Opinion: The outdoor industry at cross-roads.... Again ?

Client speak Reverse auction and bidding amongst agencies for low commissions and costs. The agency commissions down to 1.5% on media costs. The reason: the industry makes money but there are grey areas; so we need to bargain at the lowest acceptable amount.”

Agency speak Still need to make gross margins of 15% to survive. This can be broken down to 1.5% (to 5%) from clients. The rest from media – credit notes or short payments or from both – shorter display periods than planned, different sites and credit notes and short and delayed payments. “Clients force us to ridiculous levels – we have to maintain our margins – they must be aware of it and are prepared to accept it at operative levels. In media there are alternates to every OOH site – so we’ll find a site for a lower price of occupancy  ... and get our margins.”

Media owner (with old sites) speak The margins on these make up for losses on new sites. There are sites that are less than 10-year old which need to maintain occupancies at any cost. For both groups: we’ll tap decent revenues from a few agencies – even if we have to pay for it. “If agencies or clients think they can better us – we can do better. We’ll take multiple bookings and agencies or clients wont know about it at all.”

Municipality or authority speak  “Lots” of money in advertising with the big companies. We need to have a threshold bid which is much higher than the last time. This ensures we have got a fair share of the rental. “If there isn’t any company that we already “know” who is bidding, then we must peg a minimum bid amount four times the last bid amount to ensure we get a maximum,”

Overall systemic effect Certain individuals across the industry appear to have flourished. However  few companies can claim to have healthy bottom-line growths – or healthy bottom lines at all - any time during last four years or so . And so, one can construe that wealth has been accrued to the individuals instead of companies and businesses ... !

End of the day, report card of four years Specialist Agencies Shut down or merged or acquired:  Zero. Diversified into related activities like activation, exhibitions, retail merchandizing, signage: Nearly all. Those who haven’t: Struggling to maintain gross margins which still hasn’t reduced  below 12% in any case.

Media Companies Who have shut down or merged  or acquired : Zero. For those in conventional media: Reduced profit levels.

Large companies that have entered in the last 10 years have focussed on acquiring sole concessions. Most  of which are profitable in about three to four years.  Projects with high ‘desperate’ acquisition rates have seen low levels of implemntation or stands surrendered within two years.

Clients Gutsy clients spend on OOH (with an eye on innovations) but lesser than the previous year on conventional outdoor. The common gripes are:

• Too many grey areas
• Never know whether we got fooled in this transaction 
• Easier to justify spends on other media
• Takes too much effort to manage compared to spend
• We now have alternatives and markets are shifting – controlling outdoors in up country markets from remote locations is a higher risk”.

Final result: The spends on outdoor reduce for fourth year in a row - with total advertising media spends down now from  6% to 5%.

So, whither outdoors? My answer is:

• No brand can do without outdoor advertising!
• Media companies unite to restore trust and  faith in the medium by investing in research, case studies
• Making AdEx results available in open domain. This will help clients justify their spends on outdoor and prove that deliverables are being complied with
• Media and agencies move swiftly and adapt best practices. This includes a hard look at the old regime where a media house paid commission to agencies. This is replaced with transparent rates from media to clients.

This is the way for OOH to move forward. Is there a choice?

Views expressed above are personal, and Sen does not claim or subscribe to be the official or unofficial view of the IOAA.