In the United States, commercial radio stations generate most of their revenue by selling airtime for radio advertisements. These advertisements are paid for by a business or service in exchange for the station airing their commercial or mentioning them on air. The most common type of advertisement is the "spot commercial", which typically lasts no longer than one minute. Longer advertisements, often running for 45, 60, or more minutes, are known as "infomercials" and provide more detailed information about the promoted product or service.
The United States Federal Communications Commission (FCC), established under the Communications Act of 1934, regulates commercial broadcasting. Many of the relevant laws have remained relatively unchanged since the Radio Act of 1927."The Radio Act of 1927 as a Product of Progressivism" by Mark Goodman (scripps.ohiou.edu) In 2015, radio accounted for 7.8% of total U.S. media expenditures."US Spending on Paid Media Expected to Climb 5.1% in 2016" March 25, 2016. (emarketer.com)
History Commercial advertising by audio services predates the introduction of radio broadcasting, beginning with the 1893 establishment of the telephone-based Telefon Hírmondó in Budapest, Hungary. As of 1901, this early "telephone newspaper" sold 12-second advertising spots for one forint each, reaching subscribers who listened to its programming."The Telephone Newspaper" by Thomas S. Denison, World's Work, April 1901, p. 642.
The first radio stations, introduced in the late 1800s, used crude spark transmitters capable only of sending the dots and dashes of Morse code. In the early 1900s, the first audio-capable transmitters were developed. Although these were initially used for point-to-point communication, there was also experimentation with broadcasting news and entertainment. Many of the earliest test transmissions functioned as advertisements for their owners and their new technologies. Stations soon began playing phonograph records in exchange for on-air mentions of the companies that supplied them. The earliest known instance occurred in July 1912, when Charles Herrold in San Jose, California, began weekly broadcasts from his technical school, including phonograph records provided by the Wiley B. Allen company."Will Give Concert by Wireless Telephone", San Jose Mercury Herald, July 21, 1912, p. 27.
Further developments took place in late 1916 when the De Forest Radio Telephone & Telegraph Company began operating experimental station 2XG in New York City. Lee de Forest arranged with the Columbia Gramophone Company to broadcast phonograph records from their offices; in exchange, he announced the record titles and the name "Columbia Gramophone Company" with each selection.Father of Radio: The Autobiography of Lee de Forest, 1950, p. 337. The debut program aired on October 26, 1916,"Columbia Used to Demonstrate Wireless Telephone", The Music Trade Review, November 4, 1916, p. 52. with nightly broadcasts following beginning November 1. De Forest initially used the broadcasts to promote "the products of the De Forest Radio Co.," but later discontinued the sales messages after comments from Western Electric engineers.De Forest (1950), pp. 337–338. A commentator in QST magazine observed that 2XG demonstrated the practicality of "conducting regular advertising and news talks by radio," which he described as "decidedly something to think about.""Radio Telephone Advertising", QST, April 1917, p. 34.
Radio broadcasting was suspended in April 1917 after the United States entered World War I, when a government ban silenced civilian radio stations for the duration of the conflict. After the ban was lifted in October 1919, promotional record broadcasts resumed. Westinghouse engineer Frank Conrad at experimental station 8XK in Wilkinsburg, Pennsylvania, aired records supplied by the Brunswick Shop in exchange for on-air acknowledgements."Signing Off on the First Ten Years" by George W. Gray, World's Work, December 1930, p. 47. A more formal example occurred in late October 1920, when the Randolph Wurlitzer Company sponsored a broadcast over station 9XB of Cincinnati, featuring Victor records scheduled for release in November."Wurlitzer presents the new November Victor Records by Wireless Telephone", Cincinnati Enquirer, October 31, 1920, p. 9. However, as radio broadcasting expanded rapidly in 1922, the record industry came to believe that radio broadcasts discouraged rather than promoted sales, leading to the end of these promotional arrangements.
Many early radio stations were operated by radio equipment manufacturers such as Westinghouse Electric & Manufacturing Company and General Electric, or by radio receiver retailers, including department stores such as Gimbels, Bamberger's, and Wanamaker's. These companies used broadcasting to promote receiver sales, which in turn financed station operations. As more stations began broadcasting, owners faced increasing financial pressure because running a station involved significant costs, especially once performer payments and music royalty obligations became standard.
In February 1922, the American Telephone & Telegraph Company (AT&T) announced that it would establish stations dedicated to selling airtime to interested parties, a practice AT&T termed "toll broadcasting.""National Radio Broadcast By Bell System", Science & Invention, April 1922, pp. 1144, 1173. Its flagship station, WEAF in New York (now WFAN), aired what is widely considered the first paid radio commercial on August 28, 1922, for the Queensboro Corporation, promoting a new apartment development in Jackson Heights, Queens near the recently completed #7 subway line."And Now a Word From Our Sponsor", Broadcasting-Telecasting, October 15, 1956, p. 110. Based on cross-licensing agreements, AT&T initially asserted that its patent rights gave it a monopoly on commercial radio broadcasting. Although the courts upheld this interpretation, the practice was widely unpopular, and AT&T eventually created a licensing system that allowed individual stations to sell airtime."Licensing Broadcast Stations", Radio Broadcast, August 1924, p. 300.
Other stations may have quietly sold airtime before WEAF. Frank V. Bremer reportedly leased his Jersey City, New Jersey amateur station, 2IA, to the Jersey Review in May 1920 for $35 for twice-weekly broadcasts, and again on January 1, 1922, to the Jersey Journal for $50 for a New Year's Day broadcast."Jersey Journal New Year Greetings, by Wireless, Heard Country Over", Jersey (City) Journal, January 3, 1922, p. 10.The First Quarter-Century of American Broadcasting by E. P. J. Shurick, 1946, p. 155. On April 4, 1922, Alvan T. Fuller reportedly purchased airtime on WGI of Medford Hillside, Massachusetts, to promote his Packard automobile dealership.Boston Radio: 1920–2010 by Donna L. Halper, p. 8."Great Moments In Advertising: 1st Radio Spot" by Derrick Daye, August 25, 2009.
The introduction of radio advertising was initially highly controversial. United States Secretary of Commerce Herbert Hoover said that radio should not be "drowned in advertising chatter". An article in the November 1922 issue of Radio Broadcast complained that "driblets of advertising... are floating through the ether every day" and warned that "the woods are full of opportunists who are restrained by no scruples when the scent of profit comes down the wind.""Should Radio be Used for Advertising?" by Joseph H. Jackson, Radio Broadcast, November 1922, pp. 72–76. Advertising was effective, however; a real estate developer who paid $50 for 10 minutes on WEAF said that sales increased by $127,000. Although a few stations resisted carrying commercial messages into the mid-1920s, no viable alternative funding model emerged, and by the late 1920s most U.S. radio stations aired commercially sponsored programming.
During the Golden Age of Radio, advertisers commonly sponsored entire programs, with acknowledgements such as "We thank our sponsors for making this program possible" appearing at the beginning or end of broadcasts. As the medium developed, major stations experimented with new formats, and advertising became an increasingly important source of revenue. E. H. Sanders, advertising director at Shell Oil Co., urged broadcasters to work directly with relevant advertisers and sell tie-in commercial spots for established programs. Sanders argued that both advertisers and broadcasters would benefit from such arrangements."Let Stations Build Programs, Sell Tie-ins" by E. H. Sanders. Philco informed dealers that during the Philco Hour, broadcast nationwide on Friday nights, the company's name would be mentioned at least a dozen times per episode. The "visual" dimension of programming was left to the listener's imagination. Comedian and voice actor Stan Freberg demonstrated this on his radio show in 1957,"A Lake of Hot Chocolate: Stan Freberg Shows the Way" by Harvey Jerkwater, April 20, 2005. using sound effects to depict the Royal Canadian Air Force towing a 10-ton maraschino cherry and dropping it onto a 700-ft. mountain of whipped cream floating in a lake of hot chocolate, cheered on by 25,000 extras."The Tip of the Freberg: The Stan Freberg Collection 1951–1998" by Stan Freberg. The scene was later adopted by the U.S. Radio Advertising Bureau to promote radio advertising.
The radio industry has undergone significant changes over time. Although new media and technologies now compete for consumer attention, radio remains widely used, with 95% of people in the United States listening weekly."Keeping DJ Endorsements Alive" by Berry Berman, Media Week, March 17, 2008. Internet radio listening has also expanded rapidly, rising from 12% in 2002 to over 50% in 2015."Monthly Online Radio Listeners Now Exceed Half The Population 12+" by Edison Research, February 26, 2015. Despite an increase in choices for consumers, a 2009 study found that 92% of listeners remained tuned in during commercial breaks."Radio Listeners Stay Tuned During Commercials 92%" (arbitron.com)
Formats Radio advertising is available in a broad range of types and lengths. As the radio industry has evolved and production technologies have improved, the methods used to present commercial content have diversified. The two primary types of radio advertisements are "live reads" and produced spots.
A live read, similar to an ad-libbed commercial, refers to an advertisement read on air by a DJ. The delivery may be based on a script, fact sheet, or the DJ's personal knowledge. Live reads may also take the form of an endorsement, in which the DJ promotes the advertiser's product or service. The Radio Advertising Bureau (RAB) defines an endorsement as one in which a station or on-air personality "endorses" the advertiser's product or service, typically delivered live."Universal Spot Radio Buying and Selling Terms and Network Radio Terms Addendum" by the AAAA and The Radio Advertising Bureau (RAB.com)
Produced spots are more common. A spot is considered "produced" when it is recorded for the client by a radio station or an advertising agency. Produced commercial formats include straight reads with sound effects or background music, dialogue, monologue (in which the voice talent portrays a character rather than serving as an announcer), jingles, or combinations of these approaches."Choosing a Radio Ad Format" by Gary Dahl (dummies.com) Research indicates that the overall quality of commercials is generally as important to listeners as the number of advertisements they hear."Spot Load Study 2005: Managing Radio Commercial Inventories for Advertisers and Listeners" by Bill Rose and Joe Lenski (arbitron.com)
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