It had to happen sometime. After six serene years of uninterrupted revenue growth in the out-of-home advertising sector, the first quarter of this year brought some unwelcome news. According to Outdoor Advertising Association figures, the first quarter saw a 6.7 per cent revenue decrease on the same period in 2007, taking spend for the quarter back down to £221.5 million.
The widespread belief is that the figures reflect the general uncertainty in the ad market at present as the broader economy experiences difficulties. There's certainly truth in this assertion, but a look beneath the top-line numbers reveals two further stories.
First, digital OOH screen revenue continues to boom - up a healthy 74 per cent in the quarter (see feature, page 24). It should be noted that although growing strongly, digital remains, for the time being at least, a relatively small part of the outdoor market, albeit one that is rich in innovation and new opportunities for enterprising advertisers.
Conversely, the second story is a far more unpalatable one for media owners. The six-sheet poster segment, which comprises roughly one-quarter of the outdoor sector's revenues, is struggling. Following years of steady growth, even at times when larger formats such as 48- and 96-sheets were under pressure, prices have in recent months been squeezed down.
"There's been a tremendous amount of six-sheet build in recent times because demand has been constant," Roy Jeans, the chief executive of International Poster Management, says. "Now we have an oversupply in the six-sheet market that has put it under pressure. The market has gone shorter term and prices have fallen."
IPM, together with WPP's Kinetic and Posterscope, control the majority of outdoor media buying in the UK. The latter two account for around 80 per cent of the market between them, with IPM weighing in with a further 12-14 per cent, leaving a cluster of smaller players fighting for the crumbs. A number of observers feel it is only a matter of time before the marketing services giants Omnicom and Publicis create their own specialist buying points in the UK market.
Consolidation is not quite as pronounced among media owners, but again there is a "big three", with JCDecaux, Clear Channel and CBS Outdoor accounting for well over half the market. The US-headquartered Clear Channel has been in a protracted legal battle relating to an $18 billion private equity-backed buyout, but a legal settlement was reached in late May and the transaction is on course for completion some time this summer.
An estimated £170 million has been invested in OOH inventory in the UK over the past six years with the OAA projecting a further £200 million will be ploughed in during the next six years. The shaky start to the year notwithstanding, confidence is still about.
"We're very much of the opinion that out-of-home is pretty well placed to weather any storms," James Copley, the client development director of Kinetic, says. "Even with first quarter figures down, we are still predicting 2 per cent growth for 2008."
Jeremy Male, the chief executive of JCDecaux, adds: "I don't think we are a medium sitting on our laurels. We are working very hard in terms of investment and we have the ability to deliver large audiences at low cost."
In a modernisation programme likely to run until the end of 2009, JCDecaux is replacing all 10,000 of its paper and paste billboards with high-quality, environmentally friendly one-piece posters. A new, biodegradable poster is being phased in for 9,000 48-sheet sites, while 900 96-sheets are being transformed into high-definition billboards, a quality recyclable vinyl poster. These glueless posters can be clipped in and out of their frame and even reused, meeting the growing eco-friendly demands of advertisers.
As well as being greener, the new-style posters can be put up faster, allowing for a more tactical approach to advertising - albeit not as tactical as the day-part flexibility available on some digital inventory. While the traditional paper and paste format takes a skilled person around 20 minutes to put up a poster, with dry posting, the time less than four minutes.
The sector has invested in high-profile, high-impact premium sites, such as those found in Clear Channel's Pinnacle Collection and JCDecaux's Premiere range, to give advertisers greater opportunities to stand out.
In some cases, LED Halo technology is used to accentuate creative or branding. At Clear Channel's flagship North London Tower site, 3,000 LEDs can be individually programmed from headquarters to dramatically frame the creative execution.
In this age of accountability, the industry is working to improve measures of its effectiveness. The outdoor audience measurement specialist Postar will partner up with Ipsos Mori next year to begin a new research contract with a threefold increase in consumer sample size from the current 20,000.
Meanwhile, Kinetic has partnered with Bangor University's psychology department to conduct research into how visual images from outdoor ads are processed and stored by the brain. And SnapNow, a company set up by former Nasa rocket scientists, is trying to bring interactivity to non-digital billboards by using camera phone and image recognition technology. Consumers snap a picture of the billboard, send it off and then receive a direct response to their phones. "We'd love to do a deal with IPM, Kinetic and Posterscope, so that we can say to consumers all billboards will have an interactive angle," Mark Sait, the UK managing director of SnapNow, says.
On the political front, outdoor, like other media, has to tread carefully with ads in categories such as alcohol and children's foods with high-fat, salt or sugar content. The industry argues that it already has lots of practice in avoiding the inappropriate positioning of ads, having had to think carefully over where cigarette brand campaigns could be placed without provoking unease or anger before the tobacco ad ban came into force five years ago. What's more, some media owners have their own ad rules and restrictions. The bus operator Stagecoach, for instance, does not take alcohol ads.
"We have had lots of practice at making sure ads don't appear in unsuitable places, and advertisers certainly don't want that to happen either," Alan James, the chief executive of the OAA, says. "You can't put up ads of girls in bras near places of worship. So we have processes in place and we'll keep tightening them up."