The Pros And Cons Of Digital OOH

Falling technology costs and the proliferation of new indoor locations are driving the growth of digital out-of home, with screens becoming more prevalent wherever people congregate: from airports to subway stations, from shopping malls to coffee shops to fast-food restaurants and convenience stores, from lift lobbies to gyms to cinema foyers.

Commercial property owners increasingly regard digital screens as an asset that can help them outglam the competition, while indoor media also evades much of the red tape that can clog up outdoor sites, providing further impetus to this young emerging medium.

Upgrading sites to take advantage of digital technology can be costly, however. Setting up a digital display unit can be up to ten times more expensive than a traditional light-box, while digital screens tend to last just four to five years before they need replacing, less than half the life-time of standard light-boxes.

Margins are improving with scale and technological advances, but extra maintenance fees, including electricity and repairs, can add up to a hefty premium. The question out-of home (OOH) operators must ask themselves is whether advertisers value digital’s added extras enough to justify making these investments today.

Unlike the digitization of radio and TV, where governments are keen to speed the process up to get their hands on the lucrative bandwidth occupied by analog channels, OOH digitization tends to be a purely commercial process, and decisions taken by operators on how fast to upgrade inventory could enhance or undermine the long-term health of their business.

Digital's novelty factor
Outdoor specialist Shentong JCDecaux, which has a 15-year contract to sell advertising on Shanghai’s subway system, has embarked on the next phase of its digital development, adding digital panels in high-traffic locations in 12 stations, after installing ten large plasma display panels last June in People’s Square, one of the busiest stations in the city.

The original investment in People’s Square has already paid off for the company, a joint venture between the city’s metro operator Shentong Express and international outdoor major JCDecaux, but MD Terence Cher remains cautious about further development. Long-term demand needs to be assessed, once digital’s initial novelty factor – a selling point for advertisers – wears off.

“We chose only 12 stations in our system in the phase of digital development,” Cher explains. “In Shanghai Metro we are talking about nearly 300 stations.”

Passenger levels should surge this year, with the World Expo coming to town, presenting a window of opportunity to boost ad sales. Cher however has decided against rolling out a network of digital screens for now.

Two areas compete for investment
“When we develop, we need to assess two areas,” he explains. “Whether we should create an impactful media format or whether we need to establish a network. Both serve different advertiser needs, and involve different requirements when we do the media planning, installation and maintenance.”

The focus for the moment is on investing in formats where advertisers can make an impact, with non-digital formats such as light-boxes satisfying advertiser needs for a larger campaign.

“When advertisers consider digital media, they want to do something creative,” Cher adds, “make an impact, instead of thinking about cost efficiency or network ability.”

This is an edited extract from a feature published in the Q1 2010 edition of The Asia Media Journal.