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September 30, 2011
In my prior post, I introduced PRI’s approach to solve three key issues that have hindered growth in the Digital Communication Network industry (we define the industry to include both captive, non-advertiser supported and DOOH networks). Our technology solution is an integrated Digital Marketing System, comprised of three platforms. These are Behavioral Merchandising to enable mass customization of targeted messages, automated content generation and management, and Return on Promotion performance-based metrics.
While it is my intent to detail each of these platforms in future posts, today I want to illustrate the reason why addressing the predicament of metrics is perhaps the most critical. I demonstrate this by comparing the DOOH business’s progress as compared to the Internet. My hope is that your takeaway will be that the industry needs to collectively focus its resources on this dilemma for the greater good.
Estimates of the size of the DOOH business vary greatly. This is due to, among other things, the infancy of the industry and the differing methodologies utilized by various firms. For example, in its 2011-2015 Global Digital Out-of-Home Media Forecast, PQ Media pegged the 2010 DOOH business at $2.07 billion in the U.S. (this includes both Digital Place-based Networks at $1.54 billion and Digital Billboards and Signage at $532 million); and $6.47 billion globally. On the other hand, MagnaGlobal, in its 2011 Advertising Forecast, estimated the 2010 DOOH business at $2.1 billion globally. Let’s go with PQ Media’s U.S. forecast for purposes of this discussion.
In 1998, Internet advertising was $1.92 billion, roughly equivalent to the DOOH’s 2010 $2.07 billion in ad revenue. Then, as now with the DOOH business, it was recognized that the Internet had tremendous growth potential, yet measures of effectiveness were lacking to facilitate comparisons of web ads to other forms of media. It was acknowledged that the Internet’s lack of standardized measurements to assess web-based advertising was seriously retarding industry growth. Hence, advertisers were unable to justify shifting significant advertising budgets away from traditional media and allocating them to online advertising.
Early attempts (in 1997 and 2002) at achieving industry standards via industry guidelines were not successful, mainly because they were too vague for precise measurement. Later, more successful industry attempts at metrics standardization (adopted in 2004 with implementation for year-end 2005) led to the skyrocketing growth of the Internet, as the following chart illustrates.
Source: Interactive Advertising Bureau
When looking at pricing models for Internet advertising, as the following chart illustrates, performance-based pricing is showing stronger growth than traditional CPM or hybrid models. I am not suggesting that metrics have been the sole driver behind the growth of Internet advertising. The medium’s increasing popularity over time, coupled with the fact that many people have easy access to screens (PCs) for viewing certainly helps. Yet a simple comparison can lend support to the statement that the introduction of performance-based metrics had a significant impact on the Internet’s growth. This should demonstrate the challenge, and the opportunity, now confronting the DOOH business.
Source: Interactive Advertising Bureau
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