Radio broadcasters will likely need to overhaul their revenue strategies if they are to capitalize on the pending transition from third-party cookies, used in digital advertising, to more first-party data, from direct relationships with online listeners.
That’s the advice from a new report from Borrell Associates which shows just how much the radio industry would lose in digital advertising each year if third-party cookies were eliminated today.
The report, “State of the Industry Report: What the Loss of Third-Party Cookies Means for Broadcasters,” says the average multi-station radio cluster would lose more than $730,000 from an immediate phase-out of third-party affiliations with no privacy-preserving alternatives. In all, the local radio industry is expected to earn about $1.9 billion this year from digital advertising sales via streaming.
Google is likely doing away with cookies, which is a type of tracking technology, by the end of 2024, according to Borrell Associates. Apple has already eliminated most cookies.
But the news for radio broadcasters isn’t all bad, according to the new study, which was delivered by Borrell Associates President Jim Brown at NAB Show New York. The transition to first-party data collection from listeners could allow radio broadcasters to take control of their audiences in the long run.
The study, commissioned by NAB’s innovation wing PILOT, found programmatic display of banner ads and audience extension ads, which are the largest single sources of digital revenue for many broadcasters, would be negatively impacted by the eventual phase-out of tracking cookies. “When it occurs, the phase-out of 3rd-party cookies is likely to deliver more benefit than loss to broadcasters,” according to the study. “The main benefit may be that it motivates broadcasters to take control of their own audiences by establishing a first-party relationship with viewers and listeners who’ve remained anonymous for decades.
“A secondary benefit could be that broadcasters begin reaching beyond their traditional audiences, developing relationships with new audiences altogether — some of whom may reside outside their traditional broadcast geographies. And that could have broad, positive effects that extend well beyond any revenue generated by digital ad sales.”
Some broadcasters have been prepping for the change since 2016, according to the report, which used telephone and in-person interviews with broadcast executives and surveys of more than 50 broadcast companies, including iHeartMedia, Audacy, Cumulus Media and Hubbard Broadcasting among others, to estimate the financial impact on broadcasters, gauge the industry’s level of preparedness for the impending deprecation of third-party tracking cookies used in digital advertising.
It is noted in the study that more than two-thirds of internet traffic in the United States does not rely on third-party cookies. That’s because some browser companies or mobile operating systems have already blocked or severely restricted cookie usage, the report states. In addition, a large portion of Internet users have disabled cookies in their own browsers.
“The phase-out of 3rd-party cookies won’t end the demand for targeted advertising. By some measures, it seems to have increased it,” the report states.
The Borrell Associates report also provides broadcasters with proactive measures to mitigate the impact of the third-party cookie phase-out and opportunities for more direct-to-consumer audience engagement. The recommendations include: “Educating internal stakeholders and securing team buy-in, accurately gauging the urgency and setting a timeline for response, beginning work on a comprehensive plan, starting to prep site visitors and app users and focusing on the needs of ad buyers.”
Borrell Associates also takes time in the study to define what a cookie is: “The term cookie comes from fortune cookie, which contains an embedded message. In internet vernacular, a cookie refers to a small string of data that contains information about your activities as you browse the web or use an app. It’s stored on your computer.”
Cookies were invented by a Netscape employee named Lou Montilli in 1994, according to the report, just as the world wide web was becoming popular. Montilli was seeking ways to store information about a Netscape visitor to make that person’s next visit a better experience.
The cookie issue is focused almost entirely on Google’s Chrome browser, which accounts for half of internet user traffic, and Android mobile operating system, the report states.
The latest research is part of a six-month program conducted by PILOT, with the support of the Google News Initiative, to help broadcasters with the phase-out of third-party cookies through the implementation of first-party data and direct-to-consumer business models.
[Related: “PILOT Program Explores Digital Engagement“]