Future out-of-home-report

On the Threshold of Change
The Future of Out of Home Media in the UK
The industry, consumers and technology to 2020

Kinetic Worldwide
July 2011

Contents Introduction and methodology

1 Introduction and methodology 48 Part 3 The Out of Home industry in the UK is characterised by a long, creatively
2 Participants & contributors Targeting, measurement and trading.
3 2020 Executive summary How Out of Home can revolutionise
prosperous history and has adapted well to change in recent years through
its proposition the application of high investment levels from media owners and attempts to
4 Part 1 be more accountable, measureable and flexible. It is still delivering all of these
50 A new media ecosystem
Future opportunities and challenges 51 Ones, noughts and cash: How much will digital
6 A series of questions elements to satisfy client demand and must now deal with how to effectively
posters be worth?
7 Birth of a medium: The recent history of 52 Estimated revenue split by category embrace technology as consumers get smarter and technology provides a fully
digital posters 53 Olympic landmarks interactive experience.
7 An emerging technology sector 54 Ticking all the boxes: Posters and the new world
8 A landmark in revenue growth of strategic planning
9 An agenda for change 55 Street targeting: The potential for real-time planning Kinetic’s Future of Out of Home project focuses on how change can be clearly
10 Going national: and the power of daypart and successfully implemented by the industry, but also outlines how client,
Exploring the growth of digital poster 56 A closer connection to sales
sites and the challenges for investors consumer and commercial needs will test the resolve and the creativity of the
57 Integrating Social Media into OOH planning
11 Case study: Face tracking the mall consumer 58 Measurability and driving accountability industry as it adapts to change.
12 Multiple formats 59 Case study: New Postar at a glance
13 Urban planning 60 Trading Out of Home
14 The case for and against capital Our research began in January 2011 by conducting several interviews across
61 From two weeks to two hours
expenditure on digital networks 63 Counting with CPM? the industry with investors, consultants, media owners, media agencies, creative
15 Sustainable pricing 64 Joining the dots: The implications for agencies agencies and manufacturers – whilst adding our own perspective – on what faces
16 Screen technology costs 65 Kinetic view: Commercial challenges
17 Tapping into new sources of revenue the industry over the next ten years.
18 Virgin territory: Investing in new networks 66 Part 4
19 Risk and the technology curve We also conducted consumer research into expectation, technology take-up
20 A vision of the near future:
Conclusion: Building the Future
Predicting the digital footprint
68 About Kinetic Worldwide and the perception of an industry in the process of change.
21 Multiple formats
22 Kinetic view: Complex challenges; The findings delivered a number of themes, spanning the commercial,
huge opportunities
developmental and technological aspects of Out of Home. There was
23 Part 2 consistency of perspective, particularly from within the respective quarters of
Consumer interaction, the industry. There was also much debate and some conflicting expectation.
technology and content
25 iOOH: The potential for mobile interactivity
26 Connecting OOH to mobile What we have done is bring that perspective and consensus together into a
27 Which flavour of interaction? viewpoint and a forecast of how the industry will change in the next ten years.
29 An augmented world The road to 2020 will be one that seizes on the considerable change and
30 Information swipe
31 Changing consumer behaviour initiatives already underway. Our view is that we are on the threshold of change
33 So do people want to interact with digital screens? now and that this is an exciting time for a media sector that embraces consumer
34 Great expectations mobility, technology and communication response at its heart.
35 Engaging the consumer: Can posters become
a conduit for promotions, content and social media?
37 Case study: Nike grid
38 Social media integration and relevance
39 Out of Home entertainment and editorial
40 The digital canvas: A creative opportunity?
41 Engaging advertising creatives
42 The quest for quality advertising
43 Case study: Face tracking in a commuter
rail environment
Nick Mawditt Patrick Barrett
44 Smart posters
Global Director of Insight and Marketing Consultant
45 Business rationale: New technology means
Kinetic Worldwide Simpatico PR
new models
47 Kinetic view: Consumer interaction,
technology and content Kinetic 2011

Participants & contributors 2020 Executive summary

Contributors O
ut of Home media revenues to see continued growth over the next
decade, reaching £1.15bn by 2020.

A
re-appraisal of the value of the Out of Home media sector will
be justified by robust long-term growth and a rising share of total
media expenditure.

D
igital OOH revenues will account for a quarter of total OOH revenues
Jeremy Male Matthew Dearden Mark Chippendale Tim Bleakley Simon Sugar Mike Baker by 2020.
JCDecaux Clear Channel CBS Outdoor Ocean Outdoor Amscreen Outdoor Media Centre

O
ut of Home will segment into two dual sectors; Broadcast OOH
and Targeted OOH.

I
nteractive OOH (iOOH) and Poster to Mobile will emerge as new
specialisms.

S
pecialist OOH agencies and media owners will embrace mobile,
social media, digital content creation and online advertising expertise,
Naren Patel Steve Davis Tom Goddard Richard Metcalf Nigel Gwilliam Gill Reid
Primesight Clear Channel Digicom Joule IPA MediaCom
reflecting the change in the medium towards lifestyles
and environments.

Consumers do want to interact more with digital screens.

D
aypart, retail proximity and real-time planning will revolutionise
the relationship between Out of Home and advertisers.

N
FC and RFID have the potential to transform the relationship in the
short term.
Russell Davies Neil Morris Mark Rose David Fletcher Alun Lucas Nicky Cheshire
Ogilvy Mather Grand Visual Mindshare MEC MEC Digital Consultant
S
mart posters capable of recognising and reacting to consumer type
will become commonplace.
D
igital poster networks will become more widely visible across at least
30 major cities within 10 years.

D
igital screens in established Out of Home locations will double over
the coming decade; significant impetus will be given to some roadside
and bus 6 sheets after 2015.
James Copley Nick Parker Mark Smith Colin Bundock Carolyn Nugent Mark Adams
Kinetic Kinetic Kinetic Kinetic Kinetic Kinetic
T
he total Out of Home advertising universe will increase dramatically
with very limited rationalisation of traditional static billboards.

2 On the Threshold of Change On the Threshold of Change 3
The Future of Out of Home Media in the UK – The industry, consumers and technology to 2020 The Future of Out of Home Media in the UK – The industry, consumers and technology to 2020

Part 1 Future opportunities and challenges

Future opportunities
and challenges Posters have been a part of people’s everyday
experience for centuries and in the UK, posters
and billboards have been an organised mass
The last 20 years in particular, have seen media owners
consistently invest in upgrading and enhancing their
site inventory. New formats have been launched;
advertising medium for almost 150 years. poster installations have gone hand-in-hand with
investments in public utilities, which have helped
Whether as a political medium, an art form or for improve urban environments.
commercial brand communications, posters or
billboards are an established and expected part New locations have been brought into the poster
of urban environments and have carried some of sector fold such as shopping malls and transport
the most powerful and memorable images of the environments and the presentation and impact of
last century. sites at existing locations such as airports and metro
systems has been consistently upgraded.
Out of Home (OOH) media as the commercial
poster sector is known, is no stranger to change, its Long-standing issues such as measurement have been
ubiquity in public spaces has meant it has weathered tackled with the launch of a new version of Postar,
changing consumer trends and the arrival of new which for the first time puts Out of Home audience
media technologies. Posters remained a consistently measurement on a par with – and even ahead of –
successful advertising medium through the growth other advertising media.
of mass-market newsprint in the late 19th Century
and early 20th Century; the arrival of commercial This competitive focus on enhancing the medium
TV and radio and from the turn of the millennium, has reinforced the sheer reach of poster advertising
the staggering growth of online display and search across the nation and into the daily lives of people
advertising. out and about. Research that proves the worth of
poster campaigns in isolation and studies that show
Indeed over the last decade as digital technology the benefits of mixing poster media with other media
wrought change across TV, print and radio and huge activity, make it a consistently attractive element in
growth in on and off-line content choice caused advertising campaigns.
audiences to fragment, Out of Home has been pitched
as the last broadcast medium.

As well as being subjected to external forces, the
poster industry has itself changed dramatically over
the last thirty years. In the UK, a patch-work quilt of
small media owners offering a bewildering array of
options, has been streamlined in-terms of ownership
and has become highly refined in terms of capability
and quality of delivery.

On the Threshold of Change 5
The Future of Out of Home Media in the UK – The industry, consumers and technology to 2020

A series of questions Birth of a medium: An emerging technology
The recent history sector
of digital posters
In many ways however, Out of Home advertising In this report Kinetic will argue that within these last In the context of the history of advertising, It is also clear, however, that the Digital OOH
is a medium at a cross-road. The tide of digital two questions sits an opportunity to transform the Digital OOH media is in its early infancy. universe is a complex one and displays all
technology has in the last five years caught status and role of Out of Home media. The Outdoor Media Centre (OMC) provides a the hallmarks of a nascent technology-based
up with the industry in the UK and in markets measure of revenues from digital sites as far business sector. There are approximately 50
around the world. In the context of the changing relationship between back as 2003, when they accounted for around different digital formats on offer in the UK
consumers, mobile technology, digitised media and the 1% of money spent on posters in the UK. in comparison to six main traditional formats
Static paper and paste sites are being replaced by desire amongst advertisers for reach and engagement; (excluding bus formats).
digital screens that are networked together, linked to digital technology could in the long-term create two A more meaningful date for the birth of Digital
the internet and capable of showing animated images complimentary Out of Home sectors or propositions; OOH would however be 2007, when CBS Outdoor Digital screens can now be found in significant
or full motion video. Digital screens are opening up highly targeted and engaging advertising via digital began the installation of the first large-scale digital numbers across the Tube network, in most major UK
the opportunity to run more creative and noticeable and broadcast reach via static posters. poster advertising network in the UK on the London airports, at a growing number of major shopping
advertising. Underground and was followed in quick succession centres, in retail, leisure and healthcare environments,
With these external and internal forces at work, the by JCDecaux’s launch of an airport-based digital as well as at a small number of key roadside and city
Technology that can link a poster to a mobile phone poster industry is now embarking on a process of network and the roll-out of digital roadside panels centre locations.
and can recognise passers-by, is waiting to be deployed. change perhaps more radical and far-reaching than by Clear Channel and JCDecaux.
The potential to carry advertising, content, promotions any period in its long history. However, only in-store, mall and some transport
and social media activity from the internet into public Within this period, digital screen advertising has environments provide anything approaching a national
spaces and back again via poster-to-mobile campaigns undergone massive growth both in terms of revenues, footprint. The bulk of digital sites are concentrated in
is already recognised by advertising agency planners. site numbers, new companies selling digital advertising London and the south east with a few small pockets in
space and experimentation with both visual and key locations in the midlands, the north and Scotland.
The implications of the creation of national networks interactive technology.
of digital posters is dawning on media traders who Currently advertising media strategies using digital
can see the potential value of using dealing models Kinetic estimates that in the first Quarter of 2011, are constructed by piecing together different location-
more akin to online or broadcast media, in the world there were around 20,000 digital poster screens in based networks, or even site-by-site. The capacity to
of poster media. traditional Out of Home environments and a further buy a national display campaign is limited.
50,000 in other places, designed in a myriad of shapes
But hand-in-hand with apparent opportunities come and sizes and installed at around 20,000 locations
major challenges. When and where is it economically in the UK.
viable for media owners to deploy digital posters?
Which technologies will prove durable and which To put this into context however, it’s worth noting that
ones will consumers respond best to? To what extent the total number of Out of Home poster sites in the UK
can and should the Out of Home sector become stands at approximately 250,000, making digital sites
digitised? Is smartphone advertising a threat or a huge around 5% of the total Out of Home sector in the UK.
opportunity? What are the implications for a medium
that could be segmented into digital and non-digital
sectors and how will traditional static sites work with
digital ones?

There’s not a business on the planet that is not
thinking about a digital network.

Tom Goddard
Digicom


A landmark in revenue growth An agenda for change

Even so, Digital OOH has rapidly become a While the digital poster sector continues to grow, While the UK’s Out of Home media owners Tim Bleakley, CEO at Ocean Outdoor, a media owner
meaningful opportunity for advertisers. Spend it will do so in parallel to ongoing improvements to have a strong track record in investing in their that is a relatively recent entrant into the Out of Home
on digital sites has more than doubled from traditional, static billboards and posters, which will medium to ensure it remains vibrant and market and largely a specialist in digital sites, believes
£42m in 2007 to £101m in 2010 (OMC). This continue to account for the bulk of available poster relevant, media agencies already regard Digital the integration of digital technology will mark a
places Digital OOH at around 11% of all Out sites and for the foreseeable future, revenues. OOH not just as the next step in an ongoing strategic shift in status and capability of poster
of Home advertising spend in the UK, putting series of general improvements to inventory, advertising. “Because Out of Home is now in the
it within striking distance of Cinema in terms However, Kinetic believes investment in digital poster but as a potential step-change for Out of Home digital space, it offers advertisers an ever-changing,
of revenue scale. sites, streamlining of format types and growing media as a whole. ever-evolving and ever-moving opportunity in the
alignment of digital poster creative advertising with way that our static billboards aren’t designed to.
“There is no doubt that we are reaching a kind of other digital creative forms, will make the integration Mark Rose, Account Director at Mindshare says: You might change the lighting on a static billboard,
inflection point where digital shifts from being a of technology, the primary driving force for growth “I think it’s fair to say digital and digitalisation is the you might change it to scrolling, but fundamentally
niche consideration to a central one,” says Mike across the Out of Home sector over the coming decade. primary driving force for the future of Out of Home it’s a billboard. There’s always going to be a place for
Baker, CEO at The Outdoor Media Centre. “When you in terms of attracting advertisers. traditional billboards that can broadcast for brands
consider Out of Home is getting on for 10% of all This view is underscored by perhaps the most and I think actually the solidity of the traditional side
display advertising and around 10% of Out of Home important indicator of the potential for Out of Home “I think its history of ongoing innovation and of the medium is even more important in this world
is digital; that already makes digital posters 1% of to grow as an advertising medium; the attitude and investment means Out of Home is always front where everything’s moving all the time.
all display in the UK.” level of expectation expressed by media agency of mind, always a consideration, but I do think
planners who deploy advertisers’ media budgets. that digital innovation is answering a fast “But I think the addition of digital is enabling
The OMC measured Out of Home advertising at emerging requirement that advertisers want Out of Home to do more dynamic targeting using
9.4% of all display advertising in the UK in 2010. If from the medium. new technology. It allows it to compete on an equal
online classified or “search” expenditure is taken into Outdoor share of UK footing with what, in effect, are the two mainstream
consideration Out of Home advertising held a 5.7% display advertising revenue (%) “It’s not just about the flexibility, it’s about things mediums of today; TV and online.”
share of advertising spend in 2010 and is expected like integration of social media; all successful
to account for 5.8% in 2011 according to GroupM, mediums are all working out how they can actually The rest of this section will consider the factors
2010 9.4
the media and investment arm of WPP, in its most integrate social media.” influencing the next stage in the development
recent forecast. 2009 9.3 of Digital OOH advertising networks in the UK;
2008 9.8 David Fletcher, Head of Analytics and Insight at examining the case for investment in Digital OOH
In the pre-recession period, GroupM data ranked MEC, argues that what digital technology will do for sites and forecasting where and when future digital
2007 9.8
the growth in expenditure on Out of Home media Out of Home media is to effectively plug the medium site networks will be added to the media mix.
as second only to growth in online spending. As we 2006 9.7 into brand communications initiatives and innovations
emerge from recession and overall economic growth 2005 9.2 that are being planned on the web, therefore opening
gradually recovers, GroupM predicts Out of Home the door to new revenues.
2004 8.9
advertising will once again rank amongst the fastest
growing media in the UK. 2003 8.8 “Who would have thought that A3 paper escalators
2002 8.0 panels would become a really interesting medium?
Digital technology has made that space into a
2001 7.8
wonderful canvas and as these opportunities
2000 7.5 proliferate they will awaken brands and agencies
to the potential to implement real-time planning
on digital poster networks.
Source Outdoor Media Centre / WARC

“We’ve tended not to worry particularly about
Out of Home is about the only medium consistent audience scale in online media; if it is
where digital enhances rather than undermines cool we will do it even if it only gets 50,000 unique I think a lot of the people are assuming a sort
it, because of audience and channel users because there is an appetite for cool amongst of linear, nice, comfortable, transition to digital.
fragmentation and because of the difficulty clients. I think what Out of Home has with digital is To me the only certain thing is it’s not going to
of monetisation. a relative advantage in its ability to actually do new be like that.
stuff that’s got some real guaranteed scale to it.”
Mark Chippendale Russell Davies
CBS Outdoor Ogilvy Mather


Going national: Case study:
Exploring the growth of digital poster Face tracking the mall consumer
sites and the challenges for investors
Taken at face value, installing a digital screen The second is the cost of installing screens. Generally Kinetic has pioneered unique face-tracking
in place of a traditional static format should speaking, enclosed environments lend themselves research into consumer mood and engagement
enable a media owner to multiply revenues to smaller screens which are cheaper and easier with digital OOH in the shopping mall
generated by that site because of the ability of to maintain. environment. Conducted in partnership with
the digital poster to run a reel of ads, compared Clear Channel Outdoor, the study revealed
to just one for a static site. The third is the captive nature of audiences in enclosed new insights into engagement and optimum
environments. Railway stations and metro systems animation levels of digital advertising.
The desire to drive up the volume of ads a site can such as the London Underground create natural areas
carry prompted previous waves of investment in where people gather and wait for the next train or Cutting-edge face tracking technology from the
analogue poster technology such as the scrolling their flight. These high dwell-time areas have always Fraunhofer Institute – inventors of the MP3 audio
billboard, which typically displays three different been of value to poster companies, but are particularly format – tracked contact with advertising displayed
advertisements in succession. In theory, digital sites important to unlocking the future potential of Digital at the Westfield mall in Tunbridge Wells and later at
can run a limitless series of ads, but in reality reels OOH sites. From a commercial perspective, these Merry Hill, a top-5 UK shopping centre. An HD camera
of six to eight are typical if campaigns are to enjoy captive audiences can also be packaged and sold by was placed on a digital screen, providing contact data
effective levels of exposure time. audience type or activity, which is a vital consideration from those who passed.
given the level of capital expenditure required to
On top of the ability to increase revenue volumes, create Digital OOH advertising networks. Insights from the study revealed that ad contacts
digital screens capable of delivering moving images, strongly correlated to footfall, particularly at weekends
can also in theory command a premium over static Likewise retail environments are naturally populated where a more relaxed mindset resulted in much longer
posters. If the investment equation was that simple by consumers in a particular frame of mind. In theory, duration of contact. In the larger mall environment,
however, far more poster sites would have been digital poster screens actually within shops benefit we tend to act like we are in a bubble; our engagement
converted to digital screens. both from capturing consumers as they queue and varies slightly by day of week and gender, but
in the frame of mind where they might be more likely essentially there is high engagement and long contact;
To date, the physical growth of digital sites has largely to make a snap purchasing decision. our expressions are overwhelmingly positive.
been orientated to specific locations or destinations.
The vast majority of digital sites currently in use are The fourth equally important and directly connected As our previous research in a rail environment suggests,
in enclosed environments such as metro systems, reason is that enclosed environment digital sites are animated and scrolling copy worked better than static,
shopping malls, airports and retailers. free to carry dynamic or animated imagery. Research whilst the degree of animation is crucial to attracting
It’s not just about digital.
has already demonstrated that posters carrying attention. Shoppers were three times as likely to
It’s environment!
There are three key reasons why so far digital sites animated images, attract up to twice the attention be happy than sad in a mall environment. Younger
have emerged in these enclosed locations. The first is levels of static posters (see Kinetic’s Face and Eye audiences were more engaged with digital and static
James Copley
the safety and environmental regulations enforced by Tracking studies in mall and rail environments) and advertising; older audiences less so, but they had a
Kinetic
local councils which limit visual movement on posters are thus are distinctly more valuable. greater range of expression.
due to road safety concerns and limit the placing
of illuminated screens in areas where they might be The research has helped inform improved use of the
deemed to cause light pollution. message and creative and reinforces the point that
Digital OOH should be used as a medium in its own
right and not as a surrogate for TV commercials.

If all we do is take paper and turn it into
pixels, we’ve burnt a lot of CAPEX to no
advantage.

Matthew Dearden
Clear Channel


Multiple formats Urban planning

The formats used within these locations have The installation of digital roadside sites has to date A primary reason for the restricted growth
tended to mirror standard shapes, the most been dominated by iconic or large-scale sites situated of digital sites at roadside locations is the
abundant being the digital 6 sheet (D6), an in a small number of hand-picked locations that enforcement of planning codes by individual
evolution of the static 6 sheet in shape and deliver large audiences and grab the attention. Media local authorities. In the UK there is no uniform
size, although the majority of D6s are capable owners operating these sites have been able to justify national approach to roadside media planning
of delivering moving images or video. capital expenditure by the premiums they can charge permissions. Instead local authorities apply
advertisers based on audience and the quality of the their own criteria to different zones.
A variety of large-scale, moving image capable digital poster display. In many respects they play a role similar
billboards have also emerged along with smaller to the famous neon-moving image site at Piccadilly Public safety, particularly for drivers, is a natural
formats, perhaps the most notable of which are CBS Circus, becoming landmarks in their own right. consideration in relation to the introduction of
Outdoor’s Digital Escalator Panels (DEPs). 1,264 of moving images. However, in many ways the possibility
these are situated in 18 Tube stations across the of introducing digital moving images on roadsides in
capital, providing connected screen runs up and down selected zones where safety concerns are minimal is
escalators and enabling creative to travel from screen- uncharted territory, as the dialogue between media
to-screen. owners and landlords on this issue is part and parcel
of negotiations and pitches for new sales contracts.
The vast majority of all Out of Home sites in the
UK are however categorised as roadside. These are Evidence suggests however, that the installation This creates an interesting dynamic and will create
a mixture of 6 sheets often located at bus stops, 48 of digital sites is becoming a pivotal issue in tender some momentum behind the drive towards the
sheet and larger 96 sheet billboards and as yet these negotiations and will almost certainly feature in most conversion of digital panels, particularly bus shelter
sites are almost untouched by digital technology. future tenders. It is apparent that landlords are pressing and proximity 6 sheets, The rate of change will, of
media owners to commit to digital investment and that course, be dictated by local authority (awareness) and
The expansion of roadside Digital OOH advertising financially challenged local authorities in particular, are the timing of tender renewals. However this pressure
networks is a more complex process than the re-appraising the value of their Out of Home portfolios. on landlords to increase income, combined with media
comparatively straight-forward investment calculations owner enthusiasm to drive change on our high streets
and logistical factors faced in enclosed environments. Steve Davis, Development Director at Clear Channel, will help precipitate a fundamental shift in the OOH
says the tough economic times and public sector cuts business model. As we will see later, the long-term roll-
could mean that commercial landlords and public out of digital poster networks is at least partly bound
sector organisations with property portfolios, to some into the timing of future land owner tenders.
extent drive the growth of Digital OOH. “Cash is king
now; businesses and organisations that historically,
didn’t place Out of Home media rentals particularly
high-up on their agendas, have suddenly put a
huge onus on them. Obviously anyone who’s being
forced to cut service budgets or is seeing other
revenue sources fall, is suddenly quite interested
in the potential of digital to multiply revenues.”

I can see a time fairly soon, when every poster
in major shopping malls, railway and metro
stations and airports is digital.

Gill Reid
MediaCom


The case for and against capital Sustainable pricing
expenditure on digital networks

In effect then, the Out of Home industry in Advertisers that have invested with confidence in While generating sufficient revenue volumes With the economic climate increasing pressure on
the UK has grabbed the low-hanging fruit, by Out of Home because of its ability to deliver large-scale to match capacity and fighting for additional landlords to drive up incomes from Out of Home
developing digital sites where the relationship audience reach are now also being offered engaging share of spend is one challenge, finding a advertising contracts and blind-bidding the usual
between audience, investment and revenues digital networks that command a premium. The simple sustainable pricing structure for different types methodology for tenders, it is understandable if
is clearest. This pattern of investment is fact is that unless agency planners can see a strategic of digital site is also one of the critical issues media owners over-bid.
entirely logical given the daunting range of rationale for including both in a brand campaign, Out facing media owners as they embark on capital
factors at a micro and a macro level that will of Home’s share of the budget will not grow, it will expenditure programmes. Naren Patel of Primesight also says media owners
dictate investment success or a failure to simply be redistributed. must resist the temptation to over-promise against
make a return. Naren Patel, CEO at Primesight, says a surge in digital contracts with landlords involving investment in digital
Jeremy Male, CEO UK, JCDecaux says that media supply could cause a re-appraisal of future investments. networks, because the prices individual sites and
Even if planning restrictions are not an issue, owners are investing on the basis that digital will be “It’s basic economics. You have to manage supply, networks can command have yet to find equilibrium.
the success of capital expenditure depends on the primary source of future growth, but getting the because if it increases too much, prices will fall. “There is clearly a premium end to the market for
variables such as visibility, audience levels, audience balance right requires a complex series of calculations So one of the things media owners have to consider, iconic, high-traffic sites and digital should be able to
measurement, visual context, design and presentation, and those should include the degree to which new unless they plan to take out all the non-digital sites, command a premium for other sites, but right now
ease of installation, scalability of technology, digital sites will cannibalise income from existing is ensuring there isn’t excess capacity in the market I’m concerned that prices could fall as the market
maintenance, life-span of the technology, the cost static sites. “We expect digital sites to reach 50% of and that there is enough revenue growth to keep digital expands and settles. I am concerned about bidding
of the hardware in addition to the overall economic the UK population in 2011, giving it a bigger audience prices at a level that supports capital investments.” for tenders at current market rates given that you
conditions and buoyancy of the advertising market. reach than national press. In 2012, digital could will end up making a ten-year income generation
certainly account for 20 per cent of all Out of Home Calculating the future prices that can be charged guarantee.
However, the viability of converting a static poster advertising, making it bigger than Cinema. Obviously for campaigns is a big challenge for media owners
site to digital reduces to the core relationship between part of that growth is being driven by the investment competing to win a tender to manage the poster “ ou can imagine people making business plans at
Y
cost, price and demand. we and others will be putting in over the next inventory of major landlords such as city councils current market levels that are not sustainable. Look
couple of years. In effect digital posters are being and transport networks. at back-lighting, which cost advertisers £5,000 a face
The recession and advertising slump of the past few transformed from a niche opportunity into a distinct when introduced and the average is now around
years have not made for ideal capital expenditure medium with a national reach in a very short £2,000; when new products arrive they command
conditions. However, with UK advertising expenditure space of time. a premium, but typically, that does not last.”
returning to previous levels and a robust bounce back
in Out of Home budgets, media owners may be better “Investment in digital is fantastic for Out of Home
placed to realistically judge whether the extra capacity media because we believe it will drive growth. But
digital sites will deliver can be converted into higher in your investment plans you have to accept the fact
revenue volumes. that not every pound a digital site generates will
be new and this makes investment decisions much
With renewed confidence, larger budgets and growing more complex. As a media owner, understanding
interest in the capability of digital posters, it is clear what the impact of putting all this new signage in,
digital networks will generate larger revenues. However on the rest of your estate, is quite hard.”
media owners are acutely aware that not all of this will
be new money. Managing demand in relation to the static poster
universe as well as the emerging digital one is a critical
issue that will influence the pace of digital investments
made by existing media owners.

You’ll get other technological developments
A good billboard in an average place can in screens; you’ll get e-ink, you’ll get projection
be good business. A good digital billboard and you’ll probably get 3D screens. So the
in an average place could be very bad business, contractors are going to have to make some
for everybody. smart bets.

Tim Bleakley Russell Davies
Ocean Outdoor Ogilvy Mather


Screen technology costs Tapping into new sources of revenue

The cost of screens is the other core factor Constrained by planning permissions restricting However, the price of digital networks will
weighing heavily in media owner’s investment moving images, most large-format roadside sites will, be determined, in an increasing number of
decision making. Average costs of LED at least for the time being, struggle to generate prices instances, by more than the quality of
components have been falling steadily in recent that could justify the much larger investment required. presentation and availability. As the Digital
years (see table). Although events such as the OOH sector matures new strengths such as
Japanese earthquake and Tsunami can disrupt The issue of price also comes into sharp focus when immediacy, targeting by consumer type and
manufacturing and increase component considered from the advertisers’ perspective. A site higher engagement levels will add value to
costs, the overall long-term trend in costs is an advertiser had previously bought exclusively must the medium.
downward as LED and LCD screen manufacturers now be shared with say five other brands. This line
increasingly translate established technology of thought may continue with the question; what Mark Chippendale, Commercial Director of CBS
into dedicated products for the Digital sort of brands am I sharing this space with? The Outdoor, believes these new capabilities will over time
Out-of-Home market. concluding question may be; does digital actually mean that business sectors and brands that haven’t
add enough value to my brand to make it worth previously considered using Out of Home in their
Smaller sites such as 6 sheets are of course, far cheaper paying a premium for? communications mix will be drawn to the medium.
to install and in general the cost per-screen falls in line This, in turn, will sustain occupancy, prices and justify
with the scale of the installation project. For example Clearly digital sites need to demonstrate the benefits continued investment.
the average cost for 65” (digital 6 sheet) single sided they promise in terms of flexibility, delivery and
screen unit is currently around £13,000 for an order of improved engagement. “One way of looking at it is considering the role that
one, around £11,500 per screen for an order of 10 or other media sectors have played for advertisers and
£9,200 each for an order of around 100 (source Esprit). Tim Bleakley, CEO at Ocean Outdoor, says careful whether Out of Home can begin to do that job and do
thought and evaluation of location, audience and it better. If you look at where the tabloids make most
With each screen installation, media owners must presentation are important to ensuring large-scale of their money, a great deal comes from supermarket
factor in the cost of the actual installation investments pay for themselves. “A good billboard in price comparison campaigns. They use newspapers
(approximately £2,000 per site for 6 sheets) and of an average place can be good business. A good digital because they can run tactical daily campaigns in tune
course maintenance and running costs. Large format billboard in an average place could be very bad with the availability and cost of specific lines and
screens can cost hundreds of thousands per site and business, for everybody. You may not get the return competitor activity. Clearly traditional Out of Home
inevitably have higher installation and upkeep costs. on your investment; it may never make a profit and isn’t relevant, but Digital Out of Home can be even
the advertiser won’t get the ROI that they thought more flexible and relevant in terms of context than
The lower level of risk, is another reason, why digital they were going to get. It’ll become a white elephant any other medium.”
6 sheets in enclosed environments are emerging as and sooner or later it’ll go back to being a traditional
the core focus for media owners’ immediate capital billboard.” The potential for consumer targeting, interactivity and
expenditure strategies. enhanced flexibility through real-time planning will be
Jeremy Male of JCDecaux underscores the point: explored in Parts 2-3.
“When you look at the challenge of extracting extra
income from any investment, digital is certainly not
always the obvious solution.
Falling LED investment costs (prices per sqm) “Unless digital can be unleashed and add something
significant in terms of, immediacy, creativity, and
120 movement, the transition from static to digital
100 screen presents considerable risk to the investor.”
80

60 In your investment plans you have to accept the
40 fact that not every pound a digital site generates
will be new and this makes investment decisions
20
much more complex.
0
2007 2008 2009 2010 2011 2012 Jeremy Male
6mm 4mm 3mm
JCDecaux


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