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Bright Lights, Big Impact

Why digital billboards are growing in popularity.
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Last year, Edina Realty did something totally radical for the real estate industry. The company, a residential brokerage serving Minnesota, Wisconsin, and North Dakota, eliminated its corporate advertising for open-house and for-sale listings in local weekly newspapers. Instead, Edina signed a one-year contract with Clear Channel (NYSE:CCO) to lock up industry-exclusive rights to eight high-tech digital billboards circling the Twin Cities, its largest market. The company altered the billboards frequently, uploading new advertising as market conditions changed.

The gamble paid off. Edina's home sales totaled $7 billion in 2007, down from $8.3 billion in 2006 but a decent level of volume given the deteriorating housing market. It was successful at getting more consumers to visit its website, where the click-through rate for searchable for-sale listings increased 175 percent. "We were very satisfied with the results," says Lynn Clare, Edina's head of marketing. "It was the first time ever that we could respond to consumer trends immediately instead of being a slave to media buys. How many companies have that advantage?"

Edina is part of a group of trendsetting advertisers that are pioneering the use of what the Federal Highway Administration, or FHWA, calls electronic variable message signs. These large, computerized displays marry the choice location of traditional roadside billboards with the opportunity for customization and frequent updating that is the hallmark of Web advertising. Today, there are nearly 800 of these digitized billboards in the U.S. It's a small number compared with 450,000 traditional billboards across the country, but it's growing fast. The Outdoor Advertising Association of America, an industry trade group, projects that the number of digital billboards in the U.S. will expand at a rate of several hundred per year.

Though some big companies, like McDonald's (NYSE:MCD), are active advertisers on such venues, most digital billboards--as with traditional billboards--feature ads for regional and local companies. Prices vary according to a sign's size and location, but the cost of advertising on a digital billboard runs from $1,200 to $10,000 a month, and the ad campaigns are typically not expensive to create. Most ad agencies can handle the work, and some companies even design their own digital billboard ads in-house using basic design software such as Adobe Illustrator and Apple (NASDAQ:AAPL) Final Cut Pro.

It's not difficult to under stand why digital billboards are attractive to advertisers. They are bright and eye-catching and can convey multiple marketing messages at once. Marketers can arrange to have computerized ads change with much greater frequency than typical outdoor ads, timing their message to the season, the day of the week, and even the time of day. For instance, Edina Realty used its billboards to promote a number of time-sensitive sales and special offers. Through trial and error, Edina found that people were more responsive to ads for lakefront cabins toward the end of the workweek. And as the housing market headed south, Edina moved to bolster homebuyers' confidence by celebrating the number of homes sold locally in a given month. In all, the brokerage updated its billboard messages 31 times over the course of the year.

If digital signs are good for advertisers, they are an absolute bonanza for billboard companies, which can sell different time slots to different advertisers; a typical digital sign will feature ads for seven companies each month. Computerized signs can therefore generate substantially more revenue than traditional outdoor signage, which means that billboard owners have a huge incentive to go digital. Magic Media, a Bangor, Pennsylvania, company that owns more than 10,000 billboards around the country, says its 20 digital signs alone contribute 10 percent of its $30 million in annual revenue. Each digital sign produces $14,000 a month in revenue, typically from multiple advertisers, compared with $1,000 to $2,000 for traditional billboards, which serve only one advertiser. "My view is that over time all signs, all billboards, will go digital," says Magic Media CEO Jimmy McAndrew.

Moreover, the technology that makes the signs work has fallen in price by more than half over the past few years, to $200,000 to $500,000 per sign, depending on size. In turn, the rates charged to advertisers have come down. And in September, the FHWA issued a memo stating that digital billboards violated no law. The ruling assuaged concerns among local and state officials who worried that the signs could pose a traffic hazard. It is generally accepted that if a motorist takes his or her eyes off the road for two seconds or longer, the likelihood of an accident greatly increases. The FHWA is working on a safety study concerning digital billboards; it is scheduled to be released at the end of 2009. For the time being, the agency recommends that the images on digital billboards remain static for at least four seconds--long enough, the agency believes, to ensure that the signs are no more distracting than standard billboards. (Many municipalities go further, requiring that an ad remain in place for no less than six seconds.)

What makes a digital billboard ad effective? Given that the industry is so new, that's still being worked out. Bill Gerba, author of the blog Digital Signage News and CEO of WireSpring, a Fort Lauderdale, Florida, company that makes software for electronic signage, says the best digital billboards are not simple branding exercises. Rather, they alert drivers to time-sensitive opportunities and urge them to take action.

That's exactly the type of message Chip Boyett looks to craft with his billboards. Boyett, owner of Eubanks Appliance Service, in Valdosta, Georgia, has long found billboards to be the most effective form of marketing for his company, which sells and services home appliances such as air conditioners, washer-dryers, and refrigerators. So when digital boards were put up in the Valdosta area early last year, Boyett eagerly bought ad space. He's especially excited about having the ability to change ad content frequently to highlight many more of his company's offerings and in a more targeted fashion.

Whereas with a traditional billboard Boyett might advertise Eubanks' air conditioner services in general, he is now able to use digital billboards to promote special offers--20 percent off the normal service charge, for example, or free financing for the first year. Best of all, his vendors have provided him with password-protected access to their servers. If Boyett wants to throw up a special advertisement late on Friday afternoon, for example, he doesn't have to track down his ad rep to make the change. He can simply upload the new ad himself.

"Now that we have them," Boyett says of the digital signs, "I can't imagine us not doing digital."

Resources

Bill Gerba, CEO of WireSpring, a Fort Lauderdale, Florida, company that creates software for digital signage, maintains a blog about the industry at wirespring.com/blog.

Last updated: Mar 1, 2008




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