Nationwide (NFS), Allstate (NYSE:ALL), State Farm, Farmers, and Progressive have increased spending volume.
- Number-one GEICO continues to dominate, at more than double Nationwide’s year-to-date expenditure.
- Insurance also proved to be Network Radio’s third largest category, with a 33.9% increase to Q3’08 ($17.7M) and 30.8% year-to-date ($49.3M), according to TNS Media Intelligence.
- Professional services is the second-largest local and national growth category year-to-date, with nearly one-third of expenditures allocated in the west region for both Q3 and year-to-date (32% and 34% respectively).
- The beverage industry saw local and national gains of 2.9% for Q3, and 5.5% year-to-date.
- Coca-Cola’s (NYSE:KO) spending in these sectors increased in Q3 . This category leader is up 24.8% year-to-date.
- Second-place Pepsi (NYSE:PEP) curtailed spending in Q3.
- Heineken USA is up 34.2% for the year after increasing its Radio budget in Q3, while Molson Coors’ (NYSE:TAP) spend grew 5.1% and 12.9% in Q3 and year-to-date, respectively
- Overall, quick-service restaurants increased local and national spending 3.0% in Q3 and 3.7% year-to-date. The restaurant category also showed a 17% Q3 increase in spending vs. Q3 2007 and 10.7% year-to-date.
- McDonald’s (NYSE:MCD) remains the dominant advertiser in the category year-to-date, outspending its closest competitor by 138%.
- Ruth’s Chris (NASDAQ:RUTH) topped the quarter with a 3532% increase vs. year ago spending $1.7M. for the quarter.
- Increases to this sector’s quarterly bottom line were also fed by Burger King (BKC) (+315%) and Bojangles (+274.4%).
Retail Department/Discount Stores & Shopping Centers:
- Slowing consumer confidence greatly impacted the retail category in Q3 (down 9.7%).
- Local and national year-to-date revenues from retailers have grown 2.5%, boosted by stores targeting increasingly cost-conscious consumers.
- Among the top-10 spenders who have increased in this category in 2008: Wal-Mart (up 41.6%), Target (NYSE:TGT) (up 63.2%), JC Penney (NYSE:JCP) (up 10.2%), Kmart (up 215.1%), and Goodwill Industries (up 35.1%)
- Target nearly tripled its radio spending (up 162.9%), bringing Target’s spending to 76% of Wal-Mart’s (vs. just 24% in Q3 2007) - although Wal-Mart has outspent its major competitor by 242% year-to-date.
- In the network radio sector, the retail category grew 16% for Q3 2008, bringing the year-to-date figure up 25%. The greatest growth came from Wal-Mart, with a 78.3% increase (up to $17.2 M) in the quarter, closing out year-to-date up 148.1% (to $42.7M).
- Home Depot increased its Q3 2008 spend by 1.7% (to $11.8M) - but it was not enough to off-set its year-to-date total (down 5.9% to $33.4
- Faced with high gas prices, low consumer confidence, and the lending meltdown, the automotive industry was hard-pressed to invest money in advertising in Q3.
- Several fuel-efficient, lower-priced models advertised on local and national radio in Q3, as did luxury retailer Mercedes-Benz Dealer Association.
- Parent General Motors Corp. decreased its Q3 outlay (-19.1%), but still came out year-to-date up 9.4% (to $34.6M).
- Carfax used network radio in Q3 2008, bringing its year-to-date figure up to $5.8M).
- Mercedes-Benz used Network Radio, adding $1.6 M to the quarter and closing out year-todate at nearly $50M
- AT&T (NYSE:T) scaled back radio spending slightly in Q3 (-1.5%), but remains local and national radio’s largest advertiser this period and for the year (at $199.2 million and $466.8 million, respectively).
- Verizon Wireless (NYSE:VZ), MetroPCS, TMobile, and Leap Wireless all called for more Radio in Q3.
Politics Proved Beneficial
The extended political season for the 2008 Presidential race also proved fortuitous to radio. In the 35 markets that report advertiser detail to Miller, Kaplan, Arase & Co., campaigns on local and national radio carried $20.6 million of messages in Q3. This spending increased the year-to-date tally to $54.9 million and offset the drops among many of radio’s leading spenders. Network radio also carried $6.2 million worth ofpolitical ads in Q3, and $13.8 million year-to-date according to TNS Media Intelligence.
Additional political spending details:
In a comparison of local an national Q3 and year-to-date 2008 political spending in the Miller Kaplan markets with the last presidential election year of 2004:
- Q3 2008 saw a 20.5% increase vs. Q3 2004 (+$3.5 million).
- Year-to-date 2008 increased 43% over the same time period in 2004 (+$16.6 million).
Also in the local and national sectors, issue-focused 527 groups were the largest spenders. infusing more than $2.7 million dollars, pushing year-to-date spending over $7.8 million in the 35 Miller Kaplan reporting markets:
- Various committees, associations and organizations followed with a $.7M and $2.2M investment in national and local radio’s Q3 and year-to-date totals, respectively.
- Candidate dollars - led by those of Barack Obama and followed by those of John McCain - collectively added $0.2M to Q3 , closing out year-to-date at $1.2M.
- The bulk of all political funds was spent in the west region in Q3 (42%) and year-to-date (47%).
- Additional political quarterly and year-to-date breakouts include percentages spent in the central region (23% quarterly; 21% year-to-date); the east (18% quarterly and 19% year-to-date); the south (11% quarterly and 10%year-to-date) and the southwest (5% quarterly and 3% year-to-date).
- According to TNS, Q3 Network Radio was supported by T. Boone Pickens’ Plan ($1.4M), Obama for President ($1.0M), research and educational think tank, Heritage Foundation ($0.4M), along with Issue/527 and various organization spending.
About the data: Local and national revenues are based on approximately 100 markets as reported by the accounting firm of Miller, Kaplan, Arase & Co. and extrapolated to the entire US. Off-Air data has been collected and verified since January of 2002, and reported since September of 2004. The RAB began reporting quarterly radio revenue in dollar amounts with the 2007 results. Network revenue includes the top five radio network companies. Non-spot data has been collected and verified since January of 2002, and reported since September of 2004.