PQ Media suggests sector growth to top nine per cent in '09

October 27, 2008 by Dave Haynes

A optimistic note to start the week …
Research group PQ Media has jumped the gun a little a released its digital out of home ad spoening forecast, ahead of the Out of Home Video Advertising Bureau’s first-ever Digital Media Summit later in the week in New York.
PQ Media is expecting the medium — rolling up everything from screens in c-stores to screens on the sides of buses — to grow by 9.1 per cent in 2009.
Reports Media Week:
Thanks to technological advancement, digital OOH from 2002 through 2007 grew at a gold-rush pace, rising by a 23.1 percent click, PQ reported. Hundreds of video advertising networks sprung up as investors poured capital into new ventures. Major media companies have jumped in, including CBS (CBS Outernet) and NBC Universal (NBC Everywhere), raising the profile of a medium once considered an afterthought.

The gold rush can’t continue forever, however, especially in these economic times. Moderating from last year’s peak 24 percent growth, digital OOH will end this year up a healthy 11.2 percent, amounting to more than $2.4 billion, according to PQ.

The impending shakeout in the medium began earlier this month with the first casualty, Reactrix, forced into receivership and now on the block. Other companies have consolidated, with Bhootan and Fuelcast merging to form Outcast, and Zoom Media  recently purchasing ClubCom. No doubt the economic crisis will force more companies to either consolidate or close shop.

“The shakeout will be accelerated by the economic crisis. We’ll see more deceleration next year, but as the economy recovers, we’ll see a comeback,” said Patrick Quinn, president and CEO for PQ Media, which projects digital OOH will grow at a compound annual rate of 12.1 percent from 2007 through 2012.

Often compared to the growth of the Internet in the ’90s, Quinn believes next year will be a “seminal period of change” for digital OOH, as the medium takes steps toward measurement and as advertisers search for more efficient ways to influence consumers at the point of decision.

“This will be one of the first economic downturns where advertisers not only spend less, but also spend differently,” said Quinn. “We believe digital out of home will emerge as a key component of that new spending model. Soon, a lot of this won’t be considered experimental.” 
There seem to be a lot of people looking to that OVAB event later this week for guidance and, more than anything, direction. Quinn may be right about the sector moving beyond being an experimental buy, but only if some disciple is in place in how ads are shaped, sold and measured. 
MediaPost has also had a look through the PQ Medias report and expanded on it:
However, its strong performance in recent years will not insulate DO from the current economic downturn, according to Quinn. He predicts a “shakeout” in 2008-2009 followed by a “breakout” in 2009-2010.

In addition to general economic woes, the shakeout will be driven, in part, by the elimination of redundant or inefficient video networks– many of which were thrown together with little thought for strategy and profitability during DO’s boom years earlier this decade.

It will also see the liquidation of some high-quality networks that were unable to make their business model work. Quinn pointed to the recent demise of Reactrix, which earned kudos for its engaging interactive technology and high-profile partnerships, but still burned through venture-capital cash without turning a profit.

In large part, the shakeout will take the form of mergers and acquisitions, as complementary and competing networks are rolled up by private-equity firms. However, Quinn declined to name any specific candidates for acquisition (or failure).

The shakeout will set the stage for another surge of digital out-of-home spending in 2010, once the overall economy begins to recover. The medium’s intrinsic advantages are being reinforced by new technologies for targeting and venue-based media solutions. According to Quinn: “Marketers from time immemorial have searched for ways to influence the consumers at the point of decision. Now they’re finding ways to coordinate multiple media platforms with digital out-of-home, including event marketing, brand integration, product sampling and online content.”

Quinn was particularly enthusiastic about the “convergence between digital out-of-home and mobile.” In addition, the aggregation of video networks, either through M&A or by meta-networks like SeeSaw, will allow comprehensive geo-targeting of consumers in particular areas. In effect, it will surround them with video messages at multiple venues–a practice called “area-jacking” in Japan, where it was pioneered by advertisers.

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