4. Sources of revenue
Ad budgets and media selection are not as fluid as one might assume and the inherent advantages of digital signage are not necessarily exploited by many advertisers. To be fair, the medium offers much more flexibility than most advertisers can realistically accommodate.
The capability, for example, to change an ad four times a day for a fast-food chain, with different content for breakfast, lunch, dinner and drive-thru menus, is only helpful if the advertiser is already in a position to promote all four product lines. Most are not. It will take time for ad agencies to accommodate this increased flexibility in their media strategies.
Many DOOH network operators also make the mistake of depending too heavily on ‘traditional’ ad revenues while ignoring other lucrative sources of funds:
- Point-of-purchase (POP) and promotional budgets—In the retail sector, funds earmarked for static POP displays and other in-store promotional activities could be more effective in increasing customer awareness if a portion of them were redistributed to DOOH.
- Co-op funds—Food retailers use approximately three to five percent of their total product sales as co-op funds for local flyers and newspaper inserts. If these funds were instead spent on an internal DOOH network with a third-party operator, a portion of the co-op dollars could go back to the retailer in a revenue-sharing arrangement, rather than becoming a non-recoverable expense. Many retail-based DOOH networks currently use co-op dollars as their primary source of revenue.
- Different types of advertisers—The long-term potential for a DOOH network’s success will be increased if the operator can reduce its dependence on a single revenue source. Many operators focus too heavily on national, regional or local ads, when they should really attempt to address all three types. National advertisers will usually take a ‘wait and see’ approach with a new DOOH network until strong metrics can be demonstrated. Regional and local advertisers tend to be more flexible and can react faster to new opportunities, but the challenge with smaller expenditures and more contracts is a longer time frame to recoup investments.
5. Marketing the network and selling ads
Marketing a DOOH network is an investment in its future success. It involves establishing competitive ad rates, correctly positioning the network and using research to support all audience/viewership claims.
Without research, there are no metrics to help ad agencies establish the relative value proposition or assess the audience coverage and effectiveness of a DOOH network. High traffic counts alone may not be sufficient to obtain advertisers’ support. Rather, they will also require demographic information about the audience, including age ranges, gender split, income levels and common occupations. This data will allow them to align their communication objectives with those of the DOOH network.
One of the challenges facing the industry has been a lack of standardization in both formats and measurement metrics. The Digital Place-based Advertising Association (DPAA), for one, has established guidelines for conducting audience studies and is continuing to research the impact and effectiveness of DOOH media. In the long term, it will be essential for the industry to adopt common standards for comparable metrics across all aspects of DOOH networks.
In the meantime, networks can benefit from metrics that are already in place. Airports, for example, have definable gross audience measurements based on ticketed passengers. The larger and more quantifiable the audience, the better the revenue opportunity.
Other marketing elements are also vital to revenue generation. One of the most important is the rate structure. Detailed operation, sales and administration costs, along with a basic understanding of other similar and/or competitive media, will help create a viable rate structure for the DOOH network that is competitive with other paid media on a cost per thousand (CPM) basis.
