Ads Going Up in New Venues
Had enough elevator music? Make way for elevator advertising. And, for that matter, advertising in mall food courts, offices, hotel lobbies and at grocery store checkout counters.
A growing number of marketers are using digital technology to push their advertising messages on high-definition video screens in venues where consumers gather.
One pundit has dubbed the growing business of reaching consumers when they’re outside of the home as the “outernet.” These advertising networks typically blend commercial messages with news, sports and weather feeds supplied by major media companies.
The flurry of out-of-home advertising is spreading to 7-Eleven convenience stores in Southern California, Ralphs grocery store checkout counters and elevators in office buildings ranging from Two California Plaza in downtown Los Angeles to the South Coast Metro Center in Costa Mesa.
The outernet industry is pitching itself to advertisers that are frustrated with the high cost of traditional media and the never-ending search for advertising outlets that work.
“It’s a very chaotic advertising market right now, and that chaos tends to work for us,” said Charlie Nooney, chief executive of San Francisco-based Premier Retail Networks Inc., which beams advertising into shops operated by Wal-Mart Stores Inc. and Best Buy Inc.
Wireless technology can push advertising “anywhere you want, in trains or in gondola cars at ski resorts,” said Nancy Jackson, a vice president with Westford, Mass.-based Captivate Network Inc., which uses screens to reach consumers in elevators.
The screens account for a tiny sliver of the $5.3-billion outdoor advertising industry. But as the cost of digital technology drops, screens that show television-like commercials are expected to make inroads in the category.
The still-evolving sector mirrors early attempts at commercializing the Internet. The competitors are small, privately held ventures that depend on private investments.
Premier Retail Networks, with screens in 5,000 retail stores, has accumulated $65 million in venture capital funding, and Captivate Network, with screens in about 1,100 office buildings, has raised about $100million.
It’s an expensive and potentially risky business because technology continues to evolve rapidly. Revenue also is in short supply because most advertisers have yet to be sold on the concept, and competitors are spending heavily to create networks.
Minneapolis-based Next Generation Network, for example, has raised $60 million in venture capital, according to a Securities and Exchange Commission filing, but also has generated about $70 million in losses.
The sector also faces potential regulatory hurdles. Companies that use telephone lines to carry advertising to screens might face federal pressure to restrict tobacco and alcohol ads. As outdoor screens are installed, the industry probably will encounter the same public pressure facing billboard companies.
Big Players in Ad, Media Industries Enter the Fray
Unlike the Internet, though, the outernet’s success doesn’t depend on consumers breaking away from the real world to visit far-flung Web sites. Instead, operators hope to weave their pitch-filled screens into the daily fabric of life. And despite the technological and financing challenges, some important players in the advertising and media industries have entered the fray.
Shortly after retiring as General Motors Corp.’s top marketing and advertising executive, Philip Guarascio surfaced as chairman of AdSpace Networks Inc., a Burlingame, Calif.-based start-up that has placed screens in the lobbies of Loews Cineplex movie theaters. AdSpace also is partly owned by Kaleidoscope Sports & Entertainment, a company that’s part-owned by advertising and marketing giant Interpublic Group.
Big media companies also are signing contracts to provide news reports to the advertising networks. The Los Angeles Times and KTLA-TV Channel 5, both owned by Tribune Co., are providing news updates, as are the Wall Street Journal, the New York Times and ESPN.
Out-of-home advertising also is getting a boost from property owners who hope to augment profit by leasing out unused space on an elevator wall or above the pharmacy in a drugstore.
The industry operates on a simple principle: Find out where consumers are gathering and put a screen in their faces. Industry players want your free time, whether it’s a 20-second elevator ride at work or a two-minute wait to pay for your groceries. Messages are tailored to fit into the available window; some of the advertising pitches run 10 seconds or less.
“If you’re standing in line waiting for a Big Mac and fries, you’ve got nothing else to do,” said Tracy Crocker, president of Next Generation Network, which is installing advertising screens in 7-Elevens. “And you’re going to remember those commercials more than the ones you see sitting around at home watching your favorite TV show because there are no distractions.”
Although the sector often is lumped in with billboards and other out-of-home advertising options, industry players say their screens are a close cousin of cable television because the systems promise to deliver specific demographics rather than the broad audience a well-placed billboard attracts.
Captivate Network, for example, focuses on elevators and lobbies of high-rise office buildings that are home to high-income executives. BEVision is installing screens in beverage stores.
Technology advances that continue to cut the costs of installing screens and transmitting content and advertising are at the core of the new advertising medium. Captivate Network uses wireless local-area networks in elevator shafts to beam content and advertising onto flat-panel screens mounted in elevators. In the late 1990s, the system required cumbersome wiring for each car, an expensive and time-consuming process.
The new technologies remove barriers that have kept advertisers from reaching, say, commuter train passengers, said Captivate Network executive Jackson.
Initial market research suggests that consumers are more apt to see the electronic displays than traditional, static advertising. Premier Retail Networks last year unveiled a Nielsen Media Research study suggesting that customer recall for outernet advertising shown on screens inside Wal-Mart locations surpasses rates for similar advertising shown on television.
Proponents say the technology promises to deliver a sense of immediacy not possible with static displays. Competitors use dial-up modems, T1 lines and satellites to deliver advertising and content--either national or regional in nature--on a real-time basis.
Industry Needs Data to Convince Advertisers
Proximity to consumers is the selling point ad networks use to market their service. Irvine-based Skytron Mall Television Network boasts that its screens in mall food courts are “just aisles, not miles, away from retailers’ shelves.” That ability to influence shoppers moments before a purchase occurs is a potentially powerful draw.
Rates for the screen networks are in line with other outdoor ad categories. It’s far less expensive to use the new networks than cable or broadcast television.
But network operators hope to charge heftier rates as they build their systems and convince media buyers that the screens can deliver.
National advertisers, though, won’t take the plunge until the networks have enough screens to deliver their messages. Industry players know they also must gather audited data proving that the screens are a smart buy--or face the kind of pessimism many advertisers exhibit for Internet ads.
“If we put these screens in the right venues, deliver the audits and surveys--and traditional media continues to splinter--we’ll be in a good spot,” Crocker said.
