Kinetic future of out of home media patrick barrett at the royal institute 2011


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The Future of Out of Home Media - Kinetic Worldwide Report
Investment, Technology and the Consumer
By Patrick Barrett, Simpatico PR on behalf of Kinetic Worldwide
Presented at The Royal Institute, London – July 2011

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Kinetic future of out of home media patrick barrett at the royal institute 2011

  1. 1. Investment, Technologyand the Consumerby Patrick Barrett,Simpatico PR on behalfof Kinetic Worldwide
  2. 2. At the Royal Institution of Great Britain At the Royal Institute of Great Britain July 6th 2011 To read the full report, please click here.
  3. 3. Scale and the Investmentchallenges of Out of Home
  4. 4. Investing in Digitalp + v =
  5. 5. Investing in DigitalThe factors driving investment in digital Out of Homemedia are essentially the same that have driven all pastinvestment.Improving quality of presentation: which means premiumpricing.And:Increasing the volume of campaigns a site can carry:which means higher yields per site.However, the investment equation is not that simple.
  6. 6. What are the challenges facinginvestors? =
  7. 7. What are the challenges facing investors?In reality the equation probably looks more like this!Setting aside the issue of local authority planning restrictions for amoment…..The list of factors that dictate success or failure of capitalexpenditure on digital Out of Home formats goes something likethis:
  8. 8. What are the challenges facinginvestors? • Site location – potential audience • Future of site • Measurement and ROI • Site design and presentation • Hardware costs • Contractual obligations • Technology life-span? • Scalable, compatible, up-gradable? • Maintenance costs • Advertising market conditions • Overall economic prospects?
  9. 9. A recipe for growth
  10. 10. A recipe for growthThe attraction of High dwell time locations has also stimulatedinvestment in entirely new poster advertising networks.The in-store environment is, on paper at least an ideal location tocapture people’s attention. And they are fast becoming a major newcomponent of the Out of Home landscape.However, the failure of digital screen networks in supermarket chainsis testament to the fact that the devil truly is in the detail when it comesto creating new digital poster Capex projects.Issues such as: Site positioning, queuing systems, ease of installationand data transmission are critical to the success or failure of new interiorsite networks.Quality of audience and measurement are also critical factors if newnetworks are to prove sustainable.
  11. 11. A recipe for growth
  12. 12. A recipe for growthMost of these criteria are just as true for the other main area ofdigital poster and billboard investment:Bespoke or iconic, roadside digital screens.Cherry-picking small numbers of high-value locations andinstalling sites that become in effect local landmarks - hasattracted new investors along with established media owners.The proposition combines large audience reach with highquality delivery and commands a premium.However, this sector will remain a niche relative to the total Outof Home universe. Kinetic calculates that there areapproximately 400 locations nationally that could sustain thiskind of investment strategy.
  13. 13. Urban Planning
  14. 14. Urban PlanningThe biggest restraint on investment in digital screeninventory is of course local authority planning restrictionsThis is a significant problem for investors seeking todevelop national roadside networks …..…there is no single uniform approach to urban planning.Criteria for developments are set at a local authoritylevel.Public safety, particularly for drivers who might bedistracted by moving images is always going to remainan obvious restraining factor on investment.Unless your site is in a primary location, it’s unlikelyinvestment in a static screen running a real can bejustified until hardware prices fall to a sustainable level.
  15. 15. Local authorities havebecome wiser to thepotential of Out of homeSteve DavisClear Channel
  16. 16. Urban PlanningHowever, our consultation with the industry reveals there may beconsiderable scope for greater flexibility from local authorities,which could unlock significant future investment, particularly inroadside sites.The bottom line is that financially squeezed local authorities arelikely to look to their property portfolios - to bolster their incomes.Kinetic expects future Out of Home media contract tenders toopen up investment opportunities.The question is though - who will be in the driving seat?The investor or the landlord.Investors may indeed face pressure to over invest and over-deliver on digital advertising revenues.
  17. 17. Pricing and the risk of cannibalisation
  18. 18. Pricing and the risk of cannibalisationBut as we emerge - at snails pace from the economic slump howmuch new money will digital out of home networks generate formedia owners?And what level of pricing is sustainable? Our consultation drew outtwo clear points that investors must consider:The first is that calculating a realistic long-term pricing structure isessential. Digital sites typically carry a premium. But a premiumbased on what?Clearly a combination of high quality presentation, flexibility andaudience reach will naturally command a higher pricesBut - here’s the thorny question: The basic rules of supply anddemand will come into play as the supply of digital sites increases.
  19. 19. Really dynamic ideas areuneconomical to deliver ifyou don’t have big networksto play them over and thecapability to reach massivenumbers.Neil MorrisGrand Visual
  20. 20. Pricing and the risk of cannibalisationThis will be mitigated by the roll-out ofnational digital networks, which will clearlyanswer a demand from advertisers and re-enforce the value of digital posters.
  21. 21. Pricing and the risk of cannibalisation
  22. 22. Pricing and the risk of cannibalisationBut again, will advertisers who had been able tobuy a 6 sheet network exclusively….….be happy to share those sites (on a reel) andpay more because it is now an LED screen?
  23. 23. Pricing and the risk of cannibalisation
  24. 24. Pricing and the risk of cannibalisationThe second issue is that not every pound generated by digital willbe new. Digital sites will to some extent cannibalise static posterinventory.The central theme of this report and one which we will return toagain provides an answer over the long-term – to these two difficultchallenges.Kinetic’s view is that if Digital technology is to drive total Out ofHome market share: media owners must extend the proposition ofout of home media to one that can deliver : highly targeted, highlydynamic campaigns outside the home.And media owners must position this alongside the traditionalstrength of Out of Home - broadcast audience reach… do that digital networks must be sold flexibly and their fulltechnical capability must be unleashed.
  25. 25. Pricing and the risk of cannibalisation
  26. 26. Pricing and the risk of cannibalisationIf technology is used simply as a better way of distributing andshowcasing creative…..…..the industry will miss a massive opportunity and manyinvestments may fail to generate a sufficient return.Media owners must use technology to create a point ofdifference.
  27. 27. If all we do is takepaper and turn it intopixels, we’ve burnt alot of CAPEX to noadvantage.Matthew DeardenClear Channel
  28. 28. Pricing and the risk of cannibalisationA new capability that will drive new revenues and makepremium prices sustainable– in return advertisers will get to communicate with consumersin ways and in places they’ve never been able to before…..This is an enormous opportunity…….and is a clear reason why the vast majority of Out of Homestakeholders see digital investment as the key driver for futuregrowth- but advertisers will only care if it adds value!!
  29. 29. I think a lot of the people areassuming a sort of linear, nice,comfortable, transition to digital.To me the only certain thing is it’snot going to be like that.Russell DaviesOgilvy and Mather
  30. 30. Staying ahead of the technology curveBut if revenue growth depends on capability and efficiency……then over the coming decades Out of Home media mayexperience something of a technological arms race.In fact if all the other ingredients for investment successweren’t enough, the final one could arguably be the mostimportant:Staying ahead of the technology curve.
  31. 31. Staying ahead of the technology curve
  32. 32. Staying ahead of the technology curveInvesting in kit that will enable you to create a point of difference notjust next year,but in three to five years will be an on-goingconundrum.We are for example three and a half years away from a point whereEnders Analysis estimate 75% of the population will carry asmartphone.When will be the right time to invest in interactive technology acrossnational networks?What is the potential for electronic ink? Could I use e-ink to digitisethe rest of my static network.The only certainty in all of this is that the evolution of postertechnology and its deployment will be unpredictable.
  33. 33. Kinetic View – Investing in Digital OOH• Urban planning restrictions are a natural barrier – but greater flexibility expected• Technology lifespan and upgrades• Price depreciation is inevitable - examine the long-term sustainability of investments• Real potential for cannibalisation of revenues• Don’t invest just to create a new delivery system• Do invest to unleash the potential of flexibility and targeting capability• The new Out of Home landscape must be defined and marketed effectively
  34. 34. Technology and theConsumer
  35. 35. Technology allows Out ofHome to compete on anequal footing with what ineffect are the twomainstream mediums oftoday; TV and online.David FletcherMEC
  36. 36. The Technology CurveInvestment in digital posters is not a parochial trend that is happeningin isolation.The arrival of digital posters can and should be seen in the context ofthe massive recent growth in internet connectivity, mobilecommunications and the digitisation of other media.Digital Out of Home is also inextricably bound to trends in theadvertising business….……whether that’s social communications, mobile technology or theconsumption of content.In compiling this report we deliberately set out to create a realisticpicture of the future and considered technologies that will have animpact within ten years.
  37. 37. The Technology CurveState of the art Near FutureText Consumer recognitionBluetooth Individual recognitionLCD screens NFCQR codes RFIDAugmented reality e-ink3D screensWi-fi
  38. 38. The Technology CurvePerhaps what is most surprising though is thatmuch of what would have been deemedscience fiction even two years ago, isbecoming a reality and could be deployed innumbers within ten years.
  39. 39. Technology and the Consumer
  40. 40. Technology and the ConsumerPerhaps the way to look at the newer technologies is toconsider how and why they might be deployed.Some may simply enhance presentation.Others could help change the game for the medium and foradvertisers.
  41. 41. Technology and the Consumer 11 million per hour
  42. 42. Technology and the ConsumerIt’s worth remembering that good oldfashioned text messaging has alreadyforged a relationship between mobilephones and posters.And with good reason:The latest figures from the Mobile DataAssociation show consumers in the UK send11 million text messages an hour.
  43. 43. Technology and the Consumer
  44. 44. Technology and the ConsumerQR codes are also becoming part of the out of home technologylandscape.They’re becoming ubiquitous across advertising channels,packaging and content…..But there’s some debate about whether QR codes are here tostay and what consumers really think of them.Kinetic recently ran some consumer research to find out.
  45. 45. Emerging technologies 44% say they’re familiar with QR code images 39% think they know what to do with themSource: Kinetic Panel, May 2011
  46. 46. Emerging technologiesWe found:44% of consumers across all age groups say they are now familiar with QR codes12% of consumers have successfully scanned a QR codeThis increases to 20% amongst 18-24 year olds and 15% for 25-34 year olds.People are open-minded about using QR codes37% of consumers think they could be useful, while 35% are not yet sure – 39% at leastknow what potential they can offer.Of the possible content delivered by QR codes,49% said they would like a product voucher or brand information,42% said a link to a website could be useful and 26% would like exclusive content.In the short to medium term QR codes are likely to be a primary vehicle for posterinteractivity.Source: Kinetic Panel, May 2011
  47. 47. Technology and the Consumer
  48. 48. Technology and the ConsumerOut of Home is also experimenting with Augmented Reality.Many of you will have seen the brilliant Lynx execution at LondonVictoria and Birmingham stations where angels dropped to theground and appeared to interact with consumers.In the US retailers are already mixing social media, posters and ARto signpost virtual pop-up stores visible only through mobiles.Of all the technologies already in use AR probably has the furthestto go in terms of its potential evolution.And is perhaps the least predictable in terms of impact.
  49. 49. Technology and the Consumer
  50. 50. Technology and the ConsumerNear Field Communications or NFC is beginning to grabthe technology headlines.In a very real sense NFC could be the technology thattransforms our mobiles into a universal device.A device which could interact with pretty much anything.A swift tap on the appropriate surface or terminal isenough to buy or receive information.As such it could become as important to out of homemedia as LCD screens.
  51. 51. Technology and the Consumer
  52. 52. Technology and the ConsumerSince 2002 when The Minority Report was first screened the Outof Home industry has been plagued by questions about if andwhen, it would become possible for a poster to identify and targetan individual passer-by.This year both NEC and IBM were reported to be close tobringing this technology to market.Science fiction has become science fact in less than ten yearsBut will we really see this deployed?The fact is there are serious practical, legal and ethical issuesthat come with individual targeting.Kinetic’s view is we won’t see it deployed in meaningfulnumbers anytime soon.
  53. 53. Consumer-type technology
  54. 54. Consumer-type technologyHowever, we do think that in the medium we could begin tosee large numbers of “consumer-type” recognition capableposters in use.Posters that will react to passers-by according to age, sex andmood..The technology is ready:The question is when will media owners, agencies and ofcourse advertisers be ready too?
  55. 55. The behavioural trends affecting Outof Home
  56. 56. The behavioural trends affecting Out of HomeBut what about consumers – do they have a say in allthis?Technology is in fact just one of a series of long-term,deep rooted patterns of change in our lifestyles and inour environments…..……that are directly relevant to the performance of Out ofHome media in the long-term.
  57. 57. Evolving Lifestyles and Environments
  58. 58. Evolving Lifestyles and EnvironmentsThe last hundred years or so has seen waves of new mediatechnology influence consumer behaviour, our attitudes to andour awareness of the wider world.News print, cinema, radio, TV and the internet have all helpedshape modern lifestyles and the rhythm of modern life.Arguably, Out of Home is the one medium that hasn’t impacteddirectly on social behaviour.
  59. 59. A moving world
  60. 60. A moving worldPosters have instead been a constant – an accepted andappreciated aspect of our urban landscapes delivering hugeaudience reach and with the right creative – powerful engagement.However, it is also arguable that Out of Home is the only mediumthat has consistently grown its audience as a direct result of widerexternal trends occurring in developed societies.
  61. 61. A moving world
  62. 62. A moving worldKinetic’s global Moving World programme of research hashighlighted the changing face Urbanisation.Half of the world’s population now lives in towns and citiesand earlier Andrew described the move towards the smart-city environment.We are travelling more by train, by road by air – takingmore journeys, travelling further and spending time inplaces where we are more relaxed and generally happier.Retail and leisure pursuits have become enmeshed in ourculture.People are simply out and about enjoying themselves andtheir surroundings more.
  63. 63. Mobile computing
  64. 64. Mobile computingThe growth of mobile computing is just the latest externaltrend to impact on out of home media.It’s probably time to stop thinking about the device in youpocket as a phone.There is now a mountain of evidence that suggests thatour computer usage is shifting from desktop to mobile.
  65. 65. Mobile computing
  66. 66. Mobile computingKinetic’s research in May suggested smartphone penetrationis at 45%. A recent study by Essential Research found almost40% of smartphone owners use their device to access theinternet every day.Our consultation across the industry identified the futurerelationship between mobile technology and posters - as oneof the most important challenges and opportunities the sectorfaces.But what is the challenge? We think its this:To create a consistent opportunity for advertisers to useseamless, transactional, high-volume “Poster-to-Mobile”advertising.
  67. 67. Why mobile matters to Out of Home
  68. 68. Why mobile matters to Out of HomeWhy does mobile matter to Out of home media?What kind of relationship could a poster have with a personand their mobile beyond the established one?Of all the medium term emerging technologies: NFCprovides the answer. It enables instantaneous downloadfrom say a cash till or any surface to a mobile.Critically for Out of Home media NFC sidesteps the issue ofdwell time.
  69. 69. Technology and the Consumer
  70. 70. Technology and the ConsumerInstead of luring small numbers of consumers into lengthy richmedia experiences via a poster…. …..NFC creates the possibility of a high volume of instantaneousbrand transactions.The typical scenario might see shoppers strolling through a mall;spot a price promotion on a digital 6 sheet for a retailer 25 yardsaway - and casually tap the site to take a voucher as they walkpast on their way to Boots or Next.Perhaps that 6 sheet is smart, perhaps it spotted the groupwalking towards it were women and tailored the displayaccordingly.
  71. 71. The smartphone will meanevery single site is going tobe (effectively) digital.Richard MetcalfJoule
  72. 72. Technology and the ConsumerIntegrate that with real-time planning linked to stockmanagement - or the weather and you have anadvertising platform in urban spaces that can deliverhighly targeted campaign…………taking the relationship with consumers to an almostintuitive level.In effect the creation of a very different form of posteradvertising is potentially a few short years away.
  73. 73. Changing behaviour
  74. 74. Changing behaviourIt’s worth remembering people adapt rapidly to new technology. Here’sa couple of recent examples of rapid technology – driven behaviourchange:Ten years ago Big Brother and similar reality TV shows pioneered theuse of text messaging to create a consumer interaction with content.After Big Brother it became normal to interact with a brand by text.Likewise the Oyster Card introduced Londoners to the concept of thepay as you go touch travel card.According to Transport for London pay as you go Oyster cards are nowused in 2 million journeys a week in the capital.It’s not inconceivable then to anticipate that consumers might getused to tapping their phones against different surfaces.Especially if an instant reward is being offered for minimal effort.
  75. 75. People are beginning to recognisethe fact that there is linkagebetween social media, instant webaccess, 3G mobile, location andbrand or retail proximity and thatoutdoor has got a potentiallysignificant role to play.Mike BakerOMC
  76. 76. Changing behaviourSo does Out of Home have a viable opportunity to tap intointeractive and social media exchanges - does iOOH have afuture?To get an early view on that question, Kinetic carried out a wave ofnational and London-only research in May.The results provide strong indications that not only do mostpeople like digital posters, but they can already see the potential forentertainment, information and interaction at digital poster sites.
  77. 77. Consumer affinity with Digital OOH • 50% of consumers say they’ll download promotions from posters to their mobiles • 75% expect to carry a smartphone or tablet computer • 66% expect to see digital screens in most city centres • 70% think digital posters beneficial in high-dwell time locations • 20% expect posters to recognise them in the futureSource: Kinetic People Panel, February 2011 / Future of Out of Home
  78. 78. Digital screens make environments more attractive • 66% of people expect to see digital screens in our city centres in future • 47% of people agree that digital poster screens make shopping malls more interesting and attractive • 58% say that it makes public transport environments more attractiveSource: Kinetic People Panel, February 2011/ Future of Out of Home
  79. 79. Great Potential for interaction • 20% believe that in the future, digital poster sites would be able to recognise who they are • 26% expect posters to be able to target them with ads or information relevant to what they are doing at the time. • Around 20% of consumers already expect that they will be able to interact with most advertising in the future. • 11% said they expected to buy a product or service directly from an interactive posterSource: Kinetic People Panel, February 2011 / Future of Out of Home
  80. 80. Kinetic View – Technology and the Consumer• The technology will facilitate a transformation of Out of Home• All the indications are that NFC or similar will become a mass market mechanism• We anticipate that the big opportunity will be in instantaneous downloads via people’s mobile devices; Out of Home media will have thousands of relevant locations across the UK.• Interaction could be applied just as easily to a static poster as a digital screen.• Consumers will interact with posters given the right incentive.• OOH has the opportunity to reshape itself into a dual proposition: − Offering broadcast reach through large numbers of well-placed static sites and highly targeted and dynamic campaigns.• It’s a big challenge, but there’s every sign the industry will grasp the opportunity and re-shape the media landscape.