What’s Driving the Growth of Out Of Home

By the editors of Media Life

Out of home advertising is unique among traditional media because technology has actually helped its share of ad spending grow. While newspapers, magazines and radio struggle to adjust to digital, both in terms of content and advertising, newer, smarter technologies have led to sweeping advances in out of home, from improvements in traditional billboards to interactive digital signage to an explosion in social media pickups of alternative media stunts. Advertisers are willing to pay for all the new ad opportunities these innovations have brought about, and all this has to led to a pretty rosy outlook for ad spending over the next few years, according to Mark Boidman, managing director in the media, entertainment, communications and technology group at Peter J. Solomon Co. and a leading authority on out of home. Boidman projects OOH advertising will hit $10.1 billion in 2020, up from $6.1 billion in 2010. Its growth rate of 5.7 percent from 2013 to 2022 will trail only digital at 7.8 percent. Boidman talks to Media Life about how digital is impacting OOH spending, how mobile will change the medium over the coming years, and why OOH advertising has a greater share in Europe than in the United States. At the bottom of the story you will find a link to his latest outlook and also CPM comparison chart across different media.

What are the principal causes driving the steady growth of OOH, if you had to cite three?

One is the fact that mobile phones have been a real driver of growth. People are more mobile and on the go, and because of that the OAAA now says 70 percent of waking hours are spent outside of the home.

As people are more mobile, they’re more out and about, and because of that there’s a real opportunity to connect with the consumer closer to the point of sale.

We think of out-of-home media as any opportunity to reach consumers out of the home. So it could be advertising or it could be content, such as engaging consumers with video. You might walk by a retail store that’s showing video content of women on a runway showing the latest fashions, etc.

The other thing driving the growth is that other media channels are facing challenges. Technology isn’t always as much of a friend as it is in the OOH industry. That’s a plus for the industry, whereas for newspapers the conversion to digital has not been a plus.

So that’s another reason the OOH sector continues to grow nicely.

What areas of OOH do you see experiencing the most growth? 

We really like the transit space. We see that as being a real strong sub-sector of OOH.

The reason is there’s a real opportunity to convert to digital. Transit networks are usually private and you don’t usually need a permit to convert to digital. There’s an opportunity to grow in that sub sector, so that’s a space we really like because the signs are more street-level signs, where you’re walking by them and consumers can engage with them.

Your data shows that the transit category accounts for $1.1 billion in ad spending but that digital accounts for just $140 million. Is digital not catching on in transit? Do you expect to see stronger growth in the coming years?

Transit as a category is going to catch on.

Usually transit contracts are five or 10 years, and we’re coming to the end of some of those older contracts. So the new contracts will start the real conversion from static adverting to digital. So I think you’ll start to see that category really start to grow.

We also think the airport sector, we’re seeing a transition in that area, so that’s another area we like.

What are the big trends you see shaping out of home in the coming few years?

The biggest are mobile and programmatic buying. Today almost all OOH media is not purchased in a programmatic way. That shift will happen at some point.

Today you’re starting to slowly see automated buying of inventory, but it’s not yet to a point where you have real-time bidding (RTB) like you do online. In the future you could have a RTB platform where buyers and sellers bid on inventory, but it’s quite a ways away.

One thing that makes it difficult is not all outdoor inventory is created equally. It could be billboards in Times Square versus a billboard in the middle of nowhere, or billboards of different sizes. It’s hard to create a platform where you bid on inventory where you’re not actually talking to a human being.

But over time it will move that way.

The biggest thing we’re always talking about is if OOH can level the playing field with other media channels. If they can make it easier to buy and sell the media, that would help level the playing field with online, where you can buy inventory from anywhere at any hour.

Across OOH, are we seeing or do you expect to see significant consolidation among the major players? If so, what would the factors be driving the trend?

If you look at the industry as a pie, the largest players in the U.S control around 60 percent of the market. If three or four players control that much, there’s 40 percent of the market up for grabs.

Over time those larger players will go after that market share. There’s a lot of cost-sharing and revenue synergies that can be created by acquiring another operator in your market. So we do think there will be further consolidation.

In billboards, what share are traditional and what digital, in terms of revenue? Are we seeing a decline in revenue generated from traditional?  What share of overall OOH dollars go to billboards, and what is your general outlook for the category, both traditional and digital?

When they break up digital OOH, some include digital billboards as digital OOH. We include digital billboards as a part of traditional. We consider digital OOH place-based media. That’s starting to change as digital billboards are becoming networked. The source that we used broke out digital billboards and place-based networks.

What’s interesting is, if you look at the big public companies, last year for some of the operators, 1 percent of their faces were digital but driving 10 percent of revenue. Now some operators have 2 percent of their faces digital, accounting for 20 percent of revenue.

That will continue to increase because there’s more demand for digital.

One of the barriers to entry is you can’t just put up a digital billboard near one that already exists. You need a permit, and you can’t get new ones. That takes time. But no one wants to go through those steps if you don’t have enough demand in a marketplace. So it’s a combination of those factors [local demand and digital restrictions].

Do you see mobile, which is now exploding, taking dollars away from DOOH?

Yes and no.

There is a risk of that happening, not in the digital billboard space. In the backs of taxis, airplanes, gas station pumps–there is potential for mobile to take dollars, but I don’t think it will happen. We’re not really seeing it. Advertisers don’t love the idea of advertising on mobile phones, and consumers can find it as an annoyance.

Advertisers are more excited, I think, to advertise in digital OOH, such as at the gas pump, with something related to, say, cars. Automakers can reach their consumer and it’s not in a way that a consumer will be offended. But if I get a pop-up ad on my cell phone it could be invasive, and I might be a little turned off.

You see a bright future for mobile in OOH. How challenging will it be to integrate mobile with OOH and how far along are we in that process?

We do see a bright future for mobile. It can provide contextually relevant advertising on the go. Having your phone and the ability to interact and collect data is very valuable. We think over time it will become less and less challenging. But we’re probably at the early stages of that integration.

It will be difficult to integrate with the bulk of big billboard operators–as you’re driving down the highway it’s hard to integrate with a mobile phone. On the other hand, airports, street furniture, transit, those businesses have a lot of opportunity to engage with mobile. While you’re waiting at a bus stop there’s an opportunity to make purchases right then and there. Not as much in the billboard space, but that could change over time.

I was talking to someone about this the other day, and the only real potential threat–and I don’t think it’s much of a threat–to this sector would be driver-less cars.

If you’re sitting in a car and you’re so comfortable and not driving and just staring at a [mobile] screen, the potential could be that you don’t look out the window. But that’s way down the road, and other than that this industry is poised for rapid growth.

As you well know, through TAB, we’ve see great improvements in OOH measurement. More are coming. Where within OOH do you see the greatest need for improved measurement?

First off, we don’t think there have been great improvements. We think the TAB system needs great improvement.

They’re taking steps to do it.

The way we see it being improved is to more accurately track who is engaging and interacting with an OOH piece of media. We think their opportunity is to develop their own methods with technology that already exists, including marketing techniques and document software like soda pdf to create and edit PDFs. The interesting thing today is most operators can’t tell you with absolute certainty how many people walk by a billboard in a given day.

If they use tracking data with what TAB is doing today, I think they could have a real popular way to measure the audience.

In Europe OOH gets a larger share of spending than it does in the U.S. Do you see OOH share in the U.S. approaching that of Europe, or is it too difficult to compare the two markets?

There’s a real opportunity to get closer to those levels.

But the difference is in Europe you have a lot more walking cities, so more street furniture, etc. In the U.S. it’s much more spread out and less of an opportunity to reach a consumer in the same ways.

But maybe that will change. More and more people are staying in big cities, so maybe Americans will starting walking more versus driving. But that’s why the growth has been so significant in Europe.

Click here to see Boidman’s OOH spending forecasts