TfL's Tube network has been 'hardest hit' in outdoor market. How will it rebound?

TfL's ad revenue was down 90% year on year and changing commuter habits may affect advertiser demand even when 'normality' returns to London.

TfL: Tube advertising (top right) comprises the bulk of the transport company's ad revenue
TfL: Tube advertising (top right) comprises the bulk of the transport company's ad revenue

“Whether by design or by good luck, TfL is also an advertising company,” John Pizzamiglio, Transport for London’s lead for advertising strategy, wrote in 2016, having revealed a “quantum leap” in how the capital’s public transport provider sought to up its game as an outdoor media owner.

Such bullish language seems a distant memory, just days after TfL described the coronavirus pandemic as having a “catastrophic impact” on its business over the summer months, as the scale of advertisers cancelling contracts and people staying off the London Underground network turned out to be much worse than they thought.

Ad revenue was down 90% year on year to just £3m for the period 1 April to 28 June, much less than the £13m forecast in an emergency budget. For context, TfL’s ad revenue was £47m between January and March this year - preceding a quarter-on-quarter fall of nearly 94%. 

Chris Macleod, director, customer and revenue at TfL, told Campaign that prior to the pandemic, its advertising estate was continuing to grow but had begun to take a Covid hit towards the end of its last financial year, which runs to the end of March.

He added: “Advertising income was down significantly as lockdown measures were introduced by the government and brands started to react to the impact of coronavirus by cancelling advertising.

"Advertising revenue for the first quarter of this year continued to be adversely affected, as lockdown measures also continued and – in order to do everything possible to help reduce the spread of the coronavirus – ridership was reduced.”

This collapse is worse than that of the outdoor market, industry estimates for which vary between 70-80%, with the Advertising Association/Warc giving a figure of 70.4%. It’s also worse than TfL itself expected, with the body having assumed a 50% reduction in media income against its original budget. 

That's not the Tube we used to know

Audience data, such as Talon Outdoor’s Ada device data, which records audience movements by region, location and environment, show that TfL’s Tube network specifically has been the slowest part of the UK out-of-home sector to recover. Audience levels dropped to less than half the January baseline in the week commencing 16 March and were down 83% in April, 77% in May, 67% in June, 58% in July and 51% in August. 

That's a problem for TfL when the majority of its advertising income comes from the Tube - more than its bus shelter estate (operated by JCDecaux) and bus T-side ads. 

Nick Mawditt, managing partner at Talon Outdoor, explained: “It’s a reflection of the simple mechanics of returning audiences... We’re seeing Tube audiences at 48% below the norm by the end of August and the central London audience is certainly returning. 

“But with clients deferring or cancelling activity in OOH and across media during the lockdown, the Underground in particular was hit hardest. OOH has recovered more quickly in the UK regions and for roadside panels, so client activity has been concentrated in those locations that are now above normal activity, including high streets, malls, roadside panels, shopping malls and supermarkets.”

This chimes with what Omnicom Media Group is seeing, with one source saying that OOH sites outside of central London are benefiting from a “rapidly returning” audience. 

MacLeod insisted that its ad revenues are “slowly starting to grow again”, now that lockdown measures are easing and customer footfall is picking up on public transport.

He adds: “We are working closely with our advertising partners to ensure that, as the audience returns safely to London in line with emerging government advice, we are in a position to support the return of brands to our network and rebuild our revenue streams as soon as possible.”

Rethinking rush hour

But Gill Reid, partner - head of out-of-home at MediaCom, pointed to longer-term changes that advertisers will need to contend with even if, as prime minister Boris Johnson hopes, workers can return safely to the office soon.

She explained: “Even with the numbers starting to increase, we’re only now back to about 30-35% of where we were pre-Covid. We’re starting to see people reversing back, but the commute is also elongating, it’s no longer just 7am-9am - people are staggering their work schedules to avoid a rush-hour and this may well continue even with a ‘new normal’."

This means that advertisers will have to be aware of different times to target consumers, or use dynamically-served creative that can be turned on and off in real time, as audience patterns change. MediaCom is using anonymised mobile data that is overlaid on to data from Route, which produces audience estimates for out-of-home advertising.

Nevertheless, Reid agreed with MacLeod that the market was now picking up. “We’re seeing clients coming back to central London on six-sheets and the ramp up for Christmas will help, but there’s still a reluctance that [the Tube] is an enclosed environment and that you can’t socially distance. The fear factor is still apparent, even though if you take the Tube you see there is very strong disinfectant and everyone is wearing masks.”

“We just need to grit our teeth and move on,” she concluded. But with Friday's news that the R rate has surged to above 1 - the point at which Covid-19 transmission begins to grow exponentially - the out-of-home sector may be hit again with a new period of lockdowns, both national and local.

For the foreseeable future, it seems, TfL’s advertising income - and that of the whole out of home sector - continues to be at the mercy of luck rather than design. 

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