Outdoor: After smoke, there's still some fire

Outdoor's irrepressible urge to merge in 1997 leaves only a handful of large publicly owned companies to slug it out for advertising dollars in 1998. The benefits of those consolidations, along with improved outdoor technology, should translate to a 6 percent increase in advertising revenue, boosting outdoor's 1998 total ad spending to $2.2 billion. Outdoor Systems, Eller, Lamar, TDI and Universal Outdoor, all of which made major acquisitions this year, will continue to dominate. "The consolidation certainly gives these large companies much greater coverage and presence in a number of markets," says John Hunt, research director for the New York-based Outdoor Advertising Association of America. "Having such a large proportion of total outdoor inventory will gear them even more towards national advertising." A study by investment bank Alex Brown & Sons predicts some growth for out-of-home's national share, but the industry will continue to rely heavily on local buys. The dominance of larger companies, however, is expected to help alleviate a longtime industry problem: the prevalence of smaller operators that could not provide full-market coverage. "Consolidation raises the overall level of professionalism in the industry," says Tom Yauger, vice president of California's Brush & Daven LLC, an investment banking firm that specializes in outdoor advertising. "The level of service and the quality of outdoor displays are going to go up." The increasing use of computerized paintings, video billboards and trivision-which allows marketers to display three revolving images on one board-should make the outdoor medium more attractive, particularly to retailers. Currently, three-quarters of all billboard displays use vinyl rather than paint, and that percentage is expected to increase next year. Vinyl's advantages, including speedier application and better reproduction quality, have helped draw couture retailers into the outdoor mix in the past three years. "The Calvin Kleins, the DKNYs, for them to use your medium is a powerful plus," says Hunt. "Other retailers can see the quality and creativity that goes into the medium. So now these people are holding outdoor in higher esteem. That kind of impetus gets things going." Advertisers caution that the recent consolidation craze should not encourage undue rate increases, particularly since low-cost pricing is a large part of outdoor's appeal. "It's hard to keep track of who is still in business," says Jack Cohen, director of print and outdoor buying for DDB Needham Optimum Media. "I would hope they would think twice before hiking up rates." With Outdoor Systems leading the pack with seven acquisitions this year alone-most recently, it picked up 3M National Advertising for $1 billion-the Phoenix-based behemoth has also led the way in decreasing its reliance on tobacco. By now, out-of-home companies have had nearly two years to mull over the potential loss of $160 million in outdoor tobacco money. Generally, outdoor's dependence on Joe Camel and the Marlboro Man has decreased. According to the investment firm CIBC Wood Gundy, tobacco ads accounted for 8.2 percent of Outdoor Systems' total revenue in 1996, down sharply from 34.1 percent in 1991. Next year, tobacco will account for only 4 percent of the company's revenue. The hope is that when Congress finally determines tobacco's fate, sufficient alternatives to this lucrative ad category will be available. The other big question mark is whether new advertisers will be willing to pay top dollar for those prime locations. "As longtime incumbents, tobacco companies have had rates that are below the market," observes Hunt. "The tobacco sites would command a premium that [outdoor companies] may not be getting now, so they need to draw in a different advertiser for those prime spots." There are no guarantees that there will immediately be takers for such prime real estate. But since many markets, such as San Francisco, have gradually imposed voluntary bans on cigarette advertising, the larger companies are already courting an alternative clientele. '98 SPENDING FORECAST: VERONIS +2.4% ZENITH +5.0% '97 SPENDING a/o 5/31: $218 mil* '96 SPENDING: $1.1 bill* *Source: Competitive Media Reporting

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Outdoor: After smoke, there's still some fire

Valerie Burgher

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Valerie Burgher