Digital Out-of-Home Landscape Brief

Digital out-of-home (DOOH) advertising is a dynamic, fragmented, and rapidly evolving space. It’s one of the fastest growing media channels, with year-over-year growth pegged in the double digits through at least 2011. Total spend in “alternative OOH media” is projected to exceed $3.5 billion in 2009, with nearly $2.9 billion spent on video ad networks and digital billboards, according to PQ Media.

Beyond ad spend, network operators continue to invest in infrastructure (software, hardware, installation, and maintenance services) to the tune of $640 million in 2008. That number is projected to grow by 33 percent in 2009, despite the difficult economic conditions. By 2013, it’s expected to approach $1.4 billion.

That growth is being driven by several factors:

• Equipment and infrastructure costs are falling, including those for quality flat-panel displays, bandwidth, and so forth.
• Consumers are spending more time out of the home than ever, twice more today than 30 years ago.
• The media landscape, particularly TV, is fragmenting, leading to decreasing effectiveness of traditional advertising and the resulting search for new, alternative ways to connect with an audience.
• Advertisers are questing for accountability; digital brings new forms of measurement to OOH media.

Advertisers are getting deeper into the space as they wake up to the incredible opportunity of delivering highly targeted geo, daypart, and dynamic messages into environments where people are receptive and have a much more immediate opportunity to respond to and activate offers they are exposed to. DOOH offers a compelling platform for national and local advertisers alike. A report from Profitable Channels in August 2006 identified the 4 Cs of DOOH:

• Coverage: A powerful combination of national reach and precise targeting, by geography, venue type, and more.
• Control: As on the Web, assets are centrally controlled and managed, allowing for rapid optimization.
• Cost effectiveness: CPMs (define) continue to be competitive when compared to online, TV, and traditional OOH.
• Customer satisfaction: Unlike many advertising channels, consumers typically find DOOH useful.

In addition, certain existing ad formats (e.g., some TV and Web creative) can be relatively easily adapted. And new varieties of consumer-facing interfaces continue to diversify and advance, especially with the broader availability of multitouch platforms and gestural interface possibilities. Most in the space are also getting serious about integrations with mobile devices, an acknowledgement that the intuitive link between the personal consumer device and the public digital experience hold immense potential for brands to engage and deliver unique experiences to individual consumers.

Still, it’s a medium fighting for its life in many ways. Growth in ad spend hasn’t kept pace with inventory growth, which has kept CPMs and overall publisher revenues low and has already claimed one casualty: Reactrix, one of the more unique and innovative networks.

There appear to a host of reasons for advertisers’ relatively slow adoption. Chief among them:

• Marketers lack awareness or full understanding of the channel’s benefits and capabilities. For many advertisers, it’s so new that it’s unclear where it should fit in the marketing mix.
• Similarly, as with many emerging media channels, DOOH is a bit of a gray area in terms of what type of agency should own strategy, planning, and buying. A traditional agency because TV spots can be repurposed? The OOH shop because it’s just a digital version of a billboard? The interactive shop because it’s digital, often interactive, and highly measurable? Or will a new class of DOOH specialty shops emerge to deliver services explicitly for the channel? This lack of clarity creates uncertainty and hesitation in advertisers.
• The space remains highly fragmented, with hundreds of networks selling inventory in wildly different venues. Aggregators, such as SeeSaw Networks and Adcentricity, are beginning to help address this issue.
• There is a lack of standards in terms of formats, metrics, and more.

The metrics issue stands as the single biggest challenge facing the space. Moving away from traditional opportunity-to-see measurement and toward a new eyes-on method of understanding the connection between DOOH and consumers response to it has helped, but many brands remain skeptical.

Focused studies on influence of contextual DOOH messaging impact on drive to store and sales lift are required to fully realize this channel’s measurement story, and several groups are actively working on this piece of the puzzle. A critical piece of the value that brands are responding to is their ability to purchase DOOH media in similar ways to online and to repurpose online assets for use in DOOH with little incremental production costs. Where interactions are possible with DOOH screens, methods of evaluating the consumer experience similar to online (exposure, time spent/duration of interactions, page views, and clicks) are serving brand needs for ROI (define) well.

Ultimately, these issues stand between the channel and mainstream adoption by major U.S. brands. Key players in the space are getting organized and teaming up to try to resolve some of the more difficult challenges.

In particular, the formation of the Out of Home Video Advertising Bureau, an independent industry advocacy and regulatory group comprising leaders from both the vendor/network side and agency buyers and strategists, has done much to advance the pursuit of measurement and research for DOOH, in addition to raising overall awareness and forming collaborative alliances between agency players and major network operators. The OVAB agency advisory board released its audience and metric guidelines earlier this year, which have been endorsed industry-wide and are quickly becoming the gold standard for inventory standardization and metrics compliance in the space.

Jeremy is off today. This column was originally published July 13, 2009 on ClickZ.