Digital Place-based Media Reaching Critical Mass as Merger Wave Hits Ad Space
Rapid Rate of M&A Activity Is a Positive Economic Indicator of the Overall Strength of the DPB Advertising Space
NEW YORK, NY — A new wave of M&A activity has taken hold in the digital place-based (DPB) media space with more than a half dozen deals announced in the last eight months. The question is why now, and is all of this consolidation good for the DPB advertising?
The short answer is yes: consolidation was inevitable.
Over the last four years there were many reasons for companies not to make M&A deals because there was always a looming economic crisis to dampen confidence. The market has moved past this point. A strong equity market combined with low interest rates has created an environment that’s more conducive for companies to execute M&A activities. The high rate of M&A is also a positive economic indicator of the overall strength of the DPB advertising space, and it’s a signal of confidence by the acquiring companies.
As digital place-based networks achieve greater scale, they simultaneously increase reach and improve operational efficiency. Acquiring a competitor can also be less costly than building additional screen real estate from scratch. Out-of-home advertising is one of the very few wide-moat businesses that still exists today, and this includes digital place-based networks. A “wide-moat” means that it’s difficult for a competitor to come along and duplicate a business model. Since location defines this medium, and prime locations are at a premium, it’s often easier for one established digital advertising network to buy another network’s footprint in order to increase scale.
But the biggest reason for buying a competitor is that greater network reach attracts more advertising revenue because it makes it easier for brands to plan and buy the medium on a local, regional, or national scale. Currently, advertisers are able to buy mass media such as television and traditional out-of-home with greater efficiency than DOOH/DPB advertising media. While there are a few proprietary initiatives under development that are aimed at helping media buyers and planners buy DPB media more efficiently, none to date have gained traction. Large M&A transactions will also force all the ad-based networks to rethink how they are going to reposition themselves in the overall DOOH/DPB ecosystem.
Networks Reaching Critical Mass
Merger and acquisition activity in the DPB advertising space started heating up with an announcement in January by Gilbarco Veeder-Root, a leading provider of retail petroleum technology, that they were acquiringOutcast Media, a leading digital place-based pump-top advertising network. Outcast Media’s network will be combined with Gilbarco’s gas station TV network, Applause TV, increasing the overall network’s reach to a projected 100 million monthly viewers.
In March, JCDecaux announced that it would acquire CEMUSA’s network of street furniture and transportation-based panels in five countries, including the United States, Brazil, Spain, Portugal, and Italy. The acquisition added more than 57,000 advertising panels, including digital screens, to JCDecaux’s network.
Captivate Network announced in April that it would acquire the Wall Street Journal’s Office Media Network, creating one of North America’s largest in-office professional media networks. The acquisition increased Captivate Network’s total number of buildings by more than 70% and increased its unique monthly reach by nearly 60%. The merged network grew to more than 12,000 digital signage screens across 1,800 office buildings and delivers more than 65 million ad impressions each month.
Then in May, National CineMedia (NCM) acquired Screenvision and created the single largest cinema-advertising network in the United States. When the merger is completed, NCM’s network will cover nearly all 210 DMAs across all 50 states and deliver content to approximately 3,900 theaters with more than 34,000 screens, reaching over 1.1 billion theatergoers. National CineMedia was the largest in-theatre digital media network in North America, and with the merger, NCM has consolidated most of the available cinema-advertising inventory.
June was a particularly busy month for M&A announcements. Rockbridge Growth Equity announced that it would acquire Gas Station TV (GSTV), a direct competitor of Outcast Media. GSTV is one of the largest digital place-based video advertising networks in the United States, reaching more than 50 million viewers at gas pumps each month. GSTV has tripled its advertiser base since 2009 and counts numerous Fortune 500 companies in the automotive, retail, consumer packaged goods, and personal finance industries among its clients.
Also in June, Astral Out-of-Home, a leading OOH provider in Canada acquired Macdonald Outdoor’s digital billboard network, adding 21 large-format screens across Alberta. And Adspace Networks entered a joint selling agreement with National CineMedia (NCM) and Cinema Scene to create a new, larger digital place-based network in movie theater lobbies. NCM’s Lobby Entertainment Network and Cinema Scenes’ Trailervision network include more than 1,700 theaters with 3,600 digital place-based lobby video screens.
CBS Outdoor announced in July that it would acquire Van Wagner’s outdoor advertising businesses, adding approximately 1,100 large-format billboard displays, including digital screens in 11 top U.S. markets. Clear Channel Outdoor made a bid for Van Wagner as well.
Last week, Gilbarco Veeder-Root announced a strategic partnership with VeriFone Media to expand its gas station forecourt business. According to Gilbarco, the partnership will create the largest at-pump interactive digital place-based media network in the world, reaching more than 95 million on-the-go consumers each month with over 30,000 place-based digital advertising screens.
Outcast Media, Gilbarco’s forecourt media business purchased in January, and Applause TV, Gilbarco’s gas station TV network, will be merged with VeriFone’s digital media and VeriFone Digital Network (VNET) businesses with VeriFone Media managing the entire network. With the deal, VeriFone’s Digital Network now spans more than 140 media markets across United States and the United Kingdom including all of the top 50 U.S. media markets, providing one-to-one, interactive media engagement across more than 50,000 screens in taxis, gas pumps, and convenience stores around the world.
DPB Matures and Strengthens
Ultimately, the ongoing consolidation process will lead to a maturing and strengthening of the medium and increased awareness of DPB media with advertisers. Multiscreen campaign planning has become a high priority for media planners and buyers as consumers’ media consumption habits shift to a wider array of viewing platforms. Digital place-based media is increasingly included on media plans because it is complementary to traditional television with its ability to target hard-to-reach consumers in specific venues and locations. Consumers are spending more time outside the home commuting, shopping, and at entertainment venues, all of which provide new opportunities for advertisers.
According to the Digital Place Based Advertising Association (DPAA), Digital place-based networks aredelivering more ad impressions among 18- to 49-year-olds on a monthly basis, compared with the top 25 network primetime shows and top 20 basic cable networks. The DPAA’s research is based on an analysis of reported Nielsen data.