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Radio Is Participating in an Ad Market That’s ‘on the Mend’

SNL Kagan forecasts a 6.4% gain for radio — well behind the mobile sector but much better than newspapers

Add SNL Kagan to the list of prognosticators who expect a positive performance for U.S. commercial radio revenue this year.

SNL Kagan shows its predictions for 2011 ad revenue in the five largest ad sectors. Radio, not shown, ranks seventh in sector size. “For the first time since 2006, radio station revenues in 2010 are expected to turn in a positive performance,” the company states in a new advertising outlook study. It anticipates a 6.4% gain for radio, to $17.1 billion.

In terms of percentage growth, that would put radio in pretty good company, fifth on SNL Kagan’s forecast list this year, lagging only the very successful mobile sector (40%) and the more moderately successful broadcast TV, Internet and cable sectors — while ahead of outdoor, magazines, newspapers and various other media — all as measured by expected growth percentage.

Radio’s digital revenues “are also up by strong double digits, with new mobile applications being launched and a stronger focus on monetizing a station’s website, along with better CPMs on streaming audio ads. Our projections for [radio ‘s] digital revenues are up 15% for the year, but are only 3.3% of total radio ad sales at $552 million.”

Not that radio is leading the way among media sectors. Our industry “will have to put together a string of positive growth years to recover from one of the most challenging periods in radio’s 100-year history,” writes SNL Kagan in its executive summary. It estimates revenues dropped from $21.9 billion in 2005 to $16 billion of 2009, with most of the drop in 2008–09.

Business publications and newspapers will show the largest ad revenue percentage declines, the company’s analysts believe. “It is unlikely old-media sectors will recover from the flight of ad dollars to new media.”

SNL Kagan says daily newspaper revenue will drop 6.5% this year and the sector has seen its revenues cut in half in recent times, to an expected $23 billion next year, though losses should eventually level off.

“Conversely, Internet advertising has grown from $4.7 billion in 1999 to an estimated $27.8 billion in 2011 and is expected to more than double by 2019, reaching $60.1 billion.” (The accompanying chart shows predicted trends for 2011 in the five largest ad sectors. Radio, not shown, ranks seventh in sector size.)

The company foresees the overall U.S. advertising market rebounding 2.8% to $210.5 billion this year after two years of declines; it described the ad market as “on the mend” right now. It expects the overall market to continue to grow in the coming decade.

(Regarding satellite radio, SNL Kagan wrote that the sector is looking much better than it had been, but that ad dollars are well off their peak of $100 million three years ago and likely to remain a tiny part of the overall ad market.