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The $33B market staring you in the face

How to make a mint in the fast-growing billboard business

16 Minute Read

A decade ago, billboards were relics of the past, reserved for Cracker Barrels and gas station exits. Today, they’re one of the fastest-growing ad commodities on the market.

As other traditional media (broadcast television, radio, magazines, newspapers) flounder, billboards have adapted to the times by embracing, and integrating, the very technologies that threatened to make them irrelevant.

How has one of the world’s oldest advertising mediums survived the onslaught of a digital revolution? And how can entrepreneurs take advantage of the growth?QUICK FACTS

  • Billboards are a $29B market, and are expected to grow to a $33B market (a 12% increase) by 2021.
  • Billboards are cheaper (on a CPM level) than online alternatives.
  • Entrepreneurs see opportunities to create new forms of digital outdoor ads and streamline the process of buying billboard space.

A snapshot of the market

Billboards fall under the larger category of “out-of-home” (OOH) ads. This includes every type of ad you see outside of your home, be it on a subway, a truck, or the body of a naked cowboy.

At large, OOH makes up only 4% of the total ad market, a tiny sliver compared to the behemoth of digital (52.6%). But as we’ll show, this market is poised to experience serious growth.

OOH is made up of 4 major sub-categories: Street furniture (bus benches, phone kiosks), transit (taxis, busses, airports), place-based (arenas, shopping malls), and billboards (traditional and digital).

Billboards make up the largest chunk of the OOH market, accounting for roughly 66% of all annual revenue.

Similar to other ad markets, the billboard business is made up of several key players: 

  • Operators: The companies that own billboards. They maintain the structures and lease out the ad space.
  • Measurement companies: The companies that collect and sell data on billboard location, traffic, and inventory.
  • Media buyers: The companies/individuals that make sure the ads are being seen by their intended audience.
  • Brands: The companies buying ad space on billboards.

More than 1k businesses — ranging from large corporations (OUTFRONT, Lamar, Clear Channel) to small-town operators — control 370k billboards across America. Each year, some 15k new boards are constructed.

Major Operators

Source: MarketWatch

While radio, print, and television ads have declined in prominence, OOH ads have enjoyed 31 consecutive quarters of growth, and a 35% increase in ad spend since 2010. By 2021, billboards are expected to grow to a $33B industry.Projected growth (2018), by advertising sectorDigitalOOH (billboards)TVRadioMagazineNewspaper-20-1001020

  • value

Data via MAGNA projections

Digital still reigns supreme— but as other traditional mediums struggle, billboards continue to grow.

In popular markets, tech companies are engaged in a fierce battle for the best billboards. Earlier this year, Netflix plunked down $150m buy 32 billboards along the Sunset strip in Hollywood. AlibabaGoogle, and Reddit co-founder, Alexis Ohanian, have also hedged bets on billboards and the new tech that’s powering them.

When tech meets traditional media

At the core of this growth is a digital revolution — a confluence of old-school marketing and new-age data.

The vast majority of the billboard market is still made up of static ads (one picture that doesn’t change). But a breakdown of OOH revenue shows that growth is largely being driven by digital billboards.OOH growth is being driven by digital billboardsGrowth of static and digital OOH ads (2005-2020), in billions USD200520062007200820092010201120122013201420152016201720182019202009182736

  • Digital
  • Static

Data via MAGNA, RAPPORT

A decade ago, the billboard industry was on the brink of extinction. It had two major points of friction:

  • It was hard to find the best inventory for your ad
  • There was a lack of measurement, or capability to target ads to the right people

“I was blown away by how antiquated the tech was,” says John Laramie, founder of the OOH firm Project X. “Billboard owners were using Microsoft Excel spreadsheets to manage their inventory. They’d fax agencies pictures of what was available… And the best data they had came from those black cables you drive over that monitor traffic.”

In recent years, both of these issues have been self-corrected: Though rooted in the physical world, today’s OOH ads have progressed to the point where advertisers can now track nearly all of the same metrics with a billboard as they can with a digital ad.

“We took this old thing,” says one industry insider, “and made it sexy.”

Digital vs OOH

To better understand the potential in the OOH advertising market, it’s important to first compare its capabilities with the existing and much larger digital market, in order to spot gaps of opportunity. 

The table below dives deeply into some of the core innovations that have emerged in digital advertising that have enabled more accuracy and scale, as digital has overtaken traditional forms of media.

These “features” include more tethered demographic data (age/gender/interests), retargeting, geotargeting, seamless A/B testing, heat mapping, attribution models, analytics, and logistical efficacy. Every single one of these features is a hallmark of the deep integration that digital advertising has with data, but also presents unique land-grabs to further the OOH space.

 Current Drawback of OOH vs DigitalDigital Company Examples (Estimated ARR or Valuation)Opportunity
Demographic dataDigital ads function off of demographic data which helps inform who should be shown what ads, in order to convert at a higher rate. Clearbit (Valuation: $250M)FullContact ($15M ARR)With more connected devices, tools can be created to gather demographic data live and at a hyper-targeted level, in order to inform which ads should be showing when. Similarly, location models can help predict optimal placement of the billboards in the first place, to ensure maximum reach with minimal cannibalization. Companies like Synaps are already leveraging smart billboard technology to more intelligently advertise through artificial intelligence. 
RetargetingRetargeting is one of the most effective “innovations” in digital advertising, allowing companies to have consecutive touchpoints with their high-intent users, until they convert.  AdRoll ($300M)Live location data based on where someone is at a given time can help inform their likelihood of seeing a particular OOH ad, which can be funneled into digital remarketing campaigns with direct conversion opportunities.
Dynamic TestingDigital advertising infrastructure enables marketers to test quickly and confidently, and then seamlessly reintegrate their findings into future experiments. Optimizely ($90M)Unbounce ($25M)Currently, OOH campaigns only enable one creative and it’s difficult to get any feedback on the performance of particular parts of the assets. Digital or smart billboards, along with associated testing tools, would enable marketers to test anything from an image to a discount offer, with agility. 
Attribution (Multi-touch – 48% of US companies are using~$1B industry and growing)The buyer journey is complex, particularly for B2B products. Various sources indicate that somewhere between 5-8 touchpoints happen on average before a sale. With limited data on viewership and attribution to a sale, it’s difficult to demonstrate the effectiveness of OOH ads. C3 Metrics ($13.5M)Bizible ($6.4M)Abakus ($10M)By integrating the digital backend of billboards and other media, a multi-touch attribution model can emerge which can influence a larger model indicating where and when to show billboard ads. 
AnalyticsDigital advertisers hedge heavily on accurate real-time analytics to inform their decisions and to understand their investment. Currently, most OOH options don’t provide more than high-level aggregate information. Google Analytics (ARR: N/A)Real-time location, weather, and traffic data can feed into live tracking of billboard viewership, impacting smarter pricing and conversion of these ads. For example, 10 minutes of viewership during peak rush hour may actually be 10x more effective than 10 minutes during a traffic-free period, due to the drivers looking for distraction during gridlock. Ideally this information would be provided back to the advertiser in a clear dashboard. 
User Testing/Heat mappingCompanies leverage tools like CrazyEgg and HotJar to identify how users are engaging with their landing pages and buyer journey. CrazyEgg ($5M)HotJar ($22M)This is possibly the most difficult problem to address with OOH advertising — and in particular, billboards. For more accessible, micro-advertising options like elevator ads, touch-screen prompts could be an interesting engaging option that provide live-feedback. Similarly, smart billboards with enabled technology like facial recognition may be able to provide some depth here.  With the rush of self-driving cars coming to market, dynamic-multi-device engagement will bring a new realm of opportunity here. 
Programmatic buyingHighly intelligent algorithms have penetrated the display advertising world, using a combination of data sources to programmatically serve the right ads to the right people, optimized to the individual. Rocketfuel (ARR $420.5M)Criteo (ARR: $670M)With digital/smart billboards, ads can be dynamically served, vs. the typical 4-week blocks they’re currently sold in. 

The Podcast Parallel

OOH is not the only form of advertising struggling to keep up with the speed and accuracy of digital media. 

Podcasts are experiencing the same advertising woes. Podcasts struggle with attribution. They struggle with testing. And they struggle with retargeting. 

Yet, podcasts are still effective. In fact, 61% of people paid for a product or service upon learning about it on a podcast and podcast advertising is expected to grow 290% between 2016 and 2020. 

The promise in the podcasting industry has even driven Spotify to invest deeply in the model, making 3 podcast-related acquisitions in the last year: Gimlet ($200m), Anchor ($140m), and Parcast ($56m). Gimlet is a browsing platform for high-quality podcasts, Anchor enables creatives to easily create and distribute their podcasts, and Parcast is a podcast network. 

In addition to Spotify’s acquisitions, many companies have sprung up enabling podcasters to easily track their success and reach, including ChartablePodtrac, and PodBean, which sport a variety of features mimicking those in the digital advertising space, including geo-targeting, user engagement, funnel tracking, and more.

The common thread? Marketers are looking for new outlets outside of pure digital, but need the right tooling, data infrastructure, and logistical ease to enable and grow these at scale. 

Compare the two search volume trends for (1) podcast analytics and (2) OOH advertising below. Both have grown significantly in the last 4 years, as people look outside of the saturated digital media space.

(1) Podcast analytics 

(2) OOH advertising 

Moreover, when you take a look at related keywords for “podcast analytics,” you get back a suite of other keywords which indicate that people increasingly care about measuring and being more data-driven with their podcasts. The same motivations exist with OOH advertising and are simply waiting to be taken advantage of. 

So the question, or rather opportunity, becomes: Who will solve these problems for the OOH space?

There are already some companies taking advantage of this shift, with Crunchbase logging a total of 154 results under “Outdoor Advertising.” Of the 154, there are a few big players which tend to be concentrated in the United States.

Largest Outdoor Advertising Companies:

While the above organizations control much of the digital spaces in their associated countries, they still rely heavily on tooling and data-processing companies to provide them with the right inputs. That’s where many of the below companies come in, many of which have received multiple rounds of funding. 

Other Supporting Organizations:

Smarter Billboards

Do a quick search for out-of-home advertising, and you’ll find a wealth of articles comparing the efficacy of the medium with the more popular form of digital media. But these two things are not — and should not be — mutually exclusive. In fact, there has been an emergence of digital billboards, coined “smarter” billboards, which are leveraging the new wave of innovation to produce better OOH results.

One of the OOH giants, OUTFRONT Media, has put together a series of case studies which feature specific metrics associated with campaign lift. Despite billboards typically being regarded as a largely unattributable form of media, each case study features quantifiable metrics which span some of the following:

  • Lift in purchase intent, brand awareness, store visitation, or sales
  • Clicks or impressions
  • Increase in mentions on social media
  • ROI or increase in revenue
  • Store visits

Additionally, Nielson has done a plethora of research which has yielded the very quantifiable conclusion that OOH actually has the best activation/$ spent ratio, as compared to other forms of traditional media. 

Source: Nielson 

As companies enter the OOH space looking to digitize and innovate, our ability to track impact and improve activation will only increase and distance outdoor advertising from its traditional peers.Top cities for billboards (by total ad spend, in millions USD)0200400600800NYCLAChicagoSFDallasPhillyAtlantaMiamiBostonHoustonData via Kantar Media (2017); includes all OOH advertising

Billboards are a multi-billion dollar business (Zachary Crockett / The Hustle)

Entrepreneurs have enlisted a trove of metrics, data, and analytics to not only improve OOH ad targeting, but streamline the management of inventory. Companies like Project X offer interactive databases that map out billboard inventory across the country and automate the entire process of finding, buying, and tracking billboards.

Let’s say you want to run a billboard ad targeted at pregnant women. The operational technology is now in place to allow advertisers to find billboards in markets with the highest rate of hyper-targeted demographics.

Ryan Bohn, SVP of the OOH startup True Impact Media, likens this targeted accuracy to “sniper shots.”

“You can even target a specific individual,” he says. “The way you’re spending your dollars is becoming much more accurate.”

Simultaneously, the billboard industry has experienced a boom in measurement capabilities.

Geopath, often dubbed “the Nielsen for billboards,” enlists hundreds of millions of mobile data points to measure a slew of granular, anonymized demographic information on billboard passersby.

Lamar, one of the largest billboard owners in the US, works with third-party data providers to collect information on everything from weather to traffic conditions, and uses it to change its digital billboards in real-time.

“Let’s say there’s a billboard for Dunkin’ Donuts,” says Drew Dallimore, Lamar’s director of digital innovation. “If it’s snowing out, it’ll show an ad for hot coffee; if it’s sunny, it’ll switch to iced coffee.”

If you’re stuck in traffic, the Google Play billboard looming over you on the freeway might suddenly advertise “soul soothing” music; likewise, a Target billboard might display rotisserie chickens, or other prepped meals, with a message like, ‘Running late? Keep dinner easy tonight.’

Digital billboards are able to use mobile location data do things like serve Ford truck ads to drivers who just visited a Lowe’s or Home Depot (Zachary Crockett / The Hustle)

This type of optimization is made possible by the tremendous amount of anonymized, location-based mobile data being utilized by the OOH industry.

“A brand can come to us now looking for a very specific audience — female, aged 35-40, household income over $100k, likes to shop at certain stores, and eat certain foods,” says Betsy McLarney, founder of the OOH ad agency, EMC Outdoor. “And we know exactly where to put the billboard.”

The case for billboards

By working with digital instead of fighting against it, the age-old billboard industry has managed to stay relevant, desirable — and, most importantly, effective.

A recent Nielsen study found that combining billboards and digital ads can lead to a 4x increase in online activation. Other studies have shown billboards can lead to lifts of 54% in search traffic, 38% in Facebook interaction, 25% in Instagram engagement, and 47% in sales activation. 

That’s better than radio and print — and just below what you get from a TV ad, for a fraction of the price.

Billboard pricing depends on a number of factors, like location, population density, visibility, the size of the board, and demand, and can run anywhere from $600 for a sign on a Nevada highway, to $20k for a prime NYC building top.

But when you break down the CPM (how much it costs for every 1k people who see the ad), billboards are, on the whole, more affordable than other types of ads.

With an average CPM of $5.22, billboards are, in may cases, less cost prohibitive than online ads, which continue to balloon in price.Average CPM, by advertising sector (CPM = cost for 1k people to see an ad)05101520TV(Cable)MagazineFacebookYouTubeInstagramLinkedInTwitterBillboardsRadioData via MAGNA, Falcon.io, AdStage, monitizepros.com

Note: CPM widely varies based on a multitude of factors; these only serve as rough industry averages (Zachary Crockett / The Hustle)

These stats have enticed tech companies. Though billboards only make up about 7% of the average brand’s ad budget, the tech space averages 3-4x that. Four of the 10 biggest billboard spenders are tech companies (Apple, Google, Amazon, and Netflix).

Startups, in particular, are drawn to billboards. In cities like San Francisco and NYC, VC-funded brands are spending tens of millions of dollars to blanket popular areas.

“Emerging brands like them because they are a cheap, reliable way to spread the word,” says McLarney, who once helped NerdWallet “take over” a train station with 190 advertisements. “It’s a way to say, ‘We’re here! We’re here!’”

The circus

In the 1970s, we were exposed to an average of 500 ads every day. Today, that figure has ballooned by a factor of 10

“People used to think that billboards were oversaturation,” says McLarney. “But digital is like being in Times Square at all times.”

The competition for our eyeballs is fiercer and more complex than ever before — and it has been compounded by the rise of online ads, which multiply like fly larvae every time we open our internet browsers. Advertisers only have milliseconds to capture our ever-shrinking attention spans in a crowded, fleeting space.

In this era of oversaturation, billboards enjoy a unique advantage.

The striking, eye-grabbing nature of modern billboards often harkens back to the early days of circus posters (Zachary Crockett / The Hustle)

“It’s one of the few mediums where you have some assurance you have the audience’s attention,” says Drew McLellan, founder of the ad consultancy AMI. “Today, we watch TV with an iPad in our lap, while checking email on our phone… 2, 3, or 4 screens isn’t unusual. When we drive, we can’t do that.”

Where are the opportunities here?

With the compelling performance of OOH and the opportunity for digital innovation within the industry, the question becomes: What is the future of OOH? 

First off, despite billboards capturing a majority of the OOH market, there’s no need to stop there. The overall digital signage industry has tripled from 2010 to 2016 ($1.3B to $4.6B) globally, and ranges in advertisements including digital furniture, bus shelters, cinemas, taxis, and more. The influx of innovation should capitalize on connecting devices and with the opportunity to put a screen nearly anywhere, the set of data points increases exponentially. 

It’s important to note that the current representation of those purchasing OOH ads is skewed heavily towards large companies, with the largest advertisers being Comcast, McDonalds, Time Warner, and T-Mobile. Moreover, when we look to the companies which are increasing their expenditure, they tend to fall within the technology, transportation, and financial services industries.

With the emergence of new retargeting and placement techniques, “smart” billboards open up a wealth of new options for new and more niche markets. Access and cost will no longer be limited to large technology companies, but also smaller direct to consumer options. If we imagine a world of programmatic billboards, advertisers will be able to purchase in the scale of minutes, not months, opening access to companies with drastically different budgets. In fact, Project X (a media agency for outdoor media), indicated that their fastest growing vertical is actually in direct to consumer brands like Glossier, Everlane, and Homepolish. This is not unlike how Google revolutionized advertising in online search, by making ads available at a much more targeted, yet also accessible level.

By going digital, there is no easier way to go global. In 2017, Global Physical OOH Revenue was $24.5B (other sources cite the number at $50B), of which $13.5B is digital, with a growth rate of 4.3%.

In terms of country-specific data, China actually has the largest digital OOH ad expenditure and has a similar ad profile to the United States, where OOH lags only to digital. 

As we consider the digitization and globalization of billboards, we can look further to Google trends to get a high-level sense of the penetration of “smart billboards”-the cutting-edge of billboard technology-and notice that their interest is currently siloed in the United States, whereas the more general term “billboards” has distributed interest. To be clear, this is not a gloomy indicator, but instead proof that there is room to innovate with these technologies in other markets.

This assertion is supported by reports which indicate that global growth is expected to come from countries including Turkey, China, and Brazil, where there is room for new companies to capitalize on this green-field instead of trying stealing market share within the more established markets. 

Additionally, if you actually look a little deeper at the penetration of OOH in the United States, some of the most penetrated locations are not massive cities. With the workforce becoming more distributed, out-of-home ad markets may also follow suit and this data provides confidence that OOH works in a variety of markets.

The key takeaways?

  1. The OOH space has a lot of room for new innovation.
  2. Most of the innovations in the OOH advertising space are enabled through technology.
  3. Despite ad units in outdoor advertising being innately physical, the innovations are deeply digital, which means they can scale quickly and cost-effectively across the world.

If you’re a brand looking for a healthy media mix for an ad campaign, billboards can add tremendous value at a low-cost entry point.

With bolstered measurement and operational capabilities, billboards now offer hyper-specific targeting and provide a healthy supplement to digital advertising, which has become an oversaturated free-for-all.

But there is also a serious opportunity for entrepreneurs to create new OOH categories on the tech side:

  • Products that streamline the operational process of buying OOH ads
  • Products that offer new ways to display digital OOH ads
  • AdTech startups that leverage mobile data to improve OOH engagement

One OOH exec tells us a story about an entrepreneur who, with little capital, recently invented a small billboard that can be placed inside of an elevator. Another outfit, Firefly, recently raised $21.5m to put mini-billboards on top of Uber and Lyft cars.

“There are huge opportunities in riding this wave of excitement,” says True Impact’s Bohn. “Brands are willing to invest right now.”

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