Radio sings dotcom jingle

Internet-related advertisers pass retail in filling industry coffers, Interep says

By Elizabeth A. Rathbun -- Broadcasting & Cable, 5/29/2000

The radio airwaves are alive-with the sound of dotcom ads. And that music is booked for a permanent engagement, industry executives and researchers say.

According to figures compiled exclusively for Broadcasting & Cable by Interep, companies offering Internet-related products and services spent $365 million on national radio ads in 1999. That's 13% of the total $2.8 billion spent on national and network radio spots that year and just tops retail, which historically has been radio's leading advertising category.

National ads placed by the retail industry totaled $334.7 million in 1999, or 12% of the year's total, followed by automotive with $253.2 million, or 9%; telecommunications with $248.6 million, or 8.9%; media/advertising with $240.2 million, or 8.6%, and restaurants, with $147.1 million, or 5.3%.

Comparisons with 1998 were not available, but last year was really the first year of dotcom spending as "e-tailing" sprouted, Radio Advertising Bureau President Gary Fries says.

It was a "huge category, and there's no indication of it slowing down," Fries says. 'While the pace of Internet [industry] growth might slow down, it's not going to stop," he says of dotcom spending.

Interep President Ralph C. Guild agrees. Like the telecommunications industry, which also "came out of nowhere," dotcom spending is here to stay. "Dotcom is not going anyplace. It is part of our life today," Guild says. "It's almost like a volcano erupting in a farmer's backyard: It goes up there and just stays there."

In fact, dotcoms helped boost national advertising revenue by a whopping 35% in the first quarter of this year, compared with the first quarter of 1999, RAB says (dollar figures were not available). Without dotcom spending in 1Q '00, national revenue would have risen by 19%. That's still a strong number, Fries points out. "Dotcom is like somebody put an extra layer of frosting on the cake."

Local ad sales rose 17% in the first quarter compared with 1Q '99, RAB adds. Local advertising is dominated by retail, automobile, fast-food, beverage and financial advertisers, in no particular order, Fries says. Dotcoms spend their radio money almost entirely on national ads, particularly in the nation's top 10 markets, Fries and Interep researcher Michele Skettino say.

But that is expected to change. "I think it's just beginning," Guild says. "It'll get [even] better for radio."

Even the recent downgrading of Internet stocks on Wall Street hasn't hurt, says Paul T. Sweeney, a media analyst with Credit Suisse First Boston Corp. The large radio groups have reported no cancellations in ad buys into the second and third quarters of the year, he says.

"A lot of their advertisers are not just the fly-by-night dotcom companies but [more-established firms] and the 'click-and-mortar' dotcom companies" are like a JCPenney that hosts sales over the Internet, he says.

While dotcom companies contributed the most to national and network radio revenue in 1999, by brand they weren't as dominant as, for example, No. 1 Burger King. That fast-food restaurant spent $25.2 million on national radio in 1999, according to Interep. The biggest dotcom spender by brand was Priceline, which came in at No. 7 after spending $16.1 million last year. Travelocity was No. 34 with $8.74 million; ValueAmerica was No. 35 with $8.7 million, and Egghead was No. 40 with $7.9 million.

Internet companies spent most of their total ad dollars on magazines in 1999: $687.3 million, as overall Internet ad spending grew by nearly 86%, to $1.9 billion, according to a March 29 report by CMRinteractive, a division of Competitive Media Reporting. National radio and network ads placed fifth on this list. Interep based its research on CMR data.