Lamar must be prepared to take advantage of industry consolidation and ad agency turmoil. That’s how Lamar CEO Sean Reilly began his remarks to the Goldman Sachs Communicopia Conference last Thursday. Here are the highlights.
On changes in the ad agency market
There’s great turmoil in the big agency business. Clients are taking over some roles from agencies. We need to be able to go directly to them….The change is happening locally. Let’s take a regional car dealer. They’re taking their buying in house. We need to have an API that connects directly to them…….The agency intermediaries are getting disintermediated.
On Mergers and Acquisitions
We don’t play in the world of big market transit. We play in airports but not in the top 15…There are a couple of smaller companies which are getting active rolling up the independents. Boston Omaha. Venture money is still trying to execute. Fairway, for example, was bought by a venture fund.
On Acquisition Multiples
It depends on the property. We recently had an auction for a company called Regency in LA. We didn’t make the second round. That’s unusual for us…Given our footprint we’re usually the highest and best buyer.
Areas for Acquisitions
It’s situational. It would be helpful for us to have better distribution in LA.
On the ad climate
Business is good…We said in February on our earnings call that we felt like political would give us a lift and we’d have a decent lift…Since April…we’ve seen the book build…We’re looking for a really good finish to this year…Political is helping. Political up 25% year to date.
Billboards and Data
The industry has a big initiative…Geopath is going to deliver a robust measuring tool to us in 3-6 months. In the meantime we use data from vendors on a case by case basis…Outfront is building their own robust proprietary platform.
On Out of Home Advertising Contract Lengths
Digital contracts are for 1,2,3 months. The average weighted length of our contracts is 4-6 months. Posters (static) are 1-3 months. Bulletins (static) are 3-12 months. Digital is 1-2 months. We don’t sell by the day part. That’s complicated.
Local Advertising and Social Media
Local advertisers are extremely sophisticated when it comes to social media. When we walk in to make a pitch, one of the first things we ask is what you’re trying to accomplish with local search and how can we complement that.
On Hurricanes
After a hurricane local GDP in a market which is hit soars…The advertising we get is incredible. If you look at what’s going in in South Texas and Florida…these businesses are resilient. It doesn’t look like Florence is going to be that big an event for us.
On digital sign conversions
We’re going as fast as we can. They are all little construction projects. The permitting needs to fall in place…This year we set our goal at 240. I think we’re going to get there…In past years we’ve been at 120-150…Part of it is getting the lease right. You’re not going to spend the money to do the capital unless you have a long term lease.
Pricing is marginally lower over the past year. The useful life is bigger. The great thing now is we’re getting 12 year warranties from vendors. Useful life and warranties are above 10 years. We’re still primarily using Daktronics but Watchfire is up and coming.
Insider’s take
Challenging times for the agencies. It’s no fun to get disintermediated. Shorter digital ad contracts fits with the RFP’s Insider sees. Makes sense to ask your clients what their social media strategy is and then to seek to complement it. A 2017 OAAA study found that out of home delivers more online activity spent compared to online banner ads and other offline media.
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