NEW YORK For the third consecutive year, broadcast network upfront ad sales will likely be flat or down as advertisers move their money into nontraditional outlets. Among the options are a growing array of out-of-home networks that reach consumers with video ads in places like airports, retail stores, elevators, the backseats of taxi cabs, and lately, at the pump.
With the price of gas projected to hit $4 per gallon some time this summer, steamed motorists at close to 10,000 gasoline service stations around the country will have a distraction as they fill the tank: snippets of programming from networks such as ABC, ESPN, NBC and other providers. And, of course, ads.
Within the last year, three companies—Gas Station TV, FuelCast and PumpTop TV—have begun rolling out digital video networks that transmit news, sports, entertainment, weather and traffic programming, and advertising to about 1,000 gas stations. Digital video screens are installed on the gas pumps so that motorists can watch them while they fill up. There are plans to expand throughout the top 50 or 60 markets in the next three years. Big advertisers are already buying time, including General Motors, Dunkin' Donuts, AllState and State Farm Insurance.
"We create a very specific one-on-one relationship with the consumer, who's tied to a company's ad with an eight-foot rubber hose," said David Leider, CEO of Detroit-based Gas Station TV, which launched last fall in Atlanta, Dallas and Houston.
Gas pump TV is still in start-up phase and projections on future growth vary. PQ Media estimates that total ad spending in the sector was less than $25 million in 2006. According to Leo Kivijarv, vp of research at PQ Media, the annual growth for gas station-based networks would exceed 25 percent over the next several years.
"A lot of growth will occur as [pump TV] increases inventory and brand marketers understand the medium a little more," Kivijarv said. Leider, who has struck exclusive deals with ABC and ESPN for content, predicted that ad sales would reach between $200 million and $400 million by 2010 for the gas station networks.
PQ estimates that all out-of-home digital video networks generated $1 billion in client spending in 2006 and annual growth for the next several years will surpass 25 percent. By 2011, Kivijarv predicted, ad spending on out-of-home video networks will be greater than $3 billion.
Todd Hansen, president of Aegis Group's outdoor agency Posterscope USA, concurred that out-of-home digital video networks like these would continue to grow as a major draw for client dollars. "Gas pumps have had static ads on them for 50 years," he said. "The switch to digital video is a vast improvement. It's targeted, engaging and immediate." Video at the pump, is "just one part of what's going to become a very powerful medium," he added, referring to the 700-plus out-of-home digital video networks already in place throughout the U.S.
There are obstacles to that growth, however. One issue, said Hansen, is lack of standardization, forcing clients to produce different ads for different network formats. That's probably one reason clients aren't spending as much as they otherwise might in the digital out-of-home space, he noted. "An agency doesn't want to have to build 10 different specs to do a digital buy," he said.
But Hansen believes standardization issues will be worked out. And Posterscope, one of the largest out-of-home buying arms in the country, "will have more digital spend in five years than traditional spend." What budgets will those dollars shift from? Hansen said most of the dollars being spent on out-of-home digital now come from broadcast and point-of-purchase budgets.
Like Leider, Gary LePon, COO of FuelCast, which has a programming deal and ad sales arrangement with NBC, believes the gas station TV network business will grow to "hundreds of millions of dollars" within a few years.
But as gas prices climb, will motorists take it out on sponsors appearing at the pump? "We're very sensitive to that," said LePon. He claimed that among the reasons gas stations sign up is to "enhance the experience at the pump" by providing entertainment and presumably useful information like traffic and weather reports. Studies by Shell, which has signed with FuelCast, show that 80 percent of drivers view the video content positively. Only about 5 percent find pump TV annoying, he said.
Another reason the stations sign up is that the ads help hawk products sold at convenience stores, mechanic shops or car washes at the same locations. Those ads have helped the stations boost sales by 10 to 25 percent, claimed Roy Reeves, vp of marketing and sales at AdtekMedia, the company rolling out PumpTop TV. (PumpTop is working with various local TV stations for programming and is in talks with national programmers.) Such sales have been hurt in recent years as stations have phased in pumps that take charge cards.
But some bloggers already have sounded off on the issue—part of the segment that LePon called the "vocal minority." Writing on his blog, The Red Electric, in March, Rick Seifert called the gas station network efforts "the latest screen intrusion into our lives ... that is forcing hundreds of thousands of motorists to watch TV ads beamed right from gas pumps equipped with in-your-face monitors."
While those behind the gas TV efforts say they're helpfully filling a void in the four to five minutes of downtime motorists have when filling the tank, Seifert believes there are better ways to use that time. "Thinking is an option," he suggested.