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.
Electronic Billboard Locations
Over 75 percent of electronic billboard placements can be found in 17 major metropolitan regions, where the four major players often overlap. Six of the 17 markets are in the top 20 for most congested highways (Los Angeles, San Francisco, Chicago, Miami, Dallas, and Atlanta). Strategically placed at bottlenecks and heavily congested areas such as the highway through San Francisco, digital displays have an opportunity to reach more than 875,000 people daily. Even areas with low populations such as White Plains, NY, (56,000) have high commuter presence (200,000).
The addition of billboards in these areas could boost sales significantly when reaching the right clients. Less than 25 percent of electronic billboards are found in markets with populations of fewer than 250,000 residents. As the cost for electronic billboards continues to decrease, more growth is likely to be found in those smaller population markets, in part because there tends to be weaker community opposition. For example, the market between Appleton, WI, and Chicago, IL, appears to have more electronic billboards per capita than any other market in the US. States that have so far banned electronic billboards include Vermont, Alaska, Hawaii, and Maine.
Public Service Message Uses for LED Billboards
The possibilities with LED billboards go beyond advertisements. Some of the more common usages of these displays are to stream live news, scores, weather updates, etc. But one of the more unique uses is helping the government track down criminals. The FBI has made several contracts to display most wanted criminals on billboards. With so many people seeing these displays daily, it is no wonder that in two years they have helped solve more than 35 cases.
While over 96 percent of billboard locations will continue to be printed billboards in the US market through at least 2015, electronic billboards will become more ubiquitous. CBS Outdoor, LaMar Advertising, JC Decaux, and Clear Channel are all putting LED billboards at the forefront of their vision; investing more and more into them each day. The driving factor is the ability to provide more advertisements in the same space, increasing the revenue utilization of that space, followed by a reduction in labor costs. Factors holding back more placements and conversion from printed to electronic billboards will eventually not be hardware cost and return-on-investment, but mainly outside factors, such as regulatory and community opposition.