Even radio isn't immune to the New Economy's shakeout.

That fact appears to be driving trading in radio giant

Clear Channel Communications

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. On Aug. 30, the San Antonio-based radio operator completed its widely hailed $24 billion deal to acquire fellow radio behemoth


. That deal made Clear Channel the nation's No. 1 radio operator, with more than 900 radio stations, as well as 19 television stations and 700,000 billboards.

Clear Channel trending lower

Being the biggest name in radio promised more lush returns at Clear Channel, whose annual 70% revenue growth in recent years has made it a top-performing stock. After all, radio advertising growth has only accelerated in recent years, and a company that controls as many outlets as Clear Channel stood to have a huge advantage over its smaller competitors.

But in the two weeks since the deal closed, Clear Channel's stock has sunk 17%, as investors have come to worry that radio-ad growth is slowing. Particularly troublesome are the reports of sharp pullbacks in Internet advertising, which fueled much of radio's recent growth. If radio ad-spending growth returns to its historical norms, as analysts expect, the broadcaster's stock could face more static.

Slowdown Worries

In June and July, radio advertising sales growth slowed from the first five months of the year, to 14% and 11% respectively, according to the

Radio Advertising Bureau

. Those two months were the first months this year with spending growth of less than 20%.

Analysts are attributing the spending slowdown to cutbacks at dot-com companies since Web stocks were routed in April.

"We're really seeing a return to a normal environment after a massive dot-com distortion," says Gordon Hodge, analyst with

Thomas Weisel Partners

in San Francisco. (He rates Clear Channel a strong buy; his firm helped underwrite an equity and a convertible offering last year.)

Battered Cod

And it may be a few months before radio investors get a break. Tough year-to-year comparisons will be in place for the next three or four quarters, Hodge says: "I think the market was really conditioned by the first half of the year." Investors who were expecting 15% quarterly revenue growth may now be looking at 10% growth, Hodge says.

Historically, after all, radio ad spending has grown at an 8%-10% clip. "As a radio operator, you can still make a lot of money at that growth rate," Hodge says.

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But 10% growth rates probably won't cut it for investors. For the third quarter of 1999, radio ad revenues jumped 15%, and it only gets tougher from there. The fourth quarter? 18%. First quarter 2000? 21%. Second quarter? 20%.

And that slowdown will likely persist, if some spending projections are correct. Media merchant bank

Veronis Suhler & Associates

in New York is calling for 12.2% year-over-year increase in radio ad spending for 2000, not much different from the 12.3% increase between 1998 and 1999. The second half of this year "might be a little bit slower, but I don't think it is alarming," says Leo Kivijarv, director of publications at Veronis Suhler. He adds that despite a possible slowdown, the strong growth in the first half of the year will probably keep radio spending on target for 2000.

Bigger Piece

To be sure, Clear Channel isn't the only radio name to see its stock hit on fears of an ad slowdown. The entire sector has been battered; media research firm

Paul Kagan Associates'

radio index hit a 52-week low last week. (Clear Channel shares were off $1.25 Friday at to $63.50.)

Infinity Broadcasting

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, which is weighing a buyout

offer from majority shareholder


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, has seen its shares tumble 8% since the end of August.

For all the hand-wringing over radio advertising spending, Clear Channel isn't a company in trouble. Since 1996 regulation freed up the industry to consolidate (which led in part to the deal to acquire AMFM), radio's share of the advertising pie has increased each year. In 1992, radio claimed 6.5% of all ad spending; in 1999, that number rose to 8.2%.

Clear Channel's sheer scale -- it reaches some 110 million people through its various assets -- should position it to take advantage of radio's growth, analysts say. As long as radio continues to steal market share from other local media like newspapers or broadcast TV stations, Clear Channel should continue to put up solid numbers.

The company's recent spending spree hasn't been limited to AMFM; this summer, Clear Channel also completed its $3.5 billion deal to acquire live entertainment company

SFX Entertainment

, which has dominant positions in promoting live musical acts, Broadway shows and sports representation.

And analysts drool over the cross-promotional opportunities Clear Channel can exploit in promoting, say, a concert at one of its 120 live venues on one of Clear Channel's radio stations and splashed all over its billboards. Whether investors will warm to the stock again is another question, however.