Want to know about ROI? The Writing’s on the Wall…
Digital Media, and especially Social Media, are obsessed by metrics and ROI. While there are few standards, there are lots of ideas and theories.
An immense amount of energy and investment is being expended to develop new and better methods of measurement in order to prove to advertisers that they are getting a return on their investment. However, one model which is often overlooked is that of the billboard industry.
As media theorist Ray Lord says, “With all of the technology developed over the last 100 years, we’re still advertising with paper, ink and glue.” Billions of dollars are spent each year on poster advertising.
Billboards have a lot to teach us about ROI.
Outdoor Advertising – A Media Success Story
While the world is focused on digital developments, the outdoor advertising industry lives and thrives. Its global share of ad spend continues to grow, even in the digital age (from 5.5% in 1996 to 6.7% in 2008). Moreover, the growth is broad based encompassing nearly every region of the world.
Margins are, reportedly, the envy of the media world with operating margins normally above 30%. Even in the crisis year of 2008, Clear Channel reported operating margins of 22% (vs. 32% in ’07) on their US outdoor business in their SEC filings.
Ads targeting consumers in shopping malls, business travelers in airports, window shoppers on city streets and commuters on highways are popular with marketers. Prime locations, such as Times Square in New York, are among the most sought after advertising opportunities available and command stellar rates.
Another attraction of the Outdoor Industry is its predictability. There are no stars demanding huge sums, no tight market for web developers and no fickle audiences to worry about. Compared with other media industries billboards are very stable, even boring. That simplicity is key to its success.
As long as people are stuck in traffic, waiting in airports, shopping at malls and traveling on streets, there is an audience for posters.
Outdoor Media Metrics
The factors affecting billboard effectiveness have long been known and are fairly common sense:
Traffic: The amount of people who pass by an ad is probably the most important factor. Estimates in developed countries are fairly easy to come by. The Traffic Audit Bureau (TAB) in the US has been measuring billboard traffic counts for 75 years.
Visibility: In 1995, Postar of the UK conducted the first visibility studies of Outdoor Advertising. Using eye tracking technology, they studied the factors that affected billboard visibility and developed a scoring system that adjusted traffic counts for individual billboards and aggregated them into a database.
In the US, the TAB recently followed with its Eyes On program in 2008 (yes, just last year – more than a decade after the Brits).
Mathematical Models: In addition to traffic and visibility, mathematical models are used to create estimates of reach and frequency. Some fairly simple ones, like the Copland and Gallup models, have been around for 50 years. Postar and TAB’s Eyes On are much more sophisticated, incorporating traffic studies and high order equations. Postar claims it uses “neural networks.”
Billboard ROI
In truth, I have yet to meet an advertiser who has absolute confidence in outdoor audience research. Furthermore, in my past conversations with officials at Postar and TAB, I haven’t found their explanations very convincing. The traffic counts are basic averages, the visibility studies problematic and the mathematical models somewhat dubious.
Nevertheless, while Outdoor Metrics are less than ideal, the medium itself continues to enjoy advertiser support for the following reasons:
Standards: Both systems, for all of their problems, provide standards that everybody has agreed to. Both are products of coalitions between media owners, advertisers and agencies. Every billboard is measured using the same methodology.
Internal Consistency: While the TAB and Postar don’t effectively measure billboard campaigns against other media, they do evaluate between campaigns fairly well. An advertiser can distinguish value and price between competing suppliers.
Advertiser Data: The most effective salespeople for the Outdoor Industry are the clients themselves. Many major clients conduct ongoing awareness tracking studies and Outdoor campaigns perform surprisingly well, especially with upscale, light TV viewers.
Retail advertisers like McDonalds have done intensive analysis on the thousands of “directional” billboards they buy each year. Even small, local advertisers can notice the sales effect of buying a billboard down the street.
The Outdoor Lesson for the Digital World
Marketers buy billboards because they work. In truth, nobody knows why and nobody really cares all that much. Buy billboards and, invariably, there will be both an increase in awareness and a sales effect. For the most part, that’s enough.
During negotiations, clients often make demands that they are not really serious about and it is a standard practice to demand proof of value before investment.
However, that is not the way the world works. Every investment has risks, there are no sure things. Despite the histrionics, most clients do understand this simple fact of life.
The job of advertising is to deliver a message. The job of media suppliers is to provide a good product, accountability and service. Those are the factors that clients, for the most part, care about.
Moreover, every client has different goals which they measure internally against metrics that are usually confidential. Unless your clients are willing to share all of their internal data with you, true ROI for suppliers is a chimera.
Hi-tech media mavens looking to enlarge their share of the advertising pie should look to billboards.. Deliver a good product, measure it the best you can and service your clients well. The world’s great marketers are perfectly capable of measuring their own ROI.
The writing’s on the wall…
– Greg
what are you some kinda cutting-edge digital market analytical genius???
Damn good article!
1st
Traumahead,
Thx:-)
Damn good site btw.
– Greg
ROI – it’s very important question. Who can recommend me how estimate ROI in using RFID tags in automotive assambling
Greg…
Interesting article. I think the challenge is to understand how to measure and communicate awareness and the intangible things like consumer impressions and trust of brand. I wrote on that subject: http://bit.ly/6GBIMY
Thanks Momblebee!
– Greg
This is an excellent article and gives someone like me who is not directly related to the media buying/selling arena a great overview on the subject and in relation to other media realestate such as digital/online.
some far fetched thoughts did spring to mind though 🙂
1) What happens when now increasing number of people don’t travel much? i.e people are giving up driving to a meeting for VC (video conferencing). Most of the stuff from groceries etc is ordered online… swinflu is keeping people at home and online learning is taking over.
2) As a result of some of the effect of 1) above occuring… traffic on highways is less so speeds of vehicle movement is faster. This will not have an effect on billboards placed at the “correct angle” on a highway, but others will not be seen when driving at higher speeds . (I don’t know where all these funny thoughts come from – trust me! 🙂 ..i must have missed a few billboards while driving I suppose.
3) My all time favourite way out thought – Rogue Augmented Reality billboards.
Somewhat taking from an earlier post of yours on AR. imagine now that Iphones and other mobiles have all these AR browsers in them.. what if some rogue company starts “replacing” paper billboards with a “digital one” over the existing real world billboard.
I can see Pepsi getting prime time Billboard space in Times Square, while poor Coke pays for it. With an AR browser such as LAYAR when someone aims at the coke billboard a rogue – perfectly aligned Pepsi billboard appears …and animated at that! 🙂
Ok enough of rambling. great article!!
Greg,
Out of home is a very interesting case when we look at global communication trends.Its the oldest communciation medium (i think cave-paintings were possibly the first advertising form) and also it is not suffering from the ascent of digital adpend in terms of its share of communication spending like other traditional forms-particularly newspapers.In fact it is grwing slightly.
One reason is that it is actually becoming a digital medium itself.The advance of digital billboards, like other technological developments in communication such as mobile, has been extermely rapid as costs become more resonable.One could forsee this becoming the norm in a reasonable period of time.Ckearly digital brings it into the platform connectivity axis of other forms (internet, Tv,news etc) allowing it to converge.Also digital brings extra creativity to the mediume which encourage greater client use of the medium.
Even with the traditional forms there have been forces at work over a longer timeframe which have helped the medium undgo a rebirth.Its quite strange saying this, but actually Out of Home has become one of the most “international” of media in terms of cross-border ownership (unlike TV where the largest suppliers are predominantly local).
AS local suppliers are gradually acquired by the likes of Clear Channel JC Decuax and Viacom, they bring with it site quality standards that improve the communicating power of the medium as well as incresing teh potential for more stand-out collaboration of ambient executions between agencies and suppliers,hence again improving the share that the medium takes of the budget in many markets
Lastly…in a world where contact points with brands are increasing but communicating individually with smaller groups, this is the last medium which will continue to remain mass. In fact you cant stop it being a mass-communication medium even if you wanted to. So it will have this USP into the future to sustain it.
This isnt a sales promo on behalf of the Outdoor industry, but i certainly believe that companies in this sector will survive testing economic times better than some of their tradional media cousins.
Clyde,
Thanks for the comment. I’ll answer the questions as best as I can.
1. In that case, Outdoor would be worth less. However, I don’t think we should assume that Videoconferencing will lessen traffic. Communications have come a long way: Phone, e-mail, etc. Moreover, the price keeps going down.
Yet, traffic around the world has been steadily increasing for decades.
2. That’s part of the billboard scoring. If it would be come an issue, it would be easily solved by routine updating.
3. Maybe so… You already have the same thing at sporting events. People can see some brands displayed on the field live, other brands on TV.
– Greg
Stuart,
Thanks for sharing your thoughts on cave paintings. I’m sure that your wife will be interested to know that it wasn’t your daughter who made those markings all over the house!
– Greg
Another great article, Greg.
I’d like to add to your fine observations. A particularly important aspect of outdoor advertising is this, content. I’ve studied such advertising for years and it still amazes me that over 90% of these ads are too busy, lacking focus, or worse don’t give enough space to the company logo or contact information. Unless one is stuck in traffic and not texting or on the phone, for instance, a billboard ad has 10 seconds or less to get a point across. So the rule of thumb should be to keep it simple, eyecatching, focused on one key message, and for crying out loud make sure the company name, logo, and key contact information are clearly visible.
Happy Holidays to all.
Ardith,
Thanks for your input. You have nice holidays as well.
– Greg
Greg:
Thanks for your thoughts. Certainly, outdoor enjoys a captive audience, as people that drive and walk on the street shouldn´t go with their eyes shut. Those little things do help! Also, in tourist destinations advetisers targeting visitors to the location have very few possibilities to mass market their products away from outdoor. That my not apply to US but certainly to Europe where tourist tend not to read, listen or watch the destination media.
Joan,
Thanks for your comment. I don’t know about the US, it’s been a while since I spent a significant amount of time there, but certainly tourists boards use Outdoor extensively.
I think it has to do with the outdoor “target group” (which tends to be young and active), the absence of the need for the ultra fast coverage build that TV requires and the attractiveness of cheap frequency over cheap coverage.
– Greg
Greg, thanks for yet another great article. Two new developments I think add to the world of billboard advertising.
1) I’m sure most people have heard by now of Coke’s experiment (just beginning) with digital billboards. They have purchased 29 of the things to place in 20 cities in the US (at a cost of about $250,000 each – nice to be able to drop $7.25 million on an experiment, and that’s just for the medium!). They said in the release that they wanted to own the experiment and that’s why they bought the billboards rather than rent them.
2) The new digital posters in malls. Saw one of these the other day which looked like a giant iPhone – about 3 feet tall and 2 wide. It had a touch sensitive screen and people were walking by it and giving it a swipe to see it spill M&Ms all over the screen.
To “RussiaN Business Partner Center”, there are 3 posts on our website which delve into ROI and the last one describes a way to build your own ROI calculator which you could use to create one to measure the ROI of your RFID tags. This link is to an index on our post as it contains 4 links:
1) How to Run a SMM Campaign. A formal process description which calls for using ROI as one of the metrics to monitor in your campaign. And the other 3 posts cover:
2) How to measure the ROI of your website as a whole
3) The 10 best free ROI calculators on the Web and
4), How to build your own ROI calculator. This is the one you could use to find the ROI of your RFID tags
Here’s the link: http://bit.ly/cEc0ln
.-= Eric Goldman´s last blog ..Pre-planning your Website =-.
Eric,
As always, thanks for the great input!!
– Greg