Out-of-Home Advertising: sensitive for the economical crisis?

By Fred Kuhlman • December 3rd, 2008

Bracing for the recession, out-of-home media companies are making adjustments in the hopes that the business will survive the turbulence, if not come out ahead. While out-of-home has held up better than most other media through the first half of the year—posting modest, single-digit growth—the next quarters will show a complete different story.

It is clear that with advertising spending under pressure all advertisers feel the effects of a sharp fall in consumption. In times of crisis you would obviously need additional advertising to win market share (‘anticyclical advertising’), but practice shows that most companies have to cut cost in order to keep head above water. Is sensitive outdoor advertising recession?

The American Media Week reported in a headline: “As players OOH tight their belts for 2009, forecasts call for a full recovery by 2010.”

Outdoor advertising is a medium that is usually used in combination with other types of media such as television, radio. The very fact that the medium by advertisers and consultants is not seen as a primary medium makes it vulnerable. Normally, we see therefore that when ad spends fall, outdoor falls relatively stronger.

By third quarter, the nation’s three largest OOH companies reported negative growth, despite growth among digital assets, a small percentage of the overall business. Clear Channel Outdoor’s Americas business dropped 4 percent to $370 million. CBS Outdoor’s North American business reported a similar 4 percent decline to $338 million. Lamar Advertising net revenue was down by 5.5 percent to $312.5 million.

After examining ad trends for the past 30 years, including four financial downturns, the Outdoor Advertising Association of America expects a turnaround in 2010. “Historically, the industry has bounced back from decline in the third year of an economic slowdown, and the correction has been 4 to 5 percent growth,” said Stephen Freitas (in Mediaweek), chief marketing officer for the OAAA.

A decline in spending has usually large implications for operators who generally have high fixed costs (fixed franchise payments, the street furniture must be maintained and kept clean). We see at the moment, a relatively hesitant attitude in tenders and operators are seeking ways to save costs.

It should be clear: Out-of-Home is sensitive to the crisis. But there is also light at the end of the tunnel. In particular the strong growth of digital out-of-home media proves that advertisers get more and better opportunities to reach their target. Perhaps the growth of digital media could partly offset the decline of the traditional out-of-home media.

 

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