Dot-Com Ad Spending Remains High
Interep Follow-up Study, Analysts Agree:  It's a HOT Category


  • Today’s issue of Radio Sales Today is an update of a previous issue dealing with the exploding category of dot-com advertisers.
  • According to Interep, Radio ad spending by dot-coms hit a new monthly spending high in first-quarter 1999 and beat fourth-quarter 1998 totals by 27%.
  • PaineWebber analysts predict that overall dot-com offline media spending will reach $800 million in 1999, with 40 percent or $320 million of that going to Radio.
  • Members looking for tips on marketing to dot-coms should check out RadioLink’s "On The Web" section.

Editor’s Note: Portions of the data cited in this article are Competitive Media Reporting figures cited by Interep. Data from CMR includes network and national spot Radio spending only. Many national advertisers place the majority of their advertising directly with stations and not through a network or spot representative company. Therefore, such advertisers’ expenditures may not be properly reflected in the data.

In our May 20 issue, Radio Sales Today presented the highlights of an Interep report on ad spending by so-called "dot-com" advertisers. That report cited Competitive Media Reporting (CMR) figures showing that dot-com ad spending reached record levels in January 1999 and kept pace with the 1998 holiday spending boom in February 1999. Based on the data, Interep predicted that even a very conservative projection of likely 1999 revenues would place dot-coms solidly in the top ten Radio advertising categories. We here at Radio Sales Today felt the issue was worth revisiting; today’s issue is an update on the subject of dot-com advertising, with additional data to back up Interep’s original prediction.

1st Quarter: Up, Up & Away
Citing new CMR data, Interep now reports that online companies and dot-com advertisers hit a new monthly spending high in March, with total first-quarter figures topping $37 million and surpassing fourth-quarter 1998 spending by 27%. This jump over the fourth-quarter totals is especially impressive considering that:

a) First quarter is generally the lowest of all four quarters for advertising revenue (last year, first-quarter spending accounted for only 20% of total ad spending); and

b) fourth-quarter 1998 marked an explosion of e-commerce activity due to the holiday season, which engendered a related boom in offline advertising by dot-com companies.

Based on these figures and factoring in the category’s average monthly 1998 growth of 30%, Interep says that even applying a much more modest growth percentage to 1999 ad revenues would still land dot-coms solidly among Radio advertising heavyweights such as Telecommunications, Media & Advertising, and Automotive. And bear in mind that this projection is based only on national Radio ad spending; local dot-com advertising has the potential to put a lot of money in station coffers.

"Internet advertisers have clearly
become an enormously important
source of revenue for...Radio stations.
We have just begun to tap the total
revenue potential from this category."

-- Stewart Yaguda, President of Interep’s Radio 20/20 division

Another View: Wall Street
In fact, some Wall Street financial analysts are issuing even rosier projections for dot-com advertising. PaineWebber has recently upgraded its estimate of total 1999 dot-com advertising revenues from $500-$600 million to $800 million. The company expects 40% of that figure to go to Radio, for a total of $320 million in 1999 Radio ad revenues. By comparison, PaineWebber’s estimate of Radio’s 1998 share of dot-com offline media spending was 20%, with practically all of the remainder going to television. As a PaineWebber analyst put it, "In 1998, virtually all dot-com spending was placed in network TV until discovered Radio’s efficiency during the Christmas season." PaineWebber estimates the 1999 offline advertising breakdown will be 40% TV, 40% Radio, and 20% for other media.

What are the drivers of this phenomenal growth? PaineWebber cites dot-com branding efforts fueled by the strong Internet IPO market creating "trickle-down pricing power." There will be high demand on a limited supply of TV advertising time (dot-coms will be competing with robust political spending in a contested Presidential election year). This unmet demand will create a spillover effect on Radio and other media such as outdoor and cable television. Moreover, PaineWebber identifies Radio as a particularly good choice for dot-coms because of its cost-effectiveness and brand-building qualities.

Building Your Dot-Com List
How do you and your station get involved with this booming ad category? One place to look for ideas is RadioLink, RAB’s marketing resource on the Internet at RadioLink’s "On the Net" section is loaded with information on how to attract advertisers from the online community. You can also monitor the competitive media in your town and then approach local dot-com advertisers you encounter with an integrated-media proposal (RAB’s publication Media Facts, available through Member Service and on RadioLink, is a great source of information on various media that compete with Radio). However you do it, be sure to get your fair share of the dot-com pie!