Episode Transcript:
Marcus (00:00):
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Yory Wurmser (00:17):
You're seeing more direct response in out of home. You've always had that. You've always had billboards with, call this 1-800 number. But with QR codes and better tracking and things like that, you're getting more full funnel advertising than you did in the past.
Marcus (00:41):
Welcome to the Behind the Numbers Daily, an eMarketer podcast that's clearly being recorded in the morning. I'm Marcus. Today, I'm joined by our principal analyst who covers everything, advertising, media, and technology. He's based in New Jersey. It's Yory Wurmser.
Yory Wurmser (00:54):
Hey Marcus, how are you?
Marcus (00:55):
Hello. Not well, apparently, given that starts, but thank you for asking. How are you?
Yory Wurmser (01:00):
Good. Good.
Marcus (01:01):
Very good, sir. Very good. Thank you for being here Today. We'll start with the fact of the day. When did each state join the US? I won't go through them all because Stuart will be furious. He runs the team. Yory, do you know the youngest US state, states, I should say?
Yory Wurmser (01:16):
Well, it's going to be Hawaii, I think as the youngest, and Alaska is right before it.
Marcus (01:21):
Yeah. Pretty much neck and neck. I don't know exactly the month, but they both joined the gang in 1959, making them just 65 years old. Disneyland and Madonna were born before Alaska and Hawaii became states. The next youngest would be Arizona and New Mexico who joined in 1912. But Delaware ratified the US Constitution on December 7th, 1787, and so it became the first state. Many folks may know Pennsylvania and New Jersey would join that same year. Anyway, today's real topic, out of home advertising. All right, Yory, so out of home appears to be doing pretty well. The major out of home advertising players, Clear Channel Outdoor, JCDecaux, Lamar, Outfront Media, and Straw published strong Q2 figures. As a result, AlphaMED revenue grew 3.4% in Q2 year on year, reaching close to 3 billion, according to figures from the Out-Of-Home Advertising Association of America, OAAA.
(02:36):
It registered the highest quarterly volume ever, for out-of-home, fueling first half growth of nearly 5%. We're Playing a slice of pie to kick things off, Yory. What's behind this impressive Q2, and also when you zoom out, H1 growth for out-of-home advertising? Yory's got up to three reasons that make 100% of his reasons why pie chart.
Yory Wurmser (02:59):
So I would say the bulk of the growth is coming from digital channels and digital growth. So I would say, let's say 80% of the growth Is occurring from there. And that's growing for a few reasons. One is just more digital screens out there. Two is the rise of programmatic, and three is better data coming from things like retail media networks that are adding out of home components as well. So that's like 80% of the increase. And I think when you're talking specifically about this year, probably 10% also comes from rising political ad spending. You always get that in election years. And then 10%, maybe even more, is coming from transit and basically just people traveling more, going through airports, more using public transit more. And that's contributing to a pretty strong growth in transit based out of home as well.
Marcus (03:53):
Yeah. Circle back to the post-GLAD spending point for a second first, and then talk transit and political ad spending driving growth, US House and Senate out of home campaign spending in first half of this year's quadrupled from 2020 because the pandemic suppressed the out of home numbers. The political out-of-home spend is also up 70% from the midterms from 2022. So yeah, that's definitely an important driver. I think 10% is fair though because it's not a huge portion. And then the transit piece, according to the OAAA billboards, are pretty much most of out-of-home spending, at least last year's figures, 73%,. And then transits in second place, way behind the second place, but it's still 16%. So it's still a big piece of it, that it's for six and street furniture for 5%.
(04:44):
So yeah, that all adds up to me. Paul Hebert at Adweek [inaudible 00:04:47] was writing... Though that the out-of-home ad recovery has not been equal, he was pointing to some research that tells a similar story to our figures out-of-home ad dollars fell by about 30% when the pandemic hit, but have since crossed pre-pandemic levels. We estimate that that happened last year. What, to you, is the main way that out-of-home advertising is different now versus before the pandemic?
Yory Wurmser (05:10):
It's become more digital for one thing, and specifically data is playing a much bigger role than it used to. Programmatic is growing rapidly. It's still pretty small portion of overall digital out-of-home ad spending. We expect programmatic to hit almost 900 million this year, but that's compared to a little over 3 billion for digital out-of-home. So it's still only a little over a quarter of digital out-of-home spend, but it's growing super fast. Another big part is retail media networks, also growing pretty quickly, also pretty small portion of the overall digital out of home spend. But beyond that, it's being integrated into the bigger advertising ecosystem. It's less siloed than it used to be, in part because it's becoming more programmatic, so you're seeing much more use of data and things like that.
Marcus (06:01):
Yeah, there are a few ways I thought were interesting from this piece as well in terms of how it's different now. One, Mr. Hebert was saying, the ad dollars aren't coming back to each format and equal pace. So billboards and roadside signs have exceeded the past highs crossing pre-pandemic levels in 2021. However, transit is still 13% below pre pandemic, even though it is growing, to your point, which is driving some of the growth this year. And then in-store retail is still over 20% away from where it was in 2019. And then the second thing here is the top out-of-home advertising industry has changed. Business and industrial companies are now the top spenders, spending 29% more than they did in 2019. Retailers are now in second place without foam spend still 8% below pre-pandemic numbers. Pharma and healthcare are catching up, actually. They're a very close third. They've grown around 50% since before the pandemic. So you've got a few shifts there as well.
Yory Wurmser (07:04):
So also what you're seeing is more direct response and out-of-home. You've always had that. You've always had billboards with call this number, this 1-800 number. But with QR codes and better tracking and things like that, you're getting more full funnel advertising than you did in the past.
Marcus (07:22):
You mentioned QR Codes, a big reason for that. You can place them on a static traditional billboard, but you can also throw them up on a digital screen. And analyst and host of our Reimagined Retail Show, Sara Lebow, in a recent article, was noting that the line between digital out-of-home and CTV advertising is blurring, as advertisers invest in small screen formats at gas stations, in bars, on transit, et cetera. And so these smaller screens, which are closer to much easier to snap a QR code than maybe a big billboard that you're driving past, or maybe even walking past. But she notes that these small screen formats, as opposed to larger digital billboards, are part of what may be referred to as out-of-home TV or CTV out-of-home, basically TV screens consumers watch when they aren't at home. What's your take on out-of-home CTV ads?
Yory Wurmser (08:18):
They're growing, and I think it's big growth area. It not a big part of out-of-home though. So Place Exchange, which has kind of a programmatic platform for out-of-home founded about one in five digital out-of-home ads are video ads. So-
Marcus (08:35):
Interesting.
Yory Wurmser (08:36):
... we're talking a few hundred million dollars next to $30 billion plus for CTV ads. So the scale is small. It's going to grow pretty quickly though because it can use the same creative with better data, it can be targeted pretty specifically, and can be pretty effective, but it's still very much a niche format.
Marcus (08:59):
Two things it does have going for it, one is it can be a lot cheaper. This article pointing out CTV ads on out-of-home screens, so like Roku ads, but outside, can cost half as much as CTV ads found inside people's living rooms going to ad exchanger. And then, so cheaper. Two, there's a lot of potential for contextual advertising, obviously. So ads served, Sara says, in a sports bar during a Detroit Lions football game might feature great Lakes tourism, where a local car dealership's ads served in a gas station pump on summer nights might feature a cold energy drink on sale in the convenience store bars. And venues also can run their own TV commercials on this format as well, so a lot of potential there.
(09:41):
You're in your recent research of this topic, you write that out-of-home advertising continues to grow as a moderate clip buoyed by the rapid spread of digital screens. We're talking about programmatic buying, which we also touched on, and better integration with digital media. You say retailers are also trying to get a piece of the action with in-store place-based ads. When you look to the future of out-of-home, what data point interests you the most about what we're expecting to see from this format?
Yory Wurmser (10:15):
The room for growth for digital. So digital right now is a little over a third of out-of-home spending. We expect it to grow rapidly in the next few years. But specifically within that, only about 15% of out-of-home inventory is digital. Most of it is still printed, traditional advertising. And you mentioned earlier that 70 plus percent of out-of-home spending is still on billboards. There's huge room for growth on digital, and that digital screens aren't going to appear everywhere. Someone said that because they cost more, you're going to put those screens where the traffic is highest like Times Square, or in elevators or in airports, and so forth. But I think you're going to see more and more of these digital screens appear. And as a result, you're going to see a lot more programmatic advertising and better integration of data because these screens are really flexible under usage. So the fact that the inventory is still so low for digital just, to me, indicates a really large area for growth.
Marcus (11:21):
We're on the same page because that was the one that jumped out to me the most, so digital share of the total out-of-home market. To put some numbers on what Yory's saying, so digital out-of-home advertising, it's interesting, Yory, because it only accounts for a few points more in terms of share than it did pre-pandemic. It's gone from 31% of the pie, out-of-home pie, to 35% of the total pie over the last five years. However, to what you're saying, by the next Olympics in 2028, we expect it to take a 44% slice of out-of-home ad spending up from 35% today. It sounds like a lot, but it's also still not quite half. And we are seeing how digital has swallowed up the entire ad spending industry to the point where it's 80% and still growing. Is that cost? Because you kind of touched on that already, but is the main barrier to entry here, or the main barrier to growth, the fact that these things cost so much?
Yory Wurmser (12:20):
Yes, exactly. And you can put out-of-home everywhere and charge not a lot of money for it if there's not a lot of traffic because it is really inexpensive to install. You can have a sign on a building, you can put a billboard out in the middle on a rural highway or a rural road, whereas digital does cost a lot. And that's keeping the growth, tempering the growth a bit. But as the cost of screens go down, as the value of data goes up, I think that the calculus will change and you're going to see more digital inventory out there and charging higher rates. But as you said, it's still probably going to be a minority of out-of-home spend through the next five years.
Marcus (13:02):
Yeah. Another thing that jumped out to me when I look at the future of this space, a share of its total ad spending is at a lower kind of new normal. So before the pandemic, in 2019, [inaudible 00:13:14] accounted for 3.5% of advertisers budgets. Today, it's closer to 2.3 and ticking down. So even though the total out-of-home ad dollars are going up in the US, the share of the overall ad pie for this space is going down. We estimate that the space will cross a 10 billion mark though by 2027, which will be up from closer to 9 billion today.
Yory Wurmser (13:41):
Yeah, it goes back to what we were talking about, that it's still mostly a traditional format. So it's not suffering the same declines that other parts of the traditional media landscape are in terms of ad revenue. But nonetheless, it's not growing as fast as digital because the digital, a part of it is still a minority.
Marcus (14:04):
Yeah. Well, that chart jumped out to me as well, and I've got that here in my notes, which is that, as you point out, out-of-home ad spending has held up better than other traditional media. So even though you've got the growth here in the low, mid, but basically low single digits going forward, about 3 to 4% growth in out-of-home ad spending each of the next couple of years, and digital being a huge driver for that, that's still in the black. And every other traditional medium, whether you're talking TV, radio, print, whatever, they're all, by and large, recording negative growth figures for the next however many years. So when you look at it in context, it's performing pretty well compared to some of its peers in the traditional media space.
Yory Wurmser (14:48):
Even when you can compare it to TV this year, which is boosted by political ad spending and the Olympics, it's still growing faster.
Marcus (14:56):
Yep. Yep. About 5% TV, just keeping its head above water because of some of these big events that are taking place every two years. Well, Yory's full report is titled Out-of-Home Forecast and Trends 2024: Data, Digital Screens, and Programmatic Propel Growth. The link is, of course, in the show notes. Where else would it be? Or you can head to emarketer.com. If you're a pro+ subscriber. You can read it there. But that's all we have time for today's episode. Yory, thank you, as always, my friend, for hanging out.
Yory Wurmser (15:24):
Always a pleasure.
Marcus (15:25):
Yes, sir. Thank you too Victoria. She edits the show, Stuart runs the team, and Sophie, she does our social media. Thanks to everyone for listening in to the Behind the Numbers Daily, an eMarketer podcast. If you'd like, you can hang out with Sara Lebow tomorrow. She's the host of the Reimagining Retail Show. She'll be speaking with Sky Canaves and Zak Stambor, all about what to expect for this upcoming holiday.