From painted three-story murals to cheeky subway ads, out-of-home (OOH) campaigns have long resonated as a branding medium. But OOH has a long way to go to prove it can be a performance channel.
During the COVID-19 pandemic, as people stopped commuting and traveling in the vicinity of OOH ads, the OOH industry saw a 30% drop in overall revenue. But the pandemic provided an opening for OOH to reinvent itself as a more digital, more performance-focused medium.
OOH has since rebounded from the darkest days of the pandemic, with digital out of home (DOOH) leading the way.
But before DOOH can court bigger ad budgets, it must adapt the automated tools marketers use for measuring and buying against performance to a media channel that straddles the online and offline worlds.
More digital, more programmatic
Total US out-of-home ad spend for 2022 was $8.6 billion, up 20.7% YOY, according to the Out of Home Advertising Association of America (OAAA). That growth rate is in line with the 21.8% growth rate Magna projected for OOH in 2022.
But there’s plenty of room for more growth. OOH accounts for just slightly more than 2% of total US ad spend, according to Insider Intelligence.
Digital is one of OOH’s fastest-growing segments and will be a key driver of continued growth in the coming years. The DOOH segment grew by 24.2% in 2022, its second consecutive year of double-digit growth, according to the OAAA.
But those years of double-digit growth largely reflect a recovery from what Insider Intelligence pegged as a 41% drop in DOOH revenue in 2020 during the pandemic.
Still, OOH is growing faster than the overall US ad market. Magna predicts that US OOH growth will be 6.7% in 2023, compared to 5.8% for the entire US ad industry.
The OOH market is still largely the domain of traditional placements like static billboards and signage, which accounted for 66.7% of total US OOH spend in 2022. But digital’s share is steadily increasing, and Insider Intelligence projects that DOOH will draw 36.2% of OOH ad revenue in 2023 and more than 41% by 2026.
The shift toward digital and away from traditional formats has played out in OOH, like most media channels, for years. But the COVID-19 pandemic boosted the transition to digital, as advertisers came to value the flexibility of running digital out-of-home campaigns, said Nikki Stone, EVP and managing director of Zenith Canada.
So, ironically, while OOH ad spend hit a roadblock in 2020, the pandemic may have added fuel to its biggest growth engine.
Programmatic’s growing share
The next major driver behind DOOH’s increasing market share will be the expansion of open-auction programmatic. The technology required to execute programmatic DOOH campaigns is largely in place.
“At this stage in the game, all of the major out-of-home players are transacting their inventory programmatically,” said Place Exchange CEO Ari Buchalter. “The overwhelming majority of [DOOH screens in the US] are integrated with a platform that allows you to buy programmatically.”
But while the infrastructure for open-auction programmatic may be established, it’s still a relatively new technology that was considered experimental as recently as 2020. As a result, programmatic DOOH campaigns are still a small portion of OOH budgets compared to direct buys. Programmatic is only an estimated 15% of US DOOH revenue.
But that proportion has been growing exponentially over the past few years. US programmatic DOOH revenue was only about $90 million (or 3.2% of total DOOH) in 2019, which grew to about $530 million (or 14.8% of total DOOH) by 2022, according to Statista.
According to the Standard Media Index, the US is in line with similar developed markets like Canada, where programmatic currently accounts for about 10% of DOOH revenue, said Debbie Benadiba, President of Novus Media.
And there’s more ground to be gained worldwide. Programmatic infrastructure is less developed in emerging markets compared to the US and Canada, and DOOH media owners are now building more programmatic pipes in previously underserved global markets, Zenith’s Stone said.
Performance potential
As OOH becomes more digital and programmatic, it has led to improvements in targeting, measurement and attribution technology.
And buyers are noticing.
In a recent survey by DOOH marketplace VIOOH, DOOH ranked third, behind social media and mobile, as the channel developing the most innovative advertising opportunities. Forty-one percent of agency and advertising execs said most innovation comes from programmatic DOOH specifically.
For example, DOOH is arguably the market that benefits the most from location-data-based targeting and attribution, which is essential for measuring foot traffic and attributing in-person store visits.
However, some of the attribution and measurement solutions currently in market aren’t as automated as buyers would like.
“Often, we’re setting up a programmatic campaign and watching it every day with humans, so it’s not really automated,” Benadiba said. “We may have to augment with digital direct and some static inventory to ensure that we’re really reaching all the customers we want to reach and that we’re delivering the KPIs marketers are asking for.”
And performance-based KPIs, rather than relying on OOH advertising to boost brand awareness metrics, are increasingly important to marketers.
“With the data sets and technology that we now have, we can use DOOH as a lower-funnel channel, and clients want to see a lot more of that,” Stone said.
Transacting on performance metrics
But advertiser perceptions may not have caught up to DOOH’s advances in targeting and measurement, like the use of location data to track foot traffic or the inclusion of QR codes in ad creative to make DOOH campaigns more actionable and attributable.
For example, at the OAAA and Geopath’s recent OOH Media Conference in Nashville, most of the presenters were pushing for better performance measurement capabilities, said Jonathan Frangakis, CCO at Reveal Mobile, a company that specializes in geofencing-based tracking and measurement.
“I’m obviously deeply offended when I hear something like that,” Frangakis said. “But that’s coming from all the vendors and agencies that get up there and talk. So, we have to communicate the performance of our channel better.”
Indeed, buy-side gripes over measurement have been a common refrain for years, said Anna Bager, president and CEO of the OAAA. But the impending rollout of new Media Rating Council (MRC) audience measurement standards for OOH this year will allow for easier measurement and comparison against other media channels, she said.
Being able to more easily measure OOH against other channels will go a long way toward making OOH more appealing for performance marketers. But enabling marketers to purchase OOH inventory based on performance is arguably even more important.
Ultimately, advertisers want the flexibility to use OOH for broad-reach brand awareness campaigns, but they also want one-to-one targeting of key demographics and the ability to optimize ad spend against performance KPIs like store visits, Stone said.
The cutting edge in DOOH is being able to measure things like cost per incremental store visit so marketers can more effectively target the inventory that drives conversions.
For example, Zenith has tested campaigns that use the cost per incremental store visit metric as a currency for buying DOOH inventory, Stone said. But not all DOOH tech partners allow advertisers to purchase inventory based on those types of performance metrics.
“It’s about finding partners who are willing to measure that way and allow you to pay for performance that way,” Stone said. “If the OOH industry pushes that, it will see stronger buy-in from clients.”
Correction 4/12/23: This article originally said US programmatic DOOH revenue was $900,000 in 2019 and $5.3 million in 2022. US programmatic DOOH revenue was actually $90 million in 2019 and $530 million in 2022.
