Incoming Ads Affect Radio, Print, TV’s Rates and Revenues
For advertising and media circles, the surge of dot-com advertising was as much a story at this year’s Super Bowl than the final, dramatic image of a receiver straining to reach the end zone, football in hand.
Last year, four dot-com companies advertised on the national broadcast of the football game.
This year, that number more than tripled.
It’s only one statistic propelling the newest marketing force.
In San Diego, sales teams in radio, television and print media have been watching the dot-com market grow. And no one wants to drop the ball.
“What happens is you have a whole new category of advertisers,” explained Jim King, vice president and media director at local advertising agency Phillips-Ramsey.
“You have cars and furniture and fast food and all these others,” King continued. “All of a sudden, this has grown dramatically, from nothing, basically, just a couple of years ago.”
– Advertising
Rates Affected
In radio, it’s had a larger impact. But for TV, it’s yet to hit as hard.
Twenty-six local radio stations regularly participate in a joint market study done by Los Angeles-based Miller, Kaplan, Arase & Co., LLP. According to the study, Internet and E-commerce advertisers spent $7.3 million in San Diego during 1999, compared to $1.1 million in ’98.
The sales were 5.2 percent of the stations’ total radio revenues in 1999, the study reported. The year before, the category’s spending totaled an eighth of 1 percent. It’s an increase of over 500 percent.
At roughly 5 percent in ’99, the Internet companies’ advertising were the fifth-highest category behind automotive, communications, restaurants and television, the study said. For December ’99, however, the dot-coms ranked second behind automotive.
“Sometime during the spring of ’99, it really became a phenomenon,” said George Nadel Rivin, Miller’s vice president in charge of broadcast services. “That’s when the real growth spurt took place.”
Nationally, dot-com advertisers spent close to $200 million last year, Rivin said. “I see it continuing to grow,” he said. The 20 largest radio markets in the United States, of which San Diego ranks 16th, received the lion’s share of the expenditures that came from E-commerce in 1999, he said.
– Increase Expected
In Dot-Com Ads
In the future, Rivin expects dot-com advertisers to buy more, but also to buy “deeper,” meaning they’ll add to their major-market expenditures, and spend more in the smaller, 21st through 50th-ranked markets.
San Diego’s much-publicized standing as a wired city with high penetration of computer and online users puts it in strong stead, said King of Phillips-Ramsey.
The proliferation of local high-tech start-ups and relocating Internet companies is as important to the city’s potential as a market for Internet companies, said King, whose company does creative work and media buying.
The dot-com boost was no surprise, said Bob Iafrates, director of sales for the seven FM stations that Covington, Ky.-based Clear Channel Communications owns or operates in the San Diego market.
“It’s a natural evolution of the Internet,” he said. “All of these Web sites need to find a way to differentiate themselves from their competitors.”
At the San Diego Union-Tribune, advertising director Scott Whitley traces his paper’s dot-com sales spurt to August ’99.
– Sales Rise
Dramatically
Whitley didn’t disclose numbers, but said the rise had been “dramatic.”
Sales have slacked off slightly since the start of the year, he said.
He foresees it being seasonal. “I think everyone was caught up in the frenzy of trying to establish brand before the Christmas shopping season was over with,” Whitley said. Whitley expects seasonal “spikes” at Easter and near Mother’s Day, he said.
At XETV Channel 6, the local Fox affiliate, the dot-com effect has been felt. “It’s a big growth area for us,” said Chuck Dunning, general sales manager. “All of a sudden last year, out of nowhere, it became our No. 4 billing category.”
– Dot-Com Billings
Move Up The Ranks
In 1999, it ranked sixth in the station’s advertiser categories, Dunning said. For the month of December, it rose to third, but it slumped slightly in January.
Dunning preferred to not disclose too much detail, but said that dot-com advertising currently adds up to between 5 and 10 percent of his station’s billings. It’s combined with the station’s telephone and telecommunications advertising, he noted.
Dot-com advertising hasn’t affected local television as much as in larger markets, Dunning said. San Diego ranks 16th in terms of population, he said.
“Our feeling is they’ll use television in the top 10 or top 15 markets,” Dunning explained. “Then, the tendency seems to be to use radio in the lower markets.”
He expects the dot-com advertising to increase.
“Television’s a very powerful medium for them, I think,” he said.
Last fall, Dunning and other television sales managers in the San Diego market banded together to create a PowerPoint presentation that would market the city as an Internet-ready audience.
– Industry Begins
To See Impacts
Industry buzz about rising rates hasn’t really taken effect, Dunning said.
“I hear in the larger markets, they will drive the rates out of sight because, for whatever reason, they are willing to pay whatever it takes,” he said.
“If they want to be in ‘X-Files’ and you say, ‘I’m sorry ‘X-Files’ is sold out,’ they’ll say, ‘Just tell me what it costs to get into it.’
“But I’ve heard that more in the larger markets. With us, I wouldn’t say that.”
There are exceptions, such as the Super Bowl, but in general, dot-coms aren’t necessarily driving up local stations’ rate structures, Dunning said.
Still, a new group of advertisers, wanting time on the airwaves, time on the television channels, space in the newspapers and outdoor , it’s effect on the media-advertising market has been strong, King said. “That’s additional demand on the supply of advertising available.”
Along with the strong economy, it’s a major reason costs for advertising space are generally on the rise, King said. Also, because it’s an election year, candidates can buy advertising inventory at media outlets’ lowest rates, by law, he said. Because of that, sales teams keep general advertising rates higher and avoid special deals, he said.
– Rates Going Up
In Some Mediums
Rates haven’t gone up at the Union-Tribune, Whitley said. But that isn’t the case for radio, where extra pages can’t be added.
“You only have 10 units an hour,” said Clear Channel’s Iafrates, referring to program-halting 60- and 30-second commercial slots. “So, when they’re gone, you have to charge more money.
“The only way to increase revenue is raise rates,” he continued. “You can’t add spots.”
So far, radio has benefited most from the dot-com advertising increase, King said. It’s alluring to start-ups with smaller marketing budgets. The advertising is less expensive to both buy and produce, and the medium is an easier way to target age markets, he said.
According to Iafrates, dot-coms tend to target stations with age demographics of 18-34 or 18-49. Looking at Clear Channel’s FM stations, that points to alternative station 91X (also known as XTRA-FM), and Rock 105 (KIOZ) and 101.5 KGB, versus the younger-skewed KHTS, also called Channel 933.
It’s also a faster “turnaround” to get the advertising on the air, King said.
– Radio Market
Considered Prime
Southern California’s year-round mild climate and automobile dependence also makes local listeners a prime radio market, Iafrates said.
Billboard advertising is popular, King said, adding the dot-coms are affecting other advertising mediums more and more.
“There are a lot of dot-com companies in every medium because they realize they have to reach a lot of people through traditional media,” King said.
Rivin, of Miller, Kaplan, Arase & Co., also mentions radio’s Internet appeal. “There’s so much listening to radio that takes place while people are surfing the ‘Net,” he said. Rivin likens it to the marketing appeal of Internet ads on radio to those of fast-food restaurants whose advertisements play as potential customers drive by.
“What dot-com advertisers are looking for is an instant click,” he said.
Still, Whitley noted all media will play a role in the dot-coms’ future.
– Mediums Play
Different Roles
“I think it’s fair to say on the whole that they’re trying a variety of media to build brand and brand awareness,” he said. “I think that we all have a place and a role to play in that. Newspapers will continue to be an important part of the brand-building game.”
Business-to-business marketing is a less publicized but especially potent strategy, King said.
“From what I’ve seen, that seems to be the next level, the biggest growth period,” he said. “We’ve all heard about the Amazon.com and eBay that are very consumer driven and consumer oriented, but the biggest category of growth is business-to-business for these companies,” King said. “And that’s just not as known or noticeable.”
The vulnerability of the Internet companies is also a factor for their future as an marketing faction, King noted. “There’s a lot of speculation, with overvalued companies in the dot-com arena that are spending money and many of them not making any, yet,” he said.
“I think the solid ones will stay and grow. There will be some fall-off, but with the nature of our technology and just continual improvements, I think the dot-coms will become a major force of an advertising category.”
“It’s like any new industry,” King said. “There was the ‘birth’ and this is the ‘growing up,’ ‘adolescent’ stage.
“There will be a more mature phase of that industry. Whenever that is, I’m not sure, but that’s when things will settle down. But, because of the nature of the technology that has gone into our lives so much, business and personal, there’s no saying it will go away. It’s here.”
