Radio broadcasts have been a fixture in American life since the early part of the 20th century, serving as an important source for news, commentary, music and other forms of entertainment. But as an advertising platform is radio relevant or is it dead?
With the proliferation of the number of stations in each market, individual stations’ shares have diminished. Gone are the days where the number one station had 12% of the market. An advertiser could purchase air time on a few of the top stations and with enough frequency, get a good result. But now, frequency is still important, but to impact the market, the advertiser needs to buy a lot more stations and that can get expensive.
The recent economic woes have impacted many advertising budgets. With less money and more choices, it is critical to choose the right stations. But how does one determine the right stations for your marketing goals? What data can you rely on?
Since the mid-1960s, research firm Arbitron (ARB) has measured audience levels by asking radio listeners to log what they listen to in paper booklets -- diaries, in radio jargon. That information was compiled and given to advertising agencies and radio stations on a quarterly basis. It was the Holy Grail for making format changes and setting advertising rates.
However, compliance was always a problem. Compliance for the diary keeper meant filling out the diary and mailing it to ARB. The dairy keeper was to accurately record her daily listening habits.
But diaries were plagued with problems. Most people did not want to spend the time to accurately fill in the diary. Men and ethnic demographics were especially under reported as were the younger demos. More often than not, the diary keeper was a middle-aged woman who started the week with a meticulous account of her listening habits and ended it by copying whatever she recorded in the first part of the week. Often people did not know what stations they were listening to or reported the wrong stations.
Then came the answer to these problems with the introduction of The Portable People Meter. Known simply as PPM, it was officially introduced into the Columbus market on October 8, 2010 by Arbitron Radio Ratings and Media Research, with plans to have them in all the Top 50 markets by the end of 2010.
The pager like device was to be carried at all times and would electronically detect and log a station's signal whenever it was within hearing distance of the signal, even while walking through a mall or entering a business that had the radio on. It would report the statistics every month. And it would solve all the reporting problems associated with the old diaries. It was touted as a better design to measure listening habits much more accurately and in real time.
PPM ratings are now used to determine the kind of music a station plays and, based on how many people are listening, just what rates the station can charge advertisers in the Top 50 markets.
Sounds great, but the reality of the changes and the flaws in the methodology are legion. There have been allegations of racial bias and PPM has left a trail of format changes and shifts in ad spending.
Oldies and Top 40 stations have benefited most from PPM measurement at the expense of Black and Latino stations in markets where it has been deployed. It disadvantages the black and Hispanic populations because they are more dependent on cell phones. The concerns about the underrepresentation of minority audiences in the PPM’s participant pool have also been a major concern, a problem that occurred in Houston and Philadelphia after the PPM system became the official standard in those two cities
Spanish Broadcasting System Chief Revenue Officer Frank Flores began by saying Arbitron is, "for all intents and purposes, an unregulated monopoly." He noted that SBS was the first minority-targeted broadcaster to sign up for the PPM and that the company supports electronic measurement, but said the methodology needs "significant changes" to accurately reflect listening.
Though he acknowledged the effect of the bad economy on the radio industry, Flores said there is "no argument" that the PPM has "added greatly to our inability to price our inventory on a competitive basis."
The upshot is that there could be fewer stations down the road. Such concerns have particularly alarmed minority broadcasters, who have always been concerned about underreporting errors. They think the problems in the new system could lead to less diversity and less competition in the business.
Columbus, OH is ranked as the 36th largest radio market with a population of 1,482,700, 12+. There are currently between 1400-1500 meters in the market with Daily in-tab (# of meters that give usable info each day, listening for the right amount of time, etc) is about 850. On any given day, there may be a quarter of the meters sitting at home.
You do the math. With such small samples for nearly a million and a half people, the margin for error is astronomical. Statistically it is considered so poor that many stations no longer subscribe to Arbitron. This is typical in every market.
All of this is important to advertisers because they use the ratings to decide where they'll buy commercials and how much they're willing to pay for those commercials. Without a reliable source of ratings data, how do you make the right choices for your clients?
Many have chosen not to buy radio and have instead moved vast sums of money to TV/cable and online advertising. Radio revenue has suffered. But is radio dead? Can you make radio work within your defined budgets? Can Arbitron fix their imperfect ratings system? What are your thoughts?