Winners and losers from changing media consumption
10 November, 2015
Manuel in the last couple of weeks Oh Media and APN Outdoor have both upgraded their earnings guidance. There are not many Australian companies doing better than expected at the moment so why are these two attracting all of the attention?
Good question. Overall Australian companies have been growing earnings by cutting costs rather than growing revenues. Both Oh Media and APN Outdoor have come out and said that their revenues are surprising positively so they do stick out.
Australia, like many global economies, has been beset by low growth so we are not used to seeing strong growth sectors. Clearly the Out of Home Advertising sector in which these companies operate is one of them.
Is Out of Home advertising is winning share from those media which are bleeding audiences like print and television?
Advertising spend on the whole is growing slowly in the order of 1% to 3%, while Out of Home revenues grew almost 20% last year – so clearly the sector is taking share from other advertising categories. And of course what we see is rapidly declining spend in newspaper, magazine and to a lesser extent television advertising, and rapidly increasing share in online advertising and now also increasing share in the Out of Home sector.
Well it is clear that online wins share as we all spend more time on the internet, but why would Out of Home win share? We are not all spending more time outside are we?
You are right, as an idea Out of Home advertising is nothing new. We're all accustomed to seeing signs and billboards on buildings, next to roads, on bus shelters in trains and so on. In fact though audience numbers are growing, partly because urbanisation means more consumers are in the Out of Home environments and partly because changes in the media itself means it reaches us in more places.
But I think it is important to understand two major trends in the world of advertising.
Firstly, audiences are increasingly fragmented into smaller groups who will only pay attention to advertising that is relevant to them. So where a generation ago a whole family might watch every television ad, today advertisers need to reach each family member with ads they want to see, or risk being ignored.
Secondly, technology is disrupting the sector. Today that same family may well be watching recorded content on a decoder and skipping the ads, they may be watching paid content on Netflix or Apple TV, or may be on an app on a mobile device. All of this makes it hard for advertisers to reach them.
Both these dynamics are supportive for Out of Home advertising because they reach specific audiences, and with the advent of digital signs, they can play audience specific ads.
The digital signs are impressive. What impact are they having on the success of the sector?
Where a traditional static sign would have one advert on it for a month or more, digital signs can have multiple adverts on them for an appropriate amount of time. So the sign might advertise coffee in the morning, beer in the evening and a taxi service late at night.
They are also very flexible. There was a recent instance where hailstorms were expected in parts of Australia and insurance companies quickly got the message out to people to get their cars under cover to avoid hail damage, which obviously saved the insurance company some claims expense. So the technological revolution that is the digital sign, and indeed network of digital signs, is having a big impact on the success of this sector.
Are these companies are good investments do you think?
Well we own both Oh Media and APN Outdoor. I think that they are obviously benefitting from some strong growth trends and solving some very real problems for their customers, which is always a compelling investment dynamic. We're very happy shareholders in these companies and obviously are hoping that we are at the start of what turns out to be a long-term secular growth story.