Outdoor: The ten per cent push

Then, in spring, a mini-downturn kicked in and growth began to slow.

True, the media sector was having a tough time across the board in the
second quarter, but outdoor had begun to believe it was almost immune,
so strong has it been in recent years.

Sustained economic prosperity has been good for outdoor - more so than
for any of its traditional rivals. These days, we not only work harder,
we play harder, spending more time out of home than ever before.
Audiences have been on a sustained upward curve at a time when other
mass media have been losing ground. This has translated into ad revenue
growth, with only online progressing faster in recent times - so any
slowdown, however slight, is met with consternation.

But, according to Stevie Spring, the chief executive of Clear Channel,
we should keep the current situation in context. "We're still growing as
a medium," she points out. "We're not growing as quickly as we were
earlier this year, but we're still bucking the trend in the media
market."

Nigel Mansell, the chief executive of Concord, tends to agree: "The
medium is still moving forward. I know many people think that quarters
three and four will be strong again."

Both buyers and sellers remain confident outdoor can soon reach the
psychologically important goal of a 10 per cent share of display ad
revenue. Last year, according to Outdoor Advertising Association
figures, the medium managed a 9.3 per cent share on revenues of slightly
less than £850 million. This year, revenue is expected to top
£880 million.

Business as usual? Perhaps - but, surprisingly for a medium with history
seemingly on its side, outdoor has been beset by niggling doubts and
distractions this year: nothing major when taken in isolation, but
enough to help create an undercurrent of unease.

A number of contracts have been up for repitch - and media owners tend
to take their eyes off the advertising ball when they're jostling for
position. Maiden beat JCDecaux to the consolidated £35 million
Network Rail business, and Clear Channel scooped the largest
street-furniture contract ever, the £250 million Transport for
London bus-shelter business.

The pitch for the London Underground contract, on which Viacom Outdoor
is the incumbent, is ongoing.

These are nice distractions if you win, obviously. As David Pugh, the
managing director of Maiden Outdoor, reveals: "We have earmarked £5 million to invest in developing the Network Rail sites over the next
two years. As the market leader, Maiden has been leading the revival of
the billboard sector: reminding agencies and clients of the branding
power of large canvases that can be creatively planned through
Postar."

However, Pugh touches on two of the industry's less welcome
distractions.

The first is research - there has been frustration in some quarters that
sites in the transport-related sector still haven't properly been
integrated into Postar, the joint industry audience research system on
which outdoor's main trading currency is based.

Deadlines have come and gone and the data still isn't ready - but,
luckily, the medium's planners and buyers still have (limited) reserves
of patience.

There's less patience, though, on the second issue - the apparent need
to remind agencies of the power of big canvases. That reminder is
necessary because almost all of the medium's recent growth has been down
to the rise of the six-sheet format. The growing availability of
six-sheets has allowed the medium to attract new types of advertisers -
the packaged goods multinationals, for instance. Many such advertisers
have limited outdoor track records and have often tried to lean on their
greater knowledge of other media - notably magazine ads.

It's now common to see outdoor executions that are basically single-page
magazine ads writ large.

There is a feeling that this has been exacerbated by creative
agencies.

The (contentious) theory is that the larger creative agencies began to
cut corners during the recession - and, far from attempting to dissuade
advertisers from re-purposing press executions, they actually began to
encourage this as a cost- and time- saving strategy.

For many who've been worrying about this for some time, alarm bells were
ringing at last October's Campaign Press Awards. Steve Parker, the UK
buying director of Starcom Motive, was on the judging panel. "I wasn't
the only person on that jury worried that there didn't seem to be any
work that would make us fall off our chairs," he reveals. "I don't think
there's any simple reason for it. But it is worrying for the
medium."

Indeed it is, especially if it is true that craft skills are ebbing.

Spring is irritated by such talk. It's nonsense, she insists: "The
truth, as anyone who's been near a creative department will tell you, is
that when creatives get a chance to use that big canvas, they bite your
hand off."

She does, however, admit that the large-format sector may face
structural issues. Some clients regard outdoor formats as "press ads on
steroids" but the biggest problem is the "disjunction between media and
creative agencies". She explains: "Sometimes, the media agency will
start talking outdoor before the creative agency is on board and it will
have very little time when it does become involved. It's the sort of
thing that happens in a softer market - because planning and buying
tends to happen later."

But if the medium's momentum is to pick up again, priority must be given
to the 48- and 96-sheet markets, which, according to many sources, are
bumping along the bottom at the moment. It's not just a creative issue -
it's one for planners and buyers too.

And that, as it happens, brings us to arguably the greatest distraction
of all in the outdoor business over recent months - the merger,
completed in the second week of June, of Poster Publicity and Portland,
to create the WPP-owned mega-planning and buying company Kinetic.

The new company has a stature to rival Aegis' Posterscope, which for
years has been the dominant player. Now, it's game on - between them,
they control just under 70 per cent of the buying market - and we could
see fireworks and market volatility as a result, many observers say.

Kinetic's emergence could have a major effect on Posterscope, a company
whose business model is dependent on being able to trade on
ever-increasing volumes. But now it knows it will probably lose billings
through structural realignment - for instance, it currently buys for
MediaCom, a WPP agency. You don't need a crystal ball to work out that
Kinetic will soon move to mop up that business.

So it faces challenging issues. The interesting thing for many observers
is whether it has the stomach to change its business model - and whether
Aegis will let it. Posterscope has been a wonderful cash cow for
Aegis.

The bean-counters at plc level won't like hearing that the world has
changed.

Kinetic could also call into question the whole basis of trading in
outdoor, where buyers have traditionally benefited from the medium's
equivalent of the agency deal in the TV airtime market - except in
outdoor, it's generally agreed that less in the way of added-value
bonuses makes it back to clients. In a growth market, it's easy to keep
everyone happy - media owners are getting more revenue, buyers are
getting bigger discounts and advertisers seem to be getting ever better
value.

But if momentum stalls, for whatever reason, the books become that
little bit harder to balance. More excitable observers have posited the
theory that Kinetic will attempt to put pressure on Posterscope by
screwing media owners to the floor on rates and passing as much of the
benefits as they can on to clients - especially those whose outdoor
performance is monitored by auditors. Having set a new gold standard,
they would then wait for new business to roll in. There has been
speculation, for instance, about just how far Kinetic might go in wooing
Unilever, which has its outdoor advertising planned by Concord and
bought by Helix. WPP's MindShare, remember, brought in Unilever's
consolidated European media planning by promising to deliver
exceptionally keen prices across all other media.

All good stuff - but life is seldom this dramatic. And whether there's
lots more to be squeezed from media owners in terms of price is a moot
point. As demand picks up, in fact, rates will probably harden. We'll
see, obviously - and it's expected that demand will pick up across the
second half of 2005. Many buyers, though, expect that it will be new
formats, rather than the old mainstays at the 48- and 96-sheet end of
the business, that will help the market kick on again.

And when we talk about new formats, we're talking principally about
digital technologies - screens able to show moving pictures, mainly, but
also methods of providing an interactive return loop. Poster sites
enabled with Bluetooth technology, for instance.

But new out-of-home technologies have never really lived up to their
hype. Can that really be about to change? Viacom, for instance, is
trialling small video screens running up the escalators at Tottenham
Court Road Tube station. It has high hopes for the format and Tim
Bleakley, Viacom Outdoor's joint managing director, says digital's time
has come. "It's not just about putting up any old screen in any old
place. You have to deliver critical mass in terms of an audience by
putting screens in places where you know the audience will spend time
with them," he says.

But Glen Wilson, the client services director at Posterscope, argues
that there are only so many places you can put poster sites. And there
is only so much value you can add by improving their quality, for
instance by lighting them. "The next level is adding digital utility to
sites," he argues. "Digital in general - everything from big screens in
railways stations to displays in supermarkets - is the fastest-growing
sector of the market. It will be a significant driver in pushing the
medium above 10 per cent."

No-one seriously doubts that it will get there; and, according to Roy
Jeans, the managing director of Magna Global UK, outdoor's recipe for
success remains compellingly simple. "Consolidation of the medium around
the world into three main media owners has helped reassure advertisers
who've not always been sure in the past that they could trust the
medium," he says. "Outdoor remains a growth medium."

OUTDOOR AD MARKET SPLIT
2004 2005
Clear Channel 26% 27%
JCDecaux 25% 24%
Viacom Outdoor 23% 22%
Maiden 14% 13%
Others 12% 14%
Outdoor spend (pounds m) 848 917