May 3rd, 2007
Digital Billboards That Turn Your Head
By Frank Ahrens
New Ads Put Up Big Numbers and Rouse Critics
The world’s oldest, simplest way to sell a product—drawing a picture of it on a wall—is now at the cutting edge of advertising thanks to digital technology.
Nationwide networks of digital billboards and smaller video screens allow advertisers to change their sales pitches instantly, with the click of a computer mouse, from hundreds of miles away. Giant LED billboards rotate ads every few seconds, enabling billboard owners to sell the same space multiple times. And companies are experimenting with WiFi transmitters and Bluetooth technology that would send messages directly to your phone as you pass by their signs.
For the billboard industry, the technology has meant skyrocketing profits and a rise to respectability. For years, billboards were the bargain-basement ad buy, largely for low-end products like cigarettes. Today, only Internet advertising is growing faster.
At the same time, digital billboards have angered municipalities that don’t want the high-wattage signs, which they see as dangerous distractions to drivers. No studies have determined the hazard of digital billboards, though the federal government recently launched one.
“We’re always going to have environmentalists who don’t like any kind of signage in nature,” said Wally Kelly, president of CBS Outdoor, one of the industry’s three biggest players. “We’re not going to be able to cure that . . . but we might have 95 percent [compared] to 5 percent of people who say, ‘Wow! That’s a neat billboard!’ “
To hear industry executives tell it, much of their success is attributable to gridlock. Surprising, then, that the new high-tech billboards have not yet arrived in Washington.
“Our audience grows every single day,” said Paul Meyer, Clear Channel Outdoor’s chief executive. “How many more cars are on the road today compared to 10 years ago?”
Meyer tells the story of the Kennedy Expressway in his native Chicago.
“I remember years and years ago driving to the airport, rush hour was a problem,” he said. “Now, you can barely get on that expressway—it’s a bumper-to-bumper pace. What does that do? That greatly enhances the value of all our signage along the Kennedy.”
Where newspapers face declining circulation and radio has competition from iPods, “we have the ultimate ability to withstand the whole challenge of consumer avoidance,” Meyer said. “We’re there 24-7. There’s no mute button, no on-off switch, no changing the station.”
Consumers may say “billboard,” but the big signs along the highway are only one component of what is known as the outdoor industry. In addition to the billboards themselves, the industry sells ads almost anywhere there is a surface: buses, bus stop shelters, mall kiosks, taxicab tops and stadium scoreboards. Added to that are a growing number of new placements, digital and non-digital, such as 42-inch flat-screen televisions atop the entrances to New York subway stops and multi-story ads that wrap around buildings under construction.
The three largest outdoor companies are CBS, Clear Channel and Lamar Advertising. The firms collectively account for 60 percent of the revenue in the outdoor market, well up from about 15 percent a decade ago, before a wave of consolidation hit the industry.
Though outdoor revenue still is a small piece of the ad revenue pie—CBS Outdoor made less than one-quarter of the revenue of CBS’s television network last year—it is growing faster than every other traditional ad medium. At CBS Outdoor, 2006 operating income was up 21 percent over the previous year, the biggest gain of any CBS division. Clear Channel and Lamar financials tell a similar story. Outdoor advertising revenue as a whole grew by 9 percent in 2006. By comparison, network television and radio ad revenue both were up about 2 percent compared with 2005, while Internet ad growth was up 30 percent.
Technology, both behind the scenes and in your face, is feeding the outdoor boom. Companies are now able to network digital billboards across the country and control them from one spot, changing ads minute by minute, if desired. On non-digital billboards, printing technology has eliminated jobs—legions of sign painters—and lowered costs by use of inexpensive, high-quality vinyl display surfaces that can be electronically printed in minutes.
The industry is leaning on its new technology to amp up price and flexibility. Suppose an advertiser on a digital billboard wants to swap one product being advertised for another. Or reduce the price of the product. Or advertise one product in the morning but another during lunchtime. All are now possible.
The new technology comes at a heavy price. The 14-by-48-foot billboard of yore—static sign, vinyl ad—weighs about 500 pounds and can be mounted almost anywhere. Digital billboards are much heavier—“these babies can go 3,000, 4,000 pounds,” CBS’s Kelly said—and can be supported only by certain structures. And though they’ve gotten cheaper, they’re still not cheap. Three or four years ago, a 14-by-48 digital billboard cost about $1 million for a company such as CBS to buy, Kelly said. Now, the price is about $450,000.
There are about 450,000 billboards in the United States, according to the Outdoor Advertising Association of America, including about 500 of the newest digital billboards. The industry expects to convert a few hundred of its static billboards to digital each year.
Several municipalities say they have allowed billboard companies to convert static billboards to digital ones, only to become annoyed by the powerfully bright, constantly changing displays. Some Minnesota towns, for instance, have adopted moratoriums on digital displays, according to Scenic America, a Washington group that fights what it calls “billboard blight.”
Groups that have long opposed billboards for aesthetic reasons are now adding driver safety to their objections. The 1965 Highway Beautification Act forbids certain types of billboards along federally funded highways. However, 73,000 noncomplying billboards across the country were grandfathered into the law.
“What makes [outdoor] different from other businesses is that they’re compelling you to look at their stuff,” said Kevin Fry, president of Scenic America.
Fry cites a 2006 National Highway Safety Traffic Administration study of the effect of in-car distractions, such as eating and using cellphones, on drivers. The report found that accidents went up if drivers were distracted for more than two seconds. Though the study did not mention digital billboards, Fry believes they are just as distracting. The Federal Highway Administration has allocated $150,000 to study the effect of digital billboards on drivers and expects to have results by 2008 or 2009.
Keith Istre, chief financial officer of Lamar, said his company has been deploying digital billboards since 2001 and has never recorded an accident attributed to one.
“We keep track,” Istre wrote in an e-mail. “Scenic [America] does not.”
Fry counters: “No one can tell me that the brightest object in the landscape with a changing image is not distracting people for more than two seconds.”