• by Jack Loechner , Staff Writer @mp_research, June 21, 2016

According to a new study and report from Borrell, Out-of-Home advertising is the only advertising medium unaffected by the Internet. At $7.5 billion it is half the size of radio advertising and one-third the size of newspapers. Except for a slight dip in 2014, it’s the only ad medium outside of the Internet that’s shown consistent growth since 2008 and the only one expected to show year-to-year growth over the next five years.

Growth is also being sustained by broader creativity and interactive capabilities, says the report. An industry once dominated by flat posters is now vibrant with signage that emits sound, scent, and video, or billboards that can “read” the grille of a passing Ford Fusion and deliver a message.

While “digital” can mean disruption for print and broadcast media, it has a very different connotation in the outdoor world. The digitization of signage has allowed a single billboard to go from delivering one poster-type advertisement per month to offering 10 per minute in vibrant, eye catching brilliance. This year, digital signs will account for 17% of all billboard revenue, up from 4% a decade ago, says the report.

Outdoor is very much a local business. The average outdoor company employs 11 people and grosses $3.5 million annually. In all, there are 2,190 out-of-home advertising companies. Even for the big companies, almost two-thirds of ad revenue comes from local establishments.

Legislation in four states has banned billboards, and countless municipalities have instituted some sort of restrictions over concerns about distracted driving or beautification. In addition, the plethora of options has fostered competition that has driven pricing down. This paper details the growth of the out-of-home industry and examines its future, says the report.

Although billboards have long been a part of Americana, they’re often overlooked as a “media” business because they are, after all, just ads. Similar to the print and broadcast industries, however, outdoor companies dot the landscape, ranging from large enterprises with thousands of displays to the many small, family-run companies with just a handful of signs.

Most billboards are all about size, and grabbing attention as people rush by. Highway billboards are as tall and wide as 10 giraffes standing side by side, projects the report. There are also taxi ads, posters, bench signs, subway ads, and a lot more; 368,000 in all, according to the Outdoor Advertising Association of America (OAAA). If erected side by side starting in New York City, billboards would stretch all the way to Santa Fe, NM.

Borrell currently projects that almost $7.5 billion will be spent in the U.S. on ads outside the home this year. Of the total, two-thirds will go to billboard ads, but more than one dollar of every five will be spent on transit advertising, and almost one dollar of every eight will go to “alternative” out of home. In total, out of home has shown steady growth during the past five years. Current forecasts call for growth to continue, at least through the end of the decade.

To understand Out of Home advertising better, a look inside each of its component categories is necessary, says the report:

Billboards

This is the predominant part of out of home advertising, projected to earn more than $4.7 billion by the end of 2016. There are four semi-standard size ranges of billboards, ranging from the largest (billboards) to the smallest (junior posters), and including wall murals and “spectaculars” – enormous cityscape constructs which may employ animation, neon, and other eye-catching features as well.

Also included in the billboard category are digital billboards, which come in a variety of sizes. Banned outright or limited in some cities, digital billboards have the ability to change ad content, multiplying their value and enabling marketers to alter the ads displayed to fit the demographics of viewing drivers by time of day. It is estimated that digital billboards, on average, generate ten times more revenue than their static predecessors annually.

 Street Furniture

The bus shelters and street benches we’ve all sheltered in or relaxed on, the trash receptacles we use to prevent litter, the banks of news racks we pass on city streets; a good number of these are advertising venues as well. This year, marketers will spend more than $400 million to put their messages on them.

Digital urban furniture has become available at a growing number of urban locations. Bus schedules, weather, directions, and more are all available in street-hardened kiosks that carry advertising as well. As these locations increase, so will street furniture’s share of the out of home advertising “pie.” 

Transit

The advertising you see at airports, as well in buses and commuter trains, are all part of what the OAAA calls transit advertising. When surface travel alone is considered, public transit consists of more than 72,000 routes which travelled almost 43 million passenger miles last year, according to the U.S. Department of Transportation. 78% of these routes were plied by buses, cars, and vans. Most of the remainder used trains, trollies, and ferry boats, and a few used funiculars and escalators. Almost all showed advertising to passengers.

Almost 4,000 mobile billboards and truckside signs bring marketing to travelers and commuters in their own cars as well, along with more than 45,000 wrapped vehicles. Finally, almost 4,000 vehicles are now equipped with digital transit ad capability. All told, transit advertising is projected to reach $1.36 billion this year, says the report.

Alternative

The signs at sports stadiums, malls, and shopping centers, as well as the digital kiosks that supplement them, fall under the OAAA category of alternative out of home advertising. More than a million “place based” ad platforms have been installed in stores of all kinds, including more than 30,000 malls throughout the nation.  Ad revenue from alternative sites is projected to reach $977 million this year, but the burgeoning digital/video component of this out of home category promises increasing future growth.

The Immediate Future

Forecasting out of home’s next five years shows out of home advertising as a continuation of history: small total shifts that mask greater activity at the category level. The reasons behind the predicted changes, says the report, are entwined with expected changes in the U.S. economy and consumer technology, as well as shifts in transportation use, concludes the report:

• A recession is forecast for 2017-2018, says the report. The root causes will be weaknesses in the Asian economies (principally China and Japan), instability in the EU (perhaps due to Brexit), and domestic employment reductions in several lines of business due to the increased minimum wage, says the report. The effects of this recession should abate before the next presidential election
• The migration to digital out of home media will continue. However, these venues, even though they are more productive, are also far more expensive than those they replace. The next five years will be caused by availability/demand imbalances during these shifts 
• Increased use of virtual reality technology among both car passengers and transit users will make out of home ads less effective
• Probable increased lobbying by environmental groups may reduce the number of billboards allowed in some states and municipalities
• Locally focused businesses that are now heavy out of home advertising users will continue to shift their spending from legacy to digital media, targeting individual customers and prospects, rather than a mass message. Some will ask, “Why pay for a billboard when I can send a message directly to the cell phones approaching my store?”

For additional information from Borrell, the Executive Summary report is offered free using this address.