What you need to know:

• oOh! Media outfront goes down well with investors. Macquarie analyst note citing event targets share price of $1.81 versus current price of $1.28, circa 40 per cent upside, or $312m on current market cap, over the next 12 months.
• CEO Cathy O’Connor making defensive-offensive play for retailer media dollars, pushing harder into programmatic after initial cautious approach, placing content as core strategic plank.
• Chief marketer and creative Neil Ackland building out creative effectiveness database overlaid with Quantium data to link quality of creative to sales – and show advertisers how to crack it.
• Overall play to gain a greater share of broader digital budget pots.

In December 2019, oOh! was trading at $3.20. By May 2020 it had plunged 80 per cent to 61 cents. Today it’s sitting at $1.28. In a note specifically citing its outfront, analysts at Macquarie have mooted a target of $1.81 and an ‘outperform’ rating. With upside north of 40 per cent, or circa $300m, they like the plan.

There are strong signs the broader Australian OOH sector is in growth mode. Like-for-like comparators are misleading given lockdowns and restrictions last year, but latest OMA figures suggest revenue this year could match if not beat 2019 figures.

In percentage terms, JCDecaux’s share price (Paris) was not as hard hit by Covid, likely given some protection by a global footprint. But its decline, from €27.68 in December 2019 has been drawn out, initially bottoming in October 2020 at €13.25. After largely recovering to around €25 at the start of this year, it has since slumped to an all-time low of €12 in September and remains circa €13. Most analysts recommend a hold. (For context, Germany's Ströer share price is an almost mirror image of JCDecaux's, reflecting deeper economic challenges in Europe.)

Private equity-owned QMS’s financials are harder to gauge, though revenues will likely have taken a 40 per cent-plus hit in 2020 before partially recovering in 2021. What Quadrant plans next for the company remains to be seen, but it may choose to hold for now given the significant capital expenditure and likely steep interest rates on the debt incurred to rollout the City of Sydney contract amid plague and floods. However, that ten-year contract, high asset value and long-term leases across much of the broader business could ultimately pay off in the medium term if debt to earnings ratios recover. 

The rebuild

Either way, all three major operators have brought innovation to market post-Covid. 

QMS has carved up the City of Sydney street furniture network into 30 different vertical ‘packs’. It’s pulling in Visa transaction data, plus GPS and other location and people data from multiple sources in a bid to create a full funnel approach to digital out of home. It’s also pushing the value of attention and dynamic creative via a big drive around neuro science.  

JCDecaux recently briefed journalists on its work to link mobile audiences to its billboard network and vice versa (using its technology and billboards to convince 21 commuters to take a job with the firm, tracking those that travelled past the billboards and subsequently targeting them online). CMO Essie Wake claimed the firm now has a global data team of circa 50 (clarification: 15 locally) as it bids for a greater slice of digital ad dollars, while CEO Steve O’Connor underlined that its Sydney Trains contract means it can build a shedload of new large format roadside billboards along the trackside. Like QMS, it's been more bullish and moved earlier than oOh! on programmatic.

But oOh! is the only operator to date to take its plans to advertisers in a TV-style upfront. Macquarie likes the plan and while the proof is always in delivery, the strategy is coherent and the pieces coming together.

Programmatic play

oOh! dipped a toe in the programmatic water late last year and is now going harder. It’s building out a tech stack which CTIO Mat Yelavich said enables targeted and dynamic delivery and ads to be inserted into dynamic content, e.g. the AFL and Tennis, with content deals recently signed with both codes, and a “next generation inventory management tool”. Broadsign and Vistar are initial SSP partners, though more may follow.

At the outfront, the firm announced its office network is now programmatically enabled and CEO Cathy O’Connor said retail inventory will “increasingly” join roadside and street furniture in a bid to secure a larger slice of digital budgets – for example, social media spend, with some 9,000 portrait panels now able to run video ads designed for social channels.

“We're a big business with nine different formats and a lot to contemplate,” said O’Connor when asked why oOh! has been slower off the programmatic mark than rivals. She said oOh! has been concentrating on the bigger picture: “62 per cent of our revenue is digital, so there is already a substantial amount of digital advertising there … Programmatic is just one sort of version of what I would call a broader contemplation, which is connected trading … everybody wants something different.”

O’Connor said marquee sites will always be traditionally contracted, but forecast that programmatic will make up “in the vicinity of 10-15 per cent of our revenues within 24-36 months”.

Tech tax

Market concern around price premia and ‘tech tax’ within pDOOH met with short shrift.

“Our view is that high value inventory should remain highly valued however it's accessed and I think the agencies are certainly valuing ease of trade. So our pricing strategies reflect what it takes to provide that ease.” That includes paying tech fees, which “need to be priced accordingly”, said O’Connor. “So I'm pretty unapologetic about pricing strategies in programmatic. That will apply to premium inventory in any environment.”

Over time, she said longer-tail assets via open exchanges or private marketplaces could deliver cheaper deals for “value” buyers. “It's a pretty broad set of assets. So there will be value there for the value buyers, and premium assets for premium buyers.”

Either way, she said advertisers can trade however they like.

“I don’t think programmatic buying will ever replace traditional buying … But it’s an opportunity [for the OOH industry] to get back some of the 60 per cent of the advertising market that is now purely digital … and I think over time we will see genuinely new digital advertisers use the medium – because it hasn’t really been present in that [omnichannel] environment before.”

Retailer media

Making a play for retailer media dollars is both offensive and defensive. The likes of Coles have suggested they are open to partnerships with screen owners in shopping centres and outside of store to drive shoppers through their front door and into in-store networks and other categories are tipped to enter the fray.

While Cartology paid $150m for Shopper Media, becoming a competitor in the process, oOh! is confident that other retailers won’t have that kind of appetite.

O’Connor sees retailers outside of grocery and liquor coming to market over the next 12 months, hence setting up a dedicated ‘Reooh’ business unit. While “modest” in terms of current headcount, she expects it to grow in line with market predictions to become “potentially quite a significant division”. Retail currently makes up around a quarter of oOh! revenue, and O’Connor points out that packaging it to retailer media players is essentially “just productising what we already do”.

The firm has circa 7,200 screens and signs in 500-plus shopping centres, as well a massive street furniture network around those locations.

“We’ve got a significant retail media footprint outside of the supermarket or the store … and the monitoring, the procurement, that's all pretty intuitive to us and easy to deploy on behalf of a partner,” said O’Connor.

“Equally, it's what you do with a digital retail offering. I think that's probably where the real intelligence comes from…. So we just fell into conversations with advertising partners around their ambitions and, as often happens, those conversations just broadened out,” she added. “They're really good conversations – and I think you will see more moving into the space beyond just the obvious players.”

She won’t be drawn on a retailer media revenue target but indicated wins may come relatively quickly.  “We do see it's quite a good growth channel for the business, depending on the right customers – and we're in conversations with a handful of those at the moment. It's building as we speak.”

O’Connor agrees with the recent owned media valuations report by Sonder, across banks, utilities, telco and travel as well as retail that there is a bigger prize – circa $3.9bn – at stake.

“I think anyone that's looking to use screens to amplify or improve customer experience in a physical environment is a potential customer,” said O’Connor, pointing to its recently renewed deal with Qantas as “a really nice example of a very mature, advanced application of this concept … and very profitable for Qantas”.

Content magnet

A big part of the Qantas partnership is content-based, providing “public utility,” per O’Connor. While at the outfront she acknowledged the acquisition of Junkee Media had not gone entirely to plan, “we divested the publisher business, it was the right thing to do,” O’Connor said oOh! had retained “the creative talent and the tech” with content now a core strategic pillar. After striking deals with the AFL, oOh! has since broadened its partnership with News Corp, signed up Tennis Australia for the 2023 Open and struck a licensing deal with Broadsheet for lifestyle content.

The belief is that digital out of home can harness the same editorial or publisher model as news and TV – content that grabs attention which in turn increases attention for ads.

Junkee founder turned oOh! Chief Content, Marketing & Creative Officer, Neil Ackland said the approach is “landing really strongly in market” with the AFL deal proving the model and “very strong” advertiser appetite for the tennis.

“We’re trying to reframe perceptions of what digital out of home is doing. It’s giving us the ability to deliver real-time content in contextually relevant environments at scale. Sport, lifestyle, news headlines – they are all perfect use cases,” said Ackland. “We can distribute a breaking news headline, or the match score of the tennis final, video highlights, pretty much with the push of a button – and that is incredibly powerful for the people passing by and for advertisers. So the content play for us is a bigger opportunity moving forward – and the advertiser response so far has been very strong.”

It also makes oOh! a player in the lucrative sports market. Ackland thinks advertisers investing in major sports sponsorships are keen to maximise that investment. Traditionally, “they may have been taking on a sponsorship of a code and then investing over the top of that through free to air, digital or social. Now they're exploring new ways of getting that reach and frequency that might go from other mediums to out of home in a really effective way. So it's just introducing a new way of amplifying a sports partnership that probably wasn't as clear before. But it's becoming much clearer now.”

Effectiveness, attribution

Ackland is also driving creative effectiveness. He’s lifted the IPA’s template in a bid to help advertisers move the needle based on what has worked in the past. Via a bank of 130 OOH campaigns, the aim is to highlight the “common elements within those campaigns to show advertisers what factors drive best results”.

The firm is mapping that with purchase data via its Quantium partnership to underline ad effectiveness based on sales data across those 130 campaigns.

Early results are promising, said Ackland, with the firm able to prove that small creative changes can make big differences in sales. For example, brands that used fewer than six words on street furniture increased the volume of buyers by 44 per cent and per the Quantium data, brands using full motion dynamic creative increased sales 187 per cent.

Ackland said the data underlines oft-quoted research from Analytic Partners that quality of creative accounts for 41 per cent of campaign effectiveness – and he thinks that is undercooking it.

“Being able to work with Quantium to go back and look at campaigns and find where those commonalities are was a bit of a breakthrough because it's the first time we've really been able to close that loop and can actually show cause and effect,” said Ackland.

“Ultimately we want brands to move more money into out of home … If we can demonstrate the effectiveness of the creative, that's going to move the dial and it's going to bring more money into the medium – that's really what Polygraph [the new effectiveness unit] is all about.”

O’Connor agrees: “The more we start to measure through the cash register the impact of creative the bigger that database becomes – and the more powerful it is.”

Positive outlook

While the there are concerns around the effects of inflation and global challenges hitting media early next year, the likes of Macquarie clearly think the fundamentals are sound. O’Connor agrees.

“The long-term strategic outlook for out of home is rock solid. The macroeconomic environment is just a drain on many businesses and media stocks are a reflection of the view of media at the moment. But these are cyclical winds and we've got to balance the two,” she said. “One is short term, the other, our strategic place, is very long term. And I think you'll find over time that the long-term proposition wins.”