Forecast: Digital Out-of-Home Will Weather Downturn

digital out-of-home The digital out-of-home business is headed for an "inevitable shakeout," but will bounce back even stronger when the economy recovers, according to Patrick Quinn, one of the only analysts currently producing estimates of aggregate spending and forecasts for DO in coming years. Quinn summarized his findings in his new Digital Out-of-Home Media Forecast 2008-2012.

DO's strength is evident in its recent growth: Quinn pegs spending in 2007 at $2.19 billion, noting that this represents a 24.5% increase over 2006. Looking back a few years, Quinn found that the DO market tripled in size from 2002-2007, thanks to a cumulative annual growth rate of 23.1% during that time.

Thus, DO outstripped the growth rate for out-of-home advertising in general, which posted annual increases of 5% to 8% per year from 2002-2007. Comparing Quinn's estimate with the Outdoor Advertising Association of America's estimate of $7.28 billion for all out-of-home advertising in 2007 shows that DO constitutes about 30% of total out-of-home revenues, doubling its 15% share in 2002.

However, its strong performance in recent years will not insulate DO from the current economic downturn, according to Quinn. He predicts a "shakeout" in 2008-2009 followed by a "breakout" in 2009-2010.

In addition to general economic woes, the shakeout will be driven, in part, by the elimination of redundant or inefficient video networks-- many of which were thrown together with little thought for strategy and profitability during DO's boom years earlier this decade.

It will also see the liquidation of some high-quality networks that were unable to make their business model work. Quinn pointed to the recent demise of Reactrix, which earned kudos for its engaging interactive technology and high-profile partnerships, but still burned through venture-capital cash without turning a profit.

In large part, the shakeout will take the form of mergers and acquisitions, as complementary and competing networks are rolled up by private-equity firms. However, Quinn declined to name any specific candidates for acquisition (or failure).

The shakeout will set the stage for another surge of digital out-of-home spending in 2010, once the overall economy begins to recover. The medium's intrinsic advantages are being reinforced by new technologies for targeting and venue-based media solutions. According to Quinn: "Marketers from time immemorial have searched for ways to influence the consumers at the point of decision. Now they're finding ways to coordinate multiple media platforms with digital out-of-home, including event marketing, brand integration, product sampling and online content."

Quinn was particularly enthusiastic about the "convergence between digital out-of-home and mobile." In addition, the aggregation of video networks, either through M&A or by meta-networks like SeeSaw, will allow comprehensive geo-targeting of consumers in particular areas. In effect, it will surround them with video messages at multiple venues--a practice called "area-jacking" in Japan, where it was pioneered by advertisers.

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