Making Radio Pay: Toll Broadcasting and the First Ad on the Airwaves

In the early years of 1920s America, before audio dramas, giveaways, and even chart-topping hits dominated radio waves, the broadcasting business faced a question that endangered its very existence: How were they going to make money?

According to NPR, the bulk of radio’s profits at the time came from the sale of radio receivers. Most of the major radio stations were also receiver manufacturers, as the former didn’t render profits and the latter was popular with the public. However, receivers and their parts varied wildly in quality throughout the 1910s, according to Early Radio History;  betting on the receiver business to keep an entire radio station (sometimes more than one, as was the case with companies like RCA) was a significant risk. So, broadcasters spent 1921 and 1922 exploring other ways to make radio pay. Eventually, one company succeeded in paving the way for a new era of the airwaves: AT&T.

AT&T, also known as the American Telephone and Telegraph Company, was not a major player in radio’s early days. In fact, it didn’t enter the industry until 1922, when the Western Electric Company, one of its subsidiaries, began construction on the WEAF radio station in New York City. But AT&T had a plan to make its station stand out from its competitors, most of whom used their stations to promote causes, share opinions, or play music. The plan was called toll broadcasting, and its purpose was to make radio profitable by allowing companies to market their services in purchased blocks of time. Thus began the business of radio commercials.

The WEAF station opened on July 25, 1922, but a series of technical issues, including weak frequencies, forced the station to move to a new building and install additional radio towers to boost the signal’s strength. These delays prevented WEAF from selling their first marketing block until late August, but they finally experienced success when the Queensboro Real Estate Corporation bought a 10-minute advertisement for $50. In today’s radio industry, the same spot would go for more than $2,000.

On August 28, 1922, WEAF aired the Queensboro ad. It is widely considered to be the first commercial ever broadcast on radio. For ten minutes, a Queensboro spokesperson pitched listeners on the benefits of the company’s new Hawthorne Court Apartments in Jackson Heights, New York. Although no copies of the ad exist, WEAF recreated the segment in 1952 to celebrate the station’s 30^th anniversary. Parts of that recording have survived, including the one included in this NPR broadcast (listen at 3:38).

The advertisement model was immediately popular with local businesses seeking to expand their reach, and WEAF’s toll broadcasting operation saw massive profits. In two months, the company had sold over 500 dollars’ worth of ad blocks. In four years, AT&T had made enough money to comfortably exit the radio business. They sold WEAF to the National Broadcasting Company (more commonly referred to as NBC) and transitioned to the industry of telephone communication.

However, AT&T left behind its blueprint for profiting off broadcast. Numerous radio stations followed suit, mixing ad blocks both long and short into their regularly scheduled programming. Since then, ad blocks have become shorter, with a commercial break now occupied by several brief pitches instead of a single sales presentation. Yet the general premise of toll broadcasting remains the same, and the radio industry generates over $10 billion in ad revenue each year (radio companies charge an average of $200 for a 15-second ad). By comparison, radio stations only make about one fifth of their ad profits in online sales each year.

Radio stations as we know them would not exist, or be turning a profit, without the early days of AT&T and a ten-minute talk from the Queensboro Real Estate Company.