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The Future of Out of Home Media: Investment, Technology and the Consumer by Patrick Barrett, Simpatico PR on behalf of Kinetic Worldwide
Citation preview
Investment, Technology
and the Consumer
by Patrick Barrett,
Simpatico PR on behalf
of Kinetic Worldwide
At the Royal Institution of Great Britain
At the Royal Institute of
Great Britain
July 6th 2011
To read the full report,
please click here.
Scale and the Investment
challenges of Out of Home
p + v =
Investing in Digital
Investing in Digital
The factors driving investment in digital Out of Home
media are essentially the same that have driven all past
investment.
Improving quality of presentation: which means premium
pricing.
And:
Increasing the volume of campaigns a site can carry:
which means higher yields per site.
However, the investment equation is not that simple.
What are the challenges facing
investors?
=
What are the challenges facing
investors?
In reality the equation probably looks more like this!
Setting aside the issue of local authority planning restrictions for a
moment…..
The list of factors that dictate success or failure of capital
expenditure on digital Out of Home formats goes something like
this:
• Site location – potential audience
• Future of site
• Measurement and ROI
• Site design and presentation
• Hardware costs
• Contractual obligations
• Technology life-span?
• Scalable, compatible, up-gradable?
• Maintenance costs
• Advertising market conditions
• Overall economic prospects?
What are the challenges facing
investors?
A recipe for growth
A recipe for growth
The attraction of High dwell time locations has also stimulated
investment in entirely new poster advertising networks.
The in-store environment is, on paper at least an ideal location to
capture people’s attention. And they are fast becoming a major new
component of the Out of Home landscape.
However, the failure of digital screen networks in supermarket chains
is testament to the fact that the devil truly is in the detail when it comes
to creating new digital poster Capex projects.
Issues such as: Site positioning, queuing systems, ease of installation
and data transmission are critical to the success or failure of new interior
site networks.
Quality of audience and measurement are also critical factors if new
networks are to prove sustainable.
A recipe for growth
A recipe for growth
Most of these criteria are just as true for the other main area of
digital poster and billboard investment:
Bespoke or iconic, roadside digital screens.
Cherry-picking small numbers of high-value locations and
installing sites that become in effect local landmarks - has
attracted new investors along with established media owners.
The proposition combines large audience reach with high
quality delivery and commands a premium.
However, this sector will remain a niche relative to the total Out
of Home universe. Kinetic calculates that there are
approximately 400 locations nationally that could sustain this
kind of investment strategy.
Urban Planning
Urban Planning
The biggest restraint on investment in digital screen
inventory is of course local authority planning restrictions
This is a significant problem for investors seeking to
develop national roadside networks …..
…there is no single uniform approach to urban planning.
Criteria for developments are set at a local authority
level.
Public safety, particularly for drivers who might be
distracted by moving images is always going to remain
an obvious restraining factor on investment.
Unless your site is in a primary location, it’s unlikely
investment in a static screen running a real can be
justified until hardware prices fall to a sustainable level.
Steve Davis
Clear Channel
Local authorities have
become wiser to the
potential of Out of home
Urban Planning
However, our consultation with the industry reveals there may be
considerable scope for greater flexibility from local authorities,
which could unlock significant future investment, particularly in
roadside sites.
The bottom line is that financially squeezed local authorities are
likely to look to their property portfolios - to bolster their incomes.
Kinetic expects future Out of Home media contract tenders to
open up investment opportunities.
The question is though - who will be in the driving seat?
The investor or the landlord.
Investors may indeed face pressure to over invest and over-
deliver on digital advertising revenues.
Pricing and the risk of cannibalisation
Pricing and the risk of cannibalisation
But as we emerge - at snails pace from the economic slump how
much new money will digital out of home networks generate for
media owners?
And what level of pricing is sustainable? Our consultation drew out
two clear points that investors must consider:
The first is that calculating a realistic long-term pricing structure is
essential. Digital sites typically carry a premium. But a premium
based on what?
Clearly a combination of high quality presentation, flexibility and
audience reach will naturally command a higher prices
But - here’s the thorny question: The basic rules of supply and
demand will come into play as the supply of digital sites increases.
Neil Morris
Grand Visual
Really dynamic ideas are
uneconomical to deliver if
you don’t have big networks
to play them over and the
capability to reach massive
numbers.
Pricing and the risk of cannibalisation
This will be mitigated by the roll-out of
national digital networks, which will clearly
answer a demand from advertisers and re-
enforce the value of digital posters.
Pricing and the risk of cannibalisation
Pricing and the risk of cannibalisation
But again, will advertisers who had been able to
buy a 6 sheet network exclusively….
….be happy to share those sites (on a reel) and
pay more because it is now an LED screen?
Pricing and the risk of cannibalisation
Pricing and the risk of cannibalisation
The second issue is that not every pound generated by digital will
be new. Digital sites will to some extent cannibalise static poster
inventory.
The central theme of this report and one which we will return to
again provides an answer over the long-term – to these two difficult
challenges.
Kinetic’s view is that if Digital technology is to drive total Out of
Home market share: media owners must extend the proposition of
out of home media to one that can deliver : highly targeted, highly
dynamic campaigns outside the home.
And media owners must position this alongside the traditional
strength of Out of Home - broadcast audience reach….
..to do that digital networks must be sold flexibly and their full
technical capability must be unleashed.
Pricing and the risk of cannibalisation
Pricing and the risk of cannibalisation
If technology is used simply as a better way of distributing and
showcasing creative…..
…..the industry will miss a massive opportunity and many
investments may fail to generate a sufficient return.
Media owners must use technology to create a point of
difference.
Matthew Dearden
Clear Channel
If all we do is take
paper and turn it into
pixels, we’ve burnt a
lot of CAPEX to no
advantage.
Pricing and the risk of cannibalisation
A new capability that will drive new revenues and make
premium prices sustainable
– in return advertisers will get to communicate with consumers
in ways and in places they’ve never been able to before…..
This is an enormous opportunity…
….and is a clear reason why the vast majority of Out of Home
stakeholders see digital investment as the key driver for future
growth
- but advertisers will only care if it adds value!!
Russell Davies
Ogilvy and Mather
I think a lot of the people are
assuming a sort of linear, nice,
comfortable, transition to digital.
To me the only certain thing is it’s
not going to be like that.
Staying ahead of the technology curve
But if revenue growth depends on capability and efficiency…
…then over the coming decades Out of Home media may
experience something of a technological arms race.
In fact if all the other ingredients for investment success
weren’t enough, the final one could arguably be the most
important:
Staying ahead of the technology curve.
Staying ahead of the technology curve
Staying ahead of the technology curve
Investing in kit that will enable you to create a point of difference not
just next year,but in three to five years will be an on-going
conundrum.
We are for example three and a half years away from a point where
Enders Analysis estimate 75% of the population will carry a
smartphone.
When will be the right time to invest in interactive technology across
national networks?
What is the potential for electronic ink? Could I use e-ink to digitise
the rest of my static network.
The only certainty in all of this is that the evolution of poster
technology and its deployment will be unpredictable.
Kinetic View – Investing in Digital OOH
• Urban planning restrictions are a natural barrier – but
greater flexibility expected
• Technology lifespan and upgrades
• Price depreciation is inevitable - examine the long-term
sustainability of investments
• Real potential for cannibalisation of revenues
• Don’t invest just to create a new delivery system
• Do invest to unleash the potential of flexibility and
targeting capability
• The new Out of Home landscape must be defined and
marketed effectively
Technology and the
Consumer
David Fletcher MEC
Technology allows Out of
Home to compete on an
equal footing with what in
effect are the two
mainstream mediums of
today; TV and online.
The Technology Curve
Investment in digital posters is not a parochial trend that is happening
in isolation.
The arrival of digital posters can and should be seen in the context of
the massive recent growth in internet connectivity, mobile
communications and the digitisation of other media.
Digital Out of Home is also inextricably bound to trends in the
advertising business….
……whether that’s social communications, mobile technology or the
consumption of content.
In compiling this report we deliberately set out to create a realistic
picture of the future and considered technologies that will have an
impact within ten years.
The Technology Curve
State of the art
Text
Bluetooth
LCD screens
QR codes
Augmented reality
3D screens
Wi-fi
Near Future
Consumer recognition
Individual recognition
NFC
RFID
e-ink
The Technology Curve
Perhaps what is most surprising though is that
much of what would have been deemed
science fiction even two years ago, is
becoming a reality and could be deployed in
numbers within ten years.
Technology and the Consumer
Technology and the Consumer
Perhaps the way to look at the newer technologies is to
consider how and why they might be deployed.
Some may simply enhance presentation.
Others could help change the game for the medium and for
advertisers.
Technology and the Consumer
11 million per hour
Technology and the Consumer
It’s worth remembering that good old
fashioned text messaging has already
forged a relationship between mobile
phones and posters.
And with good reason:
The latest figures from the Mobile Data
Association show consumers in the UK send
11 million text messages an hour.
Technology and the Consumer
Technology and the Consumer
QR codes are also becoming part of the out of home technology
landscape.
They’re becoming ubiquitous across advertising channels,
packaging and content…..
But there’s some debate about whether QR codes are here to
stay and what consumers really think of them.
Kinetic recently ran some consumer research to find out.
Emerging technologies
44% say they’re familiar
with QR code images
39% think they know what
to do with them
Source: Kinetic Panel, May 2011
Emerging technologies
Source: Kinetic Panel, May 2011
We found:
44% of consumers across all age groups say they are now familiar with QR codes
12% of consumers have successfully scanned a QR code
This increases to 20% amongst 18-24 year olds and 15% for 25-34 year olds.
People are open-minded about using QR codes
37% of consumers think they could be useful, while 35% are not yet sure – 39% at least
know what potential they can offer.
Of the possible content delivered by QR codes,
49% said they would like a product voucher or brand information,
42% said a link to a website could be useful and 26% would like exclusive content.
In the short to medium term QR codes are likely to be a primary vehicle for poster
interactivity.
Technology and the Consumer
Technology and the Consumer
Out of Home is also experimenting with Augmented Reality.
Many of you will have seen the brilliant Lynx execution at London
Victoria and Birmingham stations where angels dropped to the
ground and appeared to interact with consumers.
In the US retailers are already mixing social media, posters and AR
to signpost virtual pop-up stores visible only through mobiles.
Of all the technologies already in use AR probably has the furthest
to go in terms of its potential evolution.
And is perhaps the least predictable in terms of impact.
Technology and the Consumer
Technology and the Consumer
Near Field Communications or NFC is beginning to grab
the technology headlines.
In a very real sense NFC could be the technology that
transforms our mobiles into a universal device.
A device which could interact with pretty much anything.
A swift tap on the appropriate surface or terminal is
enough to buy or receive information.
As such it could become as important to out of home
media as LCD screens.
Technology and the Consumer
Technology and the Consumer
Since 2002 when The Minority Report was first screened the Out
of Home industry has been plagued by questions about if and
when, it would become possible for a poster to identify and target
an individual passer-by.
This year both NEC and IBM were reported to be close to
bringing this technology to market.
Science fiction has become science fact in less than ten years
But will we really see this deployed?
The fact is there are serious practical, legal and ethical issues
that come with individual targeting.
Kinetic’s view is we won’t see it deployed in meaningful
numbers anytime soon.
Consumer-type technology
Consumer-type technology
However, we do think that in the medium we could begin to
see large numbers of “consumer-type” recognition capable
posters in use.
Posters that will react to passers-by according to age, sex and
mood..
The technology is ready:
The question is when will media owners, agencies and of
course advertisers be ready too?
The behavioural trends affecting Out
of Home
The behavioural trends affecting Out
of Home
But what about consumers – do they have a say in all
this?
Technology is in fact just one of a series of long-term,
deep rooted patterns of change in our lifestyles and in
our environments…..
……that are directly relevant to the performance of Out of
Home media in the long-term.
Evolving Lifestyles and Environments
Evolving Lifestyles and Environments
The last hundred years or so has seen waves of new media
technology influence consumer behaviour, our attitudes to and
our awareness of the wider world.
News print, cinema, radio, TV and the internet have all helped
shape modern lifestyles and the rhythm of modern life.
Arguably, Out of Home is the one medium that hasn’t impacted
directly on social behaviour.
A moving world
A moving world
Posters have instead been a constant – an accepted and
appreciated aspect of our urban landscapes delivering huge
audience reach and with the right creative – powerful engagement.
However, it is also arguable that Out of Home is the only medium
that has consistently grown its audience as a direct result of wider
external trends occurring in developed societies.
A moving world
A moving world
Kinetic’s global Moving World programme of research has
highlighted the changing face Urbanisation.
Half of the world’s population now lives in towns and cities
and earlier Andrew described the move towards the smart-
city environment.
We are travelling more by train, by road by air – taking
more journeys, travelling further and spending time in
places where we are more relaxed and generally happier.
Retail and leisure pursuits have become enmeshed in our
culture.
People are simply out and about enjoying themselves and
their surroundings more.
Mobile computing
Mobile computing
The growth of mobile computing is just the latest external
trend to impact on out of home media.
It’s probably time to stop thinking about the device in you
pocket as a phone.
There is now a mountain of evidence that suggests that
our computer usage is shifting from desktop to mobile.
Mobile computing
Mobile computing
Kinetic’s research in May suggested smartphone penetration
is at 45%. A recent study by Essential Research found almost
40% of smartphone owners use their device to access the
internet every day.
Our consultation across the industry identified the future
relationship between mobile technology and posters - as one
of the most important challenges and opportunities the sector
faces.
But what is the challenge? We think its this:
To create a consistent opportunity for advertisers to use
seamless, transactional, high-volume “Poster-to-Mobile”
advertising.
Why mobile matters to Out of Home
Why mobile matters to Out of Home
Why does mobile matter to Out of home media?
What kind of relationship could a poster have with a person
and their mobile beyond the established one?
Of all the medium term emerging technologies: NFC
provides the answer. It enables instantaneous download
from say a cash till or any surface to a mobile.
Critically for Out of Home media NFC sidesteps the issue of
dwell time.
Technology and the Consumer
Technology and the Consumer
Instead of luring small numbers of consumers into lengthy rich
media experiences via a poster….
…..NFC creates the possibility of a high volume of instantaneous
brand transactions.
The typical scenario might see shoppers strolling through a mall;
spot a price promotion on a digital 6 sheet for a retailer 25 yards
away - and casually tap the site to take a voucher as they walk
past on their way to Boots or Next.
Perhaps that 6 sheet is smart, perhaps it spotted the group
walking towards it were women and tailored the display
accordingly.
Richard Metcalf
Joule
The smartphone will mean
every single site is going to
be (effectively) digital.
Technology and the Consumer
Integrate that with real-time planning linked to stock
management - or the weather and you have an
advertising platform in urban spaces that can deliver
highly targeted campaign……
……taking the relationship with consumers to an almost
intuitive level.
In effect the creation of a very different form of poster
advertising is potentially a few short years away.
Changing behaviour
Changing behaviour
It’s worth remembering people adapt rapidly to new technology. Here’s
a couple of recent examples of rapid technology – driven behaviour
change:
Ten years ago Big Brother and similar reality TV shows pioneered the
use of text messaging to create a consumer interaction with content.
After Big Brother it became normal to interact with a brand by text.
Likewise the Oyster Card introduced Londoners to the concept of the
pay as you go touch travel card.
According to Transport for London pay as you go Oyster cards are now
used in 2 million journeys a week in the capital.
It’s not inconceivable then to anticipate that consumers might get
used to tapping their phones against different surfaces.
Especially if an instant reward is being offered for minimal effort.
Mike Baker
OMC
People are beginning to recognise
the fact that there is linkage
between social media, instant web
access, 3G mobile, location and
brand or retail proximity and that
outdoor has got a potentially
significant role to play.
Changing behaviour
So does Out of Home have a viable opportunity to tap into
interactive and social media exchanges - does iOOH have a
future?
To get an early view on that question, Kinetic carried out a wave of
national and London-only research in May.
The results provide strong indications that not only do most
people like digital posters, but they can already see the potential for
entertainment, information and interaction at digital poster sites.
Consumer affinity with Digital OOH
• 50% of consumers say they’ll
download promotions from
posters to their mobiles
• 75% expect to carry a
smartphone or tablet computer
• 66% expect to see digital
screens in most city centres
• 70% think digital posters
beneficial in high-dwell time
locations
• 20% expect posters to recognise
them in the future
Source: Kinetic People Panel, February 2011 / Future of Out of Home
Source: Kinetic People Panel, February 2011/ Future of Out of Home
• 66% of people expect to see digital
screens in our city centres in future
• 47% of people agree that digital poster
screens make shopping malls more
interesting and attractive
• 58% say that it makes public transport
environments more attractive
Digital screens make environments
more attractive
Great Potential for interaction
• 20% believe that in the future, digital poster sites
would be able to recognise who they are
• 26% expect posters to be able to target them with
ads or information relevant to what they are
doing at the time.
• Around 20% of consumers already expect that
they will be able to interact with most advertising
in the future.
• 11% said they expected to buy a product or
service directly from an interactive poster
Source: Kinetic People Panel, February 2011 / Future of Out of Home
Kinetic View – Technology and the
Consumer
• The technology will facilitate a transformation of Out of Home
• All the indications are that NFC or similar will become a mass
market mechanism
• We anticipate that the big opportunity will be in instantaneous
downloads via people’s mobile devices; Out of Home media will
have thousands of relevant locations across the UK.
• Interaction could be applied just as easily to a static poster as a
digital screen.
• Consumers will interact with posters given the right incentive.
• OOH has the opportunity to reshape itself into a dual proposition:
− Offering broadcast reach through large numbers of well-placed
static sites and highly targeted and dynamic campaigns.
• It’s a big challenge, but there’s every sign the industry will grasp
the opportunity and re-shape the media landscape.