Suzana Lay, Head of Brand Team and Planning Director at The Grove Media, takes a look at the growth of digital out-of-home advertising and the resulting impact on traditional out-of-home sites.
Digital out-of-home (DOOH) is showing impressive growth. Figures from WARC reveal the sector is set to grow to $11.5bn this year, faster than the growth expected in all other media channels.
Digital’s share of OOH is also moving at a pace. WARC forecasts that for 2023 digital will account for 25.4% of all global OOH spend, up from 17.8% in 2020. Leading outdoor media owner JCDecaux reported its DOOH revenues grew by 19.5% year-on-year in Q4 2022, and by 41.1% for the full year.
And now innovations in measurement, driven by Lumen, mean that advertisers will benefit from attention-based tracking being factored into the way that DOOH impressions are calculated. This will add a greater degree of accuracy into planning and reporting in DOOH.
These developments are hugely positive for the industry and signal the growing importance of DOOH. But with this heightened focus on digital, are were in danger of overlooking the role that traditional OOH plays in the market? Is a ‘wholesale’ shift to digital good for all advertisers?
Digitisation of OOH has brought many benefits. DOOH is becoming an increasingly normal part of consumer’s daily lives, and offers impressive, targeted reach via billboards across city and suburban locations. Few other mediums offer the potential to engage customers when they are not distracted by other advertisers.
DOOH also offers real creative flexibility. It allows advertisers to target specific days of the week, or even hours, without being confined to the usual fortnightly in-charges that paper and paste are subject to. This means that creative can be much more dynamic and reactive, and can feature sequenced assets and motion graphics.
So it’s easy to see how DOOH is now taking the lion’s share of outdoor adspend. According to OOH trade body Outsmart, last year 63% of all outdoor adspend went to digital. At The Grove Media, we predict that digital’s share of OOH adspend will rise to 75% by 2027, driven by the growth of roadside digital. However, this is share of ad revenue is in stark contrast to digital’s share of inventory in OOH. Only about 3% of inventory currently on Route – the OOH research and data company – is digital. This includes all individual public transport interior sites, so if you remove these, you get to the generally accepted figure of digital having a 6% share of inventory. If you look only at roadside, this figure then increases to around 18%.
The point here is that despite the importance of DOOH and its command on adspend, the vast majority of sites are still traditional paper and paste inventory. And at most, DOOH’s share of inventory is only likely to increase from 6% to 10% by 2027. Nobody’s doubting the importance of DOOH, but the traditional OOH market is still huge and also very important, particularly for the majority of UK advertisers, i.e. the 99% of companies which have budgets under £3m, according to Nielsen. Traditional OOH sites reach the parts that DOOH do not. While, many of the traditional sites are outside of urban and populated areas, they are still in valuable, prime locations.
With DOOH’s increasing share of adspend, we are likely to see the increasing fragmentation of the traditional market. The bigger media contractors will inevitably sell off more of their traditional estate to smaller owners. And we’ve already seen incredible shrinkage in the traditional OOH market; for example, in 2005 there were 37,500 48-sheet paper and paste sites in the market, there are now 6,500 (Mediabridge). The smaller media owners are simply going to have to work harder for the business, offering every more competitive rates and maintaining their sites to a high level.
And with the increasing shift of adspend to digital, we also have the important change in the way that digital impressions are calculated. Lumen has now been integrated into Route’s measurement process, which means that the metrics used in OOH planning now take into consideration levels of attention, based on walking speeds, dwell time and environmental conditions. This is the first channel where attention metrics have been integrated into measurement as standard. Now when an agency buys an DOOH frame, they know that the site is 100% viewable and that the level of impressions that Route calculates – and that the advertiser pays for – is the actual eyes-on audience.
This is clearly a significant development as agencies and advertisers will now see
a truer reflection of the value of DOOH sites. However, this is not likely to reveal a significant shift in overall numbers. The increases and reductions highlighted by the new tracking methodology are likely to be low and will even out for the big campaigns. Differences could however be amplified with the smaller, regional, local campaigns, as there is less sheetage to offset reductions, and so the traditional sites could bear the brunt of any loss of impressions.
Another impact of the increasing shift to DOOH adspend is the ongoing change in the way that OOH is traded. Understandably, the major media owners are moving away from traditional buying to inventory sold via automated platforms, such as JC Decaux’s VIOOH or the in-house platforms developed by specialist OOH buying agencies.
This move to platform trading will reduce the volume of ‘line by line’ inventory as media owners look to maximise revenue from higher ticket digital formats. Media owners are also starting to package up paper and paste sites, making it more difficult to buy line-by-line. Inevitably this will squeeze some smaller advertisers out of DOOH. At present programmatic trading of DOOH, via DSPs or APIs, represents only about 5% of media owner revenue (Mediabridge), but this is growing and represents another shift in the way OOH is traded.
Overall, innovation and growth in digital is positive for the OOH market. We are seeing ever more exciting and creative digital formats, trading of digital is becoming more efficient and the introduction of attention-based tracking will make measurement far more accurate. But it’s important to remember that there is a very large and valuable traditional market that is vital for many small and medium-sized advertisers. As OOH becomes more fragmented, the smaller media owners will take on a greater importance for advertisers focused on traditional inventory. These advertisers should favour a spread of sites across multiple locations to deliver a balanced and more representative campaign rather than affording one DOOH site in a central location to deliver all their impressions.