Tech - not a friend to all, but it is to OOH (mostly)
It might be fiendishly complex, but the out-of-home sector must get its act together on the use of programmatic, writes Dominic Mills. Plus: a nail in the coffin for CMOs hoping to become CEOs, and a pivotal week for both Sorrell and WPP
I’m not sure what the collective noun for a group of OOH executives would be - a ‘pasting’ perhaps, or a ‘pastie’ - but I am just back from their annual global FEPE gathering in Sorrento last week where I chaired a couple of sessions. I know you’re thinking ‘tough gig, eh?’ but, honestly, someone’s got to do it.
Amidst the debates on data, value, measurement, smart cities, audiences and so on, one comment stood out: “Except for OOH, technology is not a friend to any classic media channel.” The author was Mark Boidman, a New York investment banker from PJ Solomon who specialises in OOH M&A who has also written a book on OOH called Times Square Everywhere - which I suppose gives him double-niche status.
Perhaps it takes an outsider to frame the familiar in a different way, but I confess I had not seen OOH this way before.
And Boidman is right. Tech is fragmenting audiences for other channels, and while it offers them additional reach opportunities, the revenue is fractionalised – and that’s before you get to the other stuff.
By contrast, OOH is immune to the negative impacts of tech on advertising - fraud, viewability, ad blocking - but derives positive benefits from digitisation in terms of inventory growth, multiplied (as opposed to fractionalised) revenue opportunities, better data than before, better targeting and so on. At the same time, unrelated to tech but thanks to growing urbanisation, audiences are increasing.
What’s not to like?
Certainly the money men and women are all over OOH, hence the fact that private equity capital is piling in to the sector and funding significant investment in digital. The thing about capital is that it is amoral or neutral – it simply goes where it believes the returns are best – and right now, given that they cannot invest in Google or Facebook, OOH is a prime destination for private equity dollars looking for a somewhere that sits across tech and advertising.
All well and good, and while they shuffle the money around, private equity is also driving the trend to owner consolidation - a trend confirmed by the recent acquisition of Forrest Media for £32m by Ocean Outdoor (itself shortly to leave private equity ownership for a public listing).
There will be more of this, not just in the UK but globally, because by comparison with other channels, OOH ownership remains immensely fragmented. Indeed, one OOH owner told me this was such a big deal they were upping the frequency of their regular ‘who’s up for sale and who can we buy?’ internal meetings from monthly to fortnightly - starting this week.
But technology is an awkward beast, and what it gives can be easily taken away. For OOH, this is automation of the buying process, and it’s a shadow hanging over the industry. Unless it befriends automation, it is going to struggle.
So, despite all the talk, it has not embraced automated buying. Best guess is that amounts to around 1% of revenue in some big markets; even in Germany, where a dominant player (Ströer) should make things easier, it is around 1.5%.
I accept that programmatic in OOH is complex, far more so than in other channels. I accept too the line that OOH has seen the negative impacts of programmatic on other channels and does not wish to make the same mistakes. I accept that if it allows third-parties into the mix - i.e. getting between buyer and seller - there are risks including loss of inventory control and commoditisation, and that’s before you even get to fraud.
At the same time, just as investment money goes where the returns are best, so buyers will put their money where it is easy to buy. And if you can buy video, mobile, publishers and so on easily, why take the extra hassle of buying OOH?
The problem is compounded for OOH because its best opportunity for incremental revenue and/or growth in market share lies in taking money from budgets that are going into mobile, social and video/TV. Some of this could even be from performance budgets.
We know that, depending exactly on your calculations, Google and Facebook are hoovering up 80-90% of all incremental ad budgets. Some of that is going there simply because it’s easy to buy, and is nothing to do with effectiveness or impact - both of which are strong cards for OOH to play.
So, OOH has to get its act together. Industry consolidation will help because full-fat automation depends on common standards and platforms and the ability to make a single, scaled buy across multiple owners. But we are still some way off that. It also requires a collaborative approach, which by its own admission the industry is not good at.
There’s all to play for therefore, but no time to waste.
Gavin Patterson: a nail in the coffin for CMO-wannabe-CEOs
Erstwhile BT CEO Gavin Patterson’s rise from CMO five years ago was greeted like the second coming by the marketing industry. At last - a member of the CMO tribe reaching the higher orders.
Fellow CMOs might as well pack their dreams away. They have been banging on about how they would make great CEOs for years, but Patterson was an exception.
Years ago, a senior marketer said to me: “I think the trade press should campaign for more CMOs to get to the board and then become CEOs. You’ll raise their self-esteem and look good for supporting them.”
Me: “No chance.”
Senior marketer: “Why not?”.
Me: “It won’t happen, so when we abandon the campaign we’ll look stupid and naive.”
Senior marketer: “It will happen. Then you’ll regret being on the wrong side of history.”
(You can see this sensibility in the way Campaign chose to frame his departure.)
Er, right. Well, Patterson’s departure hammers a nail into the coffin where other CMO's hopes now sit. He had one clear success - the purchase of EE - and a verdict pending on the vast sums lavished on BT Sport.
By his own admission, he displayed a “tin ear” to Openreach’s multiple problems with Ofcom and, one could add, his decision to take a £1m bonus while presiding over a share price slump and the lay-off of 13,000 staff.
And it’s his “tin ear” that will scupper the hopes of other CMOs. That’s because the one thing a marketer is supposed to be able to do is listen - and that requires a functioning ear.
Sorrell: a pivotal week for all
As was always likely, leaks in the WPP/Sorrell saga have finally burst through the wall of silence.
It's a pivotal week for SMS. Can he put a lid on the stories at a critical time for his new venture? If so, how? By suing? If so, who: the media, or whoever he believes is the source of the leaks? Or can he just ride it out?
With its AGM this Wednesday, it's also a big week for WPP and chairman Robert Quarta. The spotlight on his governance will shine even more unforgivingly - and that's before we even get to WPP's financial performance and the succession question.
In its own way, it's as compelling as the Trump/Kim story in Singapore.
Mediatel operate two essential services for the OOH industry. SPACE is a collaboration between IPAO and Outsmart and is the most comprehensive and up-to-date list of inventory in the UK. The RouteAPI is a SaaS solution that enables easy integration of Route audience data into client's systems. See mediatel.co.uk for more information.