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.”
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…