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Out-of-Home Is the Next Auction Medium September 18, 2006

Posted by Bill in Online Advertising, Online Auction Tips, Search Marketing.
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You know those ads you see on screens in airports, office building elevators, and on the  occasional person? They’re called out-of-home digital ads. And my prediction for them is that they’ll be almost entirely auction-based by 2010.

Last week, marketing consultancy Profitable Channels came out with a report on the medium. The report is definitely a worthwhile read; the point that stood out most in my mind–the point that led to my conclusion about auctioning out-of-home spots–comes from the report’s description of out-of-home’s value. This value, the report observes, stems largely from out-of-home’s proximity to the point of sale.

In July, I wrote a piece about why Google’s attempt to auction print ads didn’t work. Since auctions are so competitive, I argued, buyers tend to avoid them unless they’re absolutely necessary–unless the auctioned item is scarce, and there’s no other place for auctiongoers to shop. That’s why fine art get sold ub auctions–because it’s one-of-a-kind; but vegetables and pants are almost never auctioned, because vegetables and pants are widely available.

Print advertising goes into the “widely available” category. Print publishers add pages to their newspapers and magazines as they sell more inventory, so they can always make space to accommodate more advertisers. That’s hardly a scenario of scarcity, and so it’s hardly a scenario for offering an auction model.

That logic also explains why keywords are sold in auction. Since only a finite number of searchers will search a given tem, keyword traffic is limited. It’s also highly valuable, as keywords represent consumers who are headed towards a point of sale. The combination of high value and limited availability makes keyword traffic a thoroughly auctionable item.

Now consider the out-of-home ad. Out-of-home advertising, again, is so attractive because it puts your ad very close to the point of sale. Your ad for kids’ cereal might be nice during Saturday morning cartoons; but think of how valuable it would be if you displayed it right in the cereal aisle. Or how valuable an ad for Pepsi could be if it was delivered right next to the soda machine. And since there are only so many spots in the world that are next to a point of sale, out-of-home advertising offers something that’s highly scarce. And, once again, scarce + valuable = auction-worthy. It’s only a matter of time before networks realize this, and sell out-of-home impressions accordingly.

Auction-based out-of-home ads will be a big news for auction marketing, because out-of-home advertising is big business. In the same report, Profitable Channels predicts a total of $1.2 billion in out-of-home ad sales this year–about the equivalent of a major TV daypart.

And the out-of-home market is still largely untapped. A second study released last week, this one by media research firm Arbitron, found that  a third of the people who watch Sunday Night Football in Houston watch it out of home. And I’d say it’s a safe assumption that a substantial number of those out-of-home viewers watched their NFL games in a bar. That creates a real opportunity. Given the sheer numbers of viewers watching football in bars, imagine how valuable bar-specific advertising would be to a beer distributor who could reach viewers, in a bar, in the middle of NFL programming.

Such a network would be so valuable, I’d like to suggest, that it’s only a matter of time before we see bar-specific networks that overlay bar-specific ads, and deliver them to bar TV screens during the commercial breaks of sporting events. And it would make perfect sense to sell the ad slots by auction: it’s a scarce resource (there are only so many commercial breaks in a game, and so many bars that the networks will reach); and, since a bar is a crucial point of sale for beverage vendors, it would also be incredibly valuable.

And bars aren’t the only location that would attract networks. Arbitron finds that, with TV sets in a slew of other places–like airports, hospital waiting rooms, hotels, and gyms–a lot of television, including daytime TV, gets major out-of-home viewing. Many of these out-of-home views could support their own overlays, with hospital TVs getting ads from insurance companies; gym TVs getting ads from diet products; hotels getting ads from tourist attractions and restaurants, and so on. For nearly every location where there’s a TV, there’s an industry or two that would see that TV as incredibly targeted real estate. Those industries would gladly participate in a bidding war to place their advertising there, and to keep their competitors out.

How long before out-of-home goes auction-based? It won’t be overnight. But it will, most likely, be within the next three years. It’s a possibility I’d put a high bid on.

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