Despite severe economic headwinds and declining traditional advertising spending, the U.S. digital out-of home media industry is on pace to grow 11.2% to $2.43 billion in 2008, according to research released today by PQ Media. While the industry's growth this year will decelerate from 24.5% in 2007, PQ Media forecasts digital OOH spending in the U.S. to grow at a compound annual rate of 12.9% from 2007 to 2012.
In the first foray into the global digital OOH market, PQ Media found that spending worldwide will grow 12.8% to $6.11 billion in 2008, slowing from 22.6% last year, but forecast to expand 14.5% from 2007 to 2012. The U.S. accounts for nearly 40% of global digital OOH spending, but its share will decline over the next several years, according to Global Digital Out-of-Home Media Forecast 2008-2012. Key international growth markets include Russia, India, China, Brazil, and Australia, among others, which will benefit from major trends such as emerging market potential for operators, greater brand acceptance, advanced technology and new measurement systems.
The digital OOH media sector, first defined, structured and sized by PQ Media in 2007, enables advertisers to engage target consumers in captive locations during their daily routines through video advertising networks, digital billboards and ambient ad platforms. The media platforms are further categorized by various venues and locations, including theaters, retail, offices, entertainment, transit, universities, roadside, and on various objects.
U.S. spending on video ad networks, the largest segment, is on track to expand 8.1% in 2008 and will decelerate in 2009 before returning to double-digit growth in 2010, according to Global Digital Out-of-Home Media Forecast 2008-2012. Digital billboards remains the fastest-growing segment, albeit slower in 2008, posting growth of 28.2% and remaining in the 20% range through 2012. Ambient ad platforms will grow 6.8% in 2008. This growth compares with expected low single-digit growth or outright declines in most ad-based media in 2008 and 2009, including newspapers, radio, broadcast TV and magazines. U.S. digital OOH spending grew 23.1% on a compound annual basis from 2002-2007, exceeding 20% growth each year of the period, PQ Media found.
"The current economic crisis and resulting advertising pullback have accelerated the seminal transition already taking place across the media landscape," said Patrick Quinn, president & CEO of PQ Media. "This will likely be the first recession in which advertisers not only spend less, but also spend differently. Marketers for time immemorial have been searching for ways to influence consumers at critical points of decision. As a new integrated media solution emerges, we believe digital out-of-home media will be a key component of the new model."
Gold Rush, Shakeout, and Breakout
PQ Media's research reveals that, following an initial gold rush period, an inevitable shakeout is taking place, as digital OOH, particularly the video ad network segment, enters a phase much like the Internet in the late 1990s. The economic headwinds have accelerated the shakeout period, with consolidation and the credit crisis clearing the way for stronger companies to surface and lead the industry into the future.
"This medium is too powerful not to breakout at some point in the next couple years because the secular trends driving its growth are not going away – changing consumer behaviors and demographics and advanced technology and measurement," Quinn said. "The industry's direction is still evolving, but the adoption of standard measurements and business practices will go a long way toward placing digital out-of-home in the regular media mix."
While there is no doubt the industry is in a critical state of transition, its ability to help brands reach target audiences in captive moments for extended periods of time will likely make it a critical part of the future marketing landscape. Among the key trends going forward are the emergence of venue-based media solutions, which combine multiple digital OOH options and other marketing strategies, such as event marketing and sampling, to provide brand marketers with a range of out-of-home venues, platforms, demographics and psychographics to build brand affinity, according to Global Digital Out-of-Home Media Forecast 2008-2012.
PQ Media predicts that advertisers will continue to boost spending in digital OOH as consumers spend more time outside the home and reduce traditional media usage. Escalating gas prices, for example, prompted more consumers to utilize mass transit in 2008, creating expanded audiences for digital OOH advertising that reaches bus, train and subway riders.
The most active digital OOH brand categories in 2007 were CPG & electronics, followed by media & entertainment, food & drink, and retail. Overall, 66% of digital OOH ad spend was national versus local, with video ad networks featuring more national advertising and digital billboards generating more local, according to PQ Media.
For more information at http://www.pqmedia.com