In August 2008 I.T. Strategies concluded that electronic billboards did not appear to be an imminent threat to traditional printed billboards. At the time there were a little more than 500 electronic billboards out of an estimated 450,000 total billboards in the US.
However, the electronic billboard market in the US has been growing in excess of 150 percent CAGR between 2006 and 2009. Currently, 39 states allow LED billboards. Cost has dropped from $1 million in 2002 to $200,000 to $300,000 in 2010. However, unit placements in 2010 slowed because of economic recession and the production capability of making these large electronic billboards has fallen behind demand.
Figure 1: Unit Forecast Electronic Billboards, US 2006-2015
I.T. Strategies believes the 2010 slowdown is not reflective of the long-term market demand, but rather a short-term effect of the recession and manufacturing capacity. Electronic billboards are too valuable to their owners: the revenue that is generated from an electronic billboard can be up to 10 times higher than print billboards, in part because the number of advertising turns is typically six to 20 times greater, and in part because owners can charge more since the retention rate on electronic billboard advertisements is said to be over 94 percent; much higher than 40 percent on printed billboards.
To project 2011-2015, we’ve provided two scenarios: one at 30 percent and one at 40 percent. The difference seems small, but the effect on units compounded over time is significant. The installed base is likely to grow to between 12,000 to 16,000 units in the US by 2015. This may seem aggressive, but as a percentage of the total billboards in the US (estimated at 450,000) electronic billboards will account for approximately 3.5 percent of all billboards installed.
These projections don’t mean that there are no obstacles to the growth of electronic billboards. To the contrary, the barriers remain as high as they were in 2008.
Figure 2: Installed base Forecast Electronic Billboards, US 2006-2015
Community Reception of Electronic Billboards
The electronic billboard industry has continued to grow steadily, but the reception of these displays continues to be one of mixed feelings. Younger generations find these displays to be “hip,” “cool,” and “eye-catching,” but politicians and lobbyists are having a hard time accepting them. Of the 50 states only 39 allow these displays to be erected, with some states keeping a watchful eye on their effects. The Federal Highway Commission is currently in the process of conducting a survey, set to come out in 2011, researching this topic. As the public and companies become better informed about the upside and governments relax their grasp on regulation the growth of these displays will be even more rapid, moving from steady to exponential growth.
Counteracting local community resistance to electronic billboards is millions of dollars spent by the major billboard real estate space owners, including CBS Outdoor, LaMar, and ClearChannel. I.T. Strategies estimates in 2010 over $20 million was spent by the billboard owners collectively lobbying for the allowance of electronic billboards.
The billboard advertising market is made up of four core owners, accounting for approximately 75 percent of all advertising: CBS Outdoor, LaMar Advertising Co., Clear Channel, and JC Decaux. These companies own roughly 400,000 traditional billboards and are looking to digital displays as the future.
Like other advertising modalities, electronic billboard advertising appears to have seen its share of discounting. For the top four (and publicly-traded) companies, cumulative revenues declined about 20 percent from 2007 to 2009 for electronic billboard advertising, but in 2010 it already started to make a recovery.