Here is part 2 of the guest post from Paul Jacobs who offers his insight on how radio needs to invest in solutions to reach younger consumers:
Assume for a minute that radio's revenue growth via the traditional commercial platform is going to continue to be challenging. And if your station specializes in lower demand demographics like 18-34s and Teens, you know that radio has fallen out of favor with many key advertisers, with no apparent turnaround on the horizon.
Yet, many major advertisers haven't changed their target demographic strategy. They've changed tactics. And radio, especially formats like Alternative and CHR, has to respond to this shift in order to survive.
Here's the facts: A recent report from PQ Media found that spending on "branded media" - event sponsorship and marketing (+12%), product placement (+34%), and advergaming and webisodes (+35%) - grew nearly 15% last year to $22 billion. And who are most of these advertisers targeting? The hard-to-reach youth market - Alternative and CHR's target listeners.
So, for radio, there's an obvious disconnect. The problem isn't younger-targeted radio station's demographics or our audience size (which is considerable). It's the way we're delivering listeners to advertisers, many of whom are moving away from the paradigm being the third spot in a five spot cluster.
Alternative and CHR stations have proven expertise in creating compelling events (and generating considerable profit from them), but there's a long way to go on digital platforms. Most aren't structured properly to satisfy changing advertiser needs. In a flat traditional advertising revenue market where owners and Wall Street are demanding growth, doesn't it make sense to ask some hard questions about the entire business model of these stations and consider some radical surgery?
Looking at it a different way, youth-targeted radio formats might be able to lead the way to revenue growth for the radio industry. There are billions of dollars available chasing youth (maybe even more than for aging baby boomers). Maybe these stations need to consider some serious experimentation by re-structuring their promotional, digital, and sales models. Maybe they need to, in the words of Jason Calacanis at Summit 12 - "surrender" to the reality that the current business model is not the road to revenue growth.
Let's invent a new one, and in the process, begin to reinvent the way that radio interfaces with advertisers - and the audience.