This Deep Dive is an abridged version of MI3's global OOH podcast above.

At the start of 2020, shares in oOh! Media were trading north of $3. At the start of this week, they were trading at $0.70. Out of home companies around the world have taken huge hits from Covid.

But the CEOs of OOH firms based in the UK, US, Germany and Australia believe sector fundamentals are healthy – and that public mobility is starting to return. Covid-19’s immediate impact, they argue, is more nuanced than investor panic might imply, while the long-term trend is one of growth.

US outlook

Is the perception that OOH has been the worst affected sector correct?

“I don't know if it's the worst, but it's certainly had two pieces that have impacted it,” says Jeremy Male, CEO of US out of home firm, Outfront Media, which includes New York's Times Square in its portfolio.

“One is the fact that our audiences obviously went down substantively overnight, and the other is that we've been dealing with the whole macro environment. So we've had kind of a double whammy.”

In metropolitan areas, subways, airports and public transport in general was hit hard.

“But then other more local markets and highway billboard markets maintained reasonably robust health, given the really special situation that we've been in,” says Male.

The firm’s Wall Street guidance is -50% YoY revenue hit for Q2. “But Q2 is the bottom and we move onwards and upwards from here,” says Male, with US mobility starting to “significantly return” in the last few weeks.

UK picture

At the depth of lockdown, the UK picture was probably even bleaker, suggests Tom Goddard, chairman of Ocean Outdoor and current president of the World Out of Home Organization (WOO). Ocean has the rights to Piccadilly Circus, which triggered a media and social media storm when it featured Queen Elizabeth during her Covid address.   

“If you look at the channels, roadside in the UK dropped in April 54% and London was down 58%. Rail was down 80%, underground [the London tube network] was down 83% and I guess airports even more so,” says Goddard.

“So the mobility numbers plummeted. And with that, revenue numbers plummeted also. For April and May, [our] revenue numbers were sitting at about 10% of 2019 figures. But in June and July, they started to climb back and they're now back over 50%.”

While government is buying up inventory to promote public health messages, commercial categories are also returning, says Goddard. UK car sales plunged 97.3% in April and 89% in May, and the automotive category is now spending to jump-start growth, he says. Meanwhile telcos plus “Amazon, Netflix, Skype and all the media that are doing well during the pandemic are there as well,” he adds.

“So we are seeing progressive build up until September and everybody is expecting a strong Q4, although visibility is very, very short … People are buying weeks ahead.”

Germany: returning to normal

Of Europe’s major economies, Germany has so far suffered the least impact, largely attributed to effective containment, test and tracing measures. As such, Christian Schmalzl co-CEO at Ströer, says there is “a fair chance” the firm will return to 80-90% of pre-Covid revenues in its home country during Q4.

“We had a very special situation in Germany. We had a rather soft lockdown for only seven or eight weeks. The peak of the crisis was the beginning of April and already from May onwards, shops and restaurants opened up again and public transport started to normalise,” says Schmalzl.

“When you look at Apple’s Mobility Report or at the mass mobility data of telco companies, you can see that already by the end of June, audience and traffic in general in public spaces was more or less at a normal or pre-Covid level.”

Should Germany’s OOH sector return almost to normal by the year end, Schmalzl believes it will give other markets confidence that business has not disappeared for good and prove the doom-mongers wrong.

“It may start a little bit later and from a lower base depending on how hard the lockdown was. But you will see that the momentum of the media is fully intact, and especially when people - the audience - go out again and almost celebrate their new freedom,” suggests Schmalzl. “I think the medium is more attractive than ever to position brands in that context.”

AUNZ view

Over the last five weeks in New Zealand, oOh! Media has booked “very similar numbers to what we wrote in the corresponding period in terms of the volume of sales each week,” says CEO Brendon Cook.

Shopping centres and retail in general are returning to normal, he says, though CBDs are “still a bit subdued”.

In Australia, audiences in Western and South Australia plus Queensland are “fully back”, suggests Cook, though Victoria has clearly “been hit hard”.

While CBDs may take some time to recover, suburban area billboards, bus shelters and shopping centres are maintaining momentum as people work from home and stay local.

As more people return to work in city centres, he says advertisers will adjust their strategies and follow.

Structurally challenged by work from home?

While Cook and others are confident people will ultimately return to pre-lockdown life, work and travel patterns, others believe the world has changed. There are suggestions that OOH’s growth trajectory will be permanently upended as people permanently work from home.

Ströer’s Schmalzl pours cold water on that that theory. He suggests other media face greater existential threats and points out that many people do not have the luxury of working from home permanently, even if they wanted to.

”When you look at the crisis and what happened, especially in March, April and May … TV ratings were up by 10%, but their revenues were down by 50%. Out of home, audience was down by 40-45% and revenues were also down by 50%. So it looks like there is not that simple correlation between audience and revenues, and advertisers have a different view on the various media,” he says.

Secondly, he adds, some 60% of Germany’s workforce does not work in offices. “Even during the crisis, only half the potential [to work from home] was used. Meanwhile, I would say even those who [currently] have the opportunity to work from home are back at least three to four days per week - because the kind of social experience within the office becomes even more valuable when you had to work for three or four months from home,” says Schmalzl.

“I would question if suddenly [post-covid] there is more work from home than actually working from the office.”

Ocean Outdoor’s Tom Goddard concurs.

“You can’t build a corporate culture from the kitchen or the bedroom. You build a corporate culture in the office where most young people want to be,” he suggests. “So I think mobility changes will be far less pronounced when we get to the other side of the pandemic.”

Outfront’s Jeremy Male agrees young people do not want to be stuck at home with their parents in the suburbs, but in the cities with their friends. The ‘cities in decline’ narrative is overblown, he suggests.

oOh!’s Brendon Cook thinks while there will be more leeway around home working in future, some disciplines will always perform better in a team environment.

“Flexibility will be there, but certain areas definitely won't want to be working from home. The reality is, the culture that you need to create, the training that comes from people being in offices together and the education that you're giving teams about your business, some of that clearly needs and desires to have people working together.”

Digital to unlock hockey stick growth

oOh!’s Brendon Cook has suggested that ongoing digitisation could see the out of home sector grow faster than the likes of Facebook, Amazon, Apple and Google. A bold call, but he suggests the sector has only just achieved the scale it needs to hit hockey stick growth.

“People seem to think that digital signs have been around for a while, but it's all about scale audiences. And I'll just use Australia's example. We've probably reached scale to audiences about 18 months ago, and it cost a lot of money. We're not an online business. We are a physical medium. We've got to pay lots of CapEx. We got to build lots of signs,” says Cook.

“The reality is that once you've got that scale of audience, then you can start to invest even further into the automation, data and systems that really change the traditional medium company into a different business to what it has been for the last 100 years.

“So if you look at how long it's taken businesses to evolve in the digital area, I like to think that we're only about 18 months into the cycle.  Over the next two years, I think we'll see a dramatic change globally in how out of home operates and what it can do.”

Programmatic: Eyes on the prize

Ströer’s Christian Schmalzl says the firm booked its first programmatic trade in 2015. It took three years to get to 3% of trades done programmatically, but just another two years to get to 25%. He says the next target is to catch up with the broader digital market in Germany, where 45% is traded programmatically.

While in theory the market could go 100% programmatic, Schmalzl says the sector won’t be making the same mistakes that have burnt publishers. Open exchanges are not part of the plan.

“That’s sometimes the advantage, when you're a bit conservative and slow, you can let other others make the bigger mistakes first and then learn from it,” says Schmalzl.

“When I look at our business and the programmatic part of it, the share of open auction deals is zero. We only focus on private deals and programmatic guaranteed structures, because we want to be sure that we know the buyer and the buyer knows exactly what he or she gets. Secondly, we have organised the tech backbone in a way that we control pricing, delivery and the whole supply chain instead of intermediaries getting in, disconnecting supply and demand and creating or developing their own arbitrage business.”

That approach should help digital OOH avoid the murky aspects that have sullied the rest of digital media.

“It is strategically the right thing for advertisers, because the biggest topics at the moment in the online world are brand safety, fraud and visibility,” says Schmalzl. “And all of it is extra costs for advertisers just to understand and control what's going on. I think we have no extraordinary visibility problems or anything like that because we ultimately are responsible for placing the ads in the right context. And we need to make sure that is happening, even if media buying is more automated or happening programmatically.”

Ströer’s digital push has unlocked new sources of revenue, he adds.

“We have a lot of ‘pure’ digital agencies that had never dealt with traditional media, and I think that opens up more avenues. We have a lot of e-commerce clients that also do most of their media buying directly, especially in the online world. They are suddenly buying through programmatic opportunities digital out of home directly, in combination with their online spend.”

He thinks that the digital category itself is the biggest prize for OOH.

“It opens up all the money pots that sit in the digital space, because out of home is not like a separate category with digital out of home and the programmatic access, it's part of the complete digital universe,” says Schmalzl. “Globally, that is 35-40% of total ad spend. And I think that's the really interesting opportunity.”

Programmatic platforms: To collaborate or not to collaborate?

To compete with the tech giants trousering the lion’s share of digital ad budgets requires scale and ease of trade.

Ocean Outdoor’s Tom Goddard thinks OOH’s major players should therefore collaborate on an industry-wide trading platform.

“If we really want to compete with big tech, we have to scale up,” says the WOO president. “We have to give greater accessibility and to huge audiences. Therefore, I think that's going to drive more collaboration and more sharing of platforms in the future.”

Some of the other OOH bosses aren’t so sure. Outfront’s Jeremy Male thinks platform complexity is a secondary issue to actually achieving digitisation of media and trading.

But Goddard thinks there will be pressure post pandemic to “pay the bills that society and the governments have invested in getting us through this. I think there will be pressure for a lot of economies of scale, pressure for efficiency,” he says. “Should we all be duplicating cost, having our own platforms or should we be combining in some way? It doesn't necessarily mean giving away any control.”

Creativity trumps tech

The platform debate will likely rumble on for some time yet. oOh!’s Brendon Cook thinks there are more pressing programmatic issues to solve.

“Some of the platforms can provide what appears to be a front end for programmatic automation, but they're really [only] doing a part of the job. And I don't think the data verification part really is to the standard that we'd want,” says Cook. “I think as industry bodies, we've got to develop better and more robust techniques to ensure that we take control of that – and that's certainly where I think industry can play a major role.”

Meanwhile, he says all the tech and smarts in the world cannot mask poor creativity.

“The key is creativity. If you don’t get that right, it doesn’t work.” Cook points to research oOh! commissioned from media mix modellers Analytic Partners, which highlights the impact of creative on ROI.

“That work shows that if you do the digital part right in terms of context, location, creative messaging, you get a 28% further improvement in your ROI. And if 40% of ROI is determined by creativity, which it is on out of home, then that becomes the single first thing that has to be solved,” says Cook. “If we get that right, all the other tech related issues become easier to deliver because we sell more for clients.”

He thinks the industry now needs to collectively re-engage advertisers to put maximum effort into creativity in order to achieve best results in a post-Covid world.

“We've got to remind everyone that we are a creative canvas, even in digital. That big creative canvas that we have out there is why people like Apple, Amazon, Facebook, Google and all the other major brands around the world use the out of home medium. Because they know when they want to build brand fame, they do it by going out of home.”