For anyone who has a read forecasts of advertising and media spending in the coming year, it's not a pretty picture. Industry analysts and media groups abound see 2009 as a year where almost all formats will experience declines. As a result of the economic tremors created by the financial sector fallout to the cratering of the US auto industry, advertising agencies have been shedding staff and many media properties have shuttered their doors. Companies are "battening down the hatches," hoping to survive what will surely be a year of layoffs, tightening budgets, reduced consumer spending, and continued property foreclosures.
Now that we've gotten the gloom and doom out of the way (Sorry, but the proper mood needed to be set). Here's some good news for people in the digital signage and out-of-home media industries:
While other forms of media, including newspapers, network and cable TV, radio, and the Web, are predicted to decline in 2009, out-of-home media is projected to eke out growth. And, here is the kicker - PQ Media forecasts digital OOH to be up 9.1 percent to $2.65 billion.
With our country in a recession, projected growth, no matter what size, is great news for any industry. As the following Mediaweek article points out - I've highlighted my favorite parts - growth in cinema advertising and digital signage networks will help to buoy out-of-home media in the coming year.
Forecast 2009: Out of Home
It’s unclear how much out-of-home advertising will be down, if at all, in 2009. Certain segments, which are helping to grow the scope of the business, are poised for healthy growth, including all digital components, led by cinema advertising and in-store networks, digital billboards and other alternative displays.
Traditional out of home—led by the nation’s largest outdoor companies (Clear Channel, CBS Outdoor and Lamar Advertising) and still the largest segment of the industry—is facing some of the same challenges as other traditional media. Like other media, it’s a buyer’s market for OOH inventory, and companies such as Lamar have been open about cutting rates. But unlike other media, there still seems to be plenty of activity from advertisers.
“Even though all our clients are facing challenging environments, there’s a steady commitment to the space,” said Chris Gagen, senior vp and managing director for Posterscope. “At a time when people are trying to gain efficiencies, the low cost for high reach is a great proposition.”
Estimates put the business at flat to up 1 or 2 percent, which isn’t bad compared to other media, but it’s far below the medium’s high single-digit growth of the last few years. PQ Media forecast total out of home to be up 3 percent to $8.5 billion. Growing at a much faster pace, digital OOH is forecast to be up 9.1 percent to $2.65 billion. With digital outpacing traditional outdoor, it’s expected to account for more than 27 percent of total revenue in 2009, up from 15.8 percent in 2008. “The trends in the out-of-home business are better than the other mass-media segments, especially on the digital alternative side,” said Patrick Quinn, president and CEO, PQ Media. “Digital has been a plus for this business, whereas it’s been an interrupter in other businesses.”
Still, a bad economy is expected to take its toll on how quickly the nascent digital business matures, since conditions are unlikely to improve in ’09. The credit crisis makes it harder for digital OOH startups to receive financing and for companies to merge. Only one merger of note was completed early last fall before credit markets seized up, when Fuelcast (a digital network at gas pumps) and Bhootan (a digital network at a variety of retail locations) merged to form Outcast. It’s a testament to the appeal of digital OOH that only one player, Reactrix, went under last year.
(How many digital signage companies do you think will go under in 2009? Which companies will benefit from the Darwinan "survial of the fittest" culling out period?)
And even though digital boards are a moneymaker for traditional companies, it still costs much-needed capital to build them out. To save money, Lamar Advertising temporarily suspended its digital rollout in ’09 and will convert only 100 next year versus a planned 400.
In the absence of significant mergers, aggregators such as SeeSaw Networks and Adcentricity have made it easier to plan and buy inventory across scores of networks. And with the Traffic Audit Bureau’s “eyes on ratings” for traditional out of home poised to be issued in the coming weeks, there is plenty of optimism that out of home will outperform most other media. (via Mediaweek)
So, there you have it, out-of-home media will experience some effects of the economic downturn - a slow down in the number of static billboards transitioning to digital probably being the most pronounced - but the industry is well-positioned to benefit from buyers and planners taking a closer look at what advertising mediums really work and those that do not
Wouldn't it be ironic for digital OOH to finally reach its tipping point while the country is in a recession?
Labels: advertising, Clear Channel, digital signage, Mediaweek, out-of-home, Venture Capital