Myopia: Are we slowly suffocating the out of home industry?

Out of home (OOH) media owners generally lease space from landlords to erect structures for advertisers to display their advertisements.

In days gone by there was a ‘general understanding’ that a media owner would not approach another media owner’s landlord and offer better terms. This gentleman’s agreement is long forgotten and landlords have caught on to the fact that better returns are achievable by approaching their tenants’ competition. Higher rental income paid to landlords means that either the advertising space is rented out for more or media owners get less income as margins have shrunk – a loss to the industry in both instances.

This leads to advertisers having to pay more, which in turn may lead to advertisers deciding that their money will be better spent on another medium, such as TV, radio or print. The media owner’s smaller margins could also result in less maintenance being done on the structure, resulting in an unattractive structure displaying the advertiser’s product.

Landlords awarding tenders to a single media owner to manage their entire portfolio (previously managed by multiple media owners) is not a new practice. Tenders are awarded and existing media owners are given notice that a new company will be taking over the lease. Generally, they have an option to sell their structures to the new company or remove them altogether. It’s not true in all cases, but income is certainly a great motivation when awarding a tender.

But more financial gain to the landlord means someone has to carry this additional cost – the advertiser. The cost of space has recently increased by as much as 400% in some instances with very little justification of why the space became so valuable.

Let’s also not forget that local authority approvals need to be in place. Those who do abide by municipal signage bylaws will tell you that it’s not an easy achievement. It is for this reason that some media owners erect structures that do not conform to these bylaws, agitating councils that then inform the advertiser involved, giving rise to further negativity and a lack of trust in the medium.

The opposite, however, is also true. In some major metropolitan areas, it’s rumoured that hundreds of sites have been earmarked by councils for development among the existing structures, bringing about further clutter. This will no doubt decrease the value of existing opportunities or result in a lack of appeal to advertisers altogether. The premium that could have been charged for a solus position is now lost.

These examples are simplified; out of home media is a complicated industry and many enter for short-term gain causing long-term negativity towards the medium. Some opportunists, masking themselves as media owners, mark up someone else’s inventory and sell it to advertisers under the pretence that they are the rightful owners. Advertisers soon find out they were paying more than they should have and are therefore at a disadvantage. Worse yet, it is likely that advertisers have a set budget for OOH and if the actual rate had been paid they could have afforded to add another site to their campaign – another sale for the industry. The roles of OOH specialists within media agencies are becoming increasingly important in managing the process and minimising advertiser risk.

In 1960, American economist and Harvard Business School professor, Theodore Levitt, published an article entitled ‘Marketing myopia’ suggesting that businesses would do better to concentrate on customer needs rather than being product-orientated.

There may be some relevance to his theory when one looks at the OOH industry. We seem to be so focused on developing sites and getting rights to the existing sites that we lose sight of the main aim: competing for media spend against other media such as TV, print and radio. Surely a concerted effort towards growing the percentage share of media spend that OOH enjoys would translate into a healthier industry?

Levitt showed insight when he wrote: “The organisation must learn to think of itself not as producing goods or services but as buying customers, as doing the things that will make people want to do business with it.”

This month’s columnist Bartho Janse Van Rensburg is the out of home media unit director at Omnicom Media Group.

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