Forecast 2007: Out-of-Home
It's shaping up to be another banner year for out-of-home advertising. The once-sleepy medium has been energized in recent years by factors including longer commutes, fragmentation of media, better audience measurement and technological advances that have made digital billboards and interactive displays proliferate.
Out-of-home this year is expected to remain the second-fastest-growing medium in terms of advertising revenue growth, behind only the Internet. Veronis Suhler Stevenson has forecast a 6.7 percent gain in out-of-home to $7.25 billion for this year, on top of 7.9 percent growth in 2006. PricewaterhouseCoopers expects a more bullish 7.9 percent uptick in 2007. Out-of-home segments including cinema and transit could see their business balloon by 10 percent to 12 percent this year, says Stephen Freitas, chief marketing officer of the Outdoor Advertising Association of America.
The expansion of digital technology, allowing marketers to rotate messages on a single board in the blink of an eye, will continue to reshape outdoor in 2007. "I feel comfortable in saying that by early next year, there will be digital boards in hundreds of communities across the United States," Freitas says. Currently, OAAA estimates, some 400 digital billboards dot the map.
Regulatory barriers are expected to continue falling by the wayside this year, aiding in the expansion of digital boards. "When there's a clear understanding of what we're doing, there's much better acceptance and there tends to be an embracing of the technology," Freitas explains. "We're not talking about flashing lights in Times Square."
The proliferation of digital tech benefits vendors who are hobbled by strict "cap and replace" ordinances that limit the number of signs a company can have in a given market, says Darrin Friskney, director of Watchfire Digital Outdoor, an Indianapolis-based manufacturer of digital signage. "There's a huge opportunity to help outdoor companies get a lot more revenue from the same number of boards," he says, explaining that digital signs reap six to eight times the income of a static billboard. The cost of digital signage is expected to continue declining in 2007. Prices of LED panels have dropped by as much as 60 percent in recent years.
While outdoor traditionally is the domain of local advertisers like retail stores and car dealerships, the expansion of digital, and the cost-effectiveness that comes with it, is expected to attract more national advertisers to the medium in 2007 and beyond. National accounts, including wireless and entertainment companies, are among those increasingly embracing outdoor. Still, this year, local services/amusements will continue to be the largest outdoor advertising category, followed by media/entertainment, then retail.
Aside from digital, the industry can expect to see the continued, dramatic expansion of alternative outdoor media, including place-based buys at sports stadiums and transit hubs, as well as interactive placements such as touchscreens and Bluetooth-enabled signage. Freitas calls 2007 the "tipping point" for interactive out-of-home. Some of the best-known brands, including Absolut and Nike, have begun using functions like texting, Bluetooth and WiFi to communicate their messages to an ever-more-wireless world via major outdoor companies including Clear Channel and CBS Outdoor.
"Technology has driven the ability to interact with people in the out-of-home space in ways we couldn't have 10 years ago," says George Giatzis, vp, ad sales for San Francisco-based Ecast, which has placed more than 8,000 touch-screen jukeboxes in bars throughout the country and counts Jeep among its clients.
Alternative out-of-home, while accounting for a relatively small share of total outdoor, is expected to turn in impressive gains this year; VSS predicts it will increase by 31.6 percent to $509 million. Alternative is expected to account for 7 percent of overall out-of-home revenue this year, compared to 1 percent five years ago.
Despite the technological advancements sweeping the outdoor business, its cash cow-the old-fashioned, static billboard-is set to score big this year, growing 5.3 percent to $4.35 billion, VSS projects. Traditional billboards will account for some 60 percent of outdoor business in '07.
Better methods of measurement are also expected to impact the business in 2007, as the Traffic Audit Bureau prepares to unveil metrics aimed at calculating an outdoor campaign's return on investment. That will help to "even the advertising playing field" for out-of-home, Freitas reckons.
Last but not least, the outdoor industry will get a little greener in 2007, rolling out eco-friendly products and initiatives including paste-free posters, digital inks, low-wattage lighting and solar power.
Special thanks to Tony Case at MediaWeek.com.