Here are the results of Lamar Advertising CEO Sean Reilly’s talk at yesterday’s J.P. Morgan Global Tech, Media and Communications Conference, sponsored and analyzed by SignValue.
There was an upbeat mood at the OAAA conference:
It was a great conference. The enthusiasm and the confidence and the sense of possibilities this year was measurably better than last year’s, so there’s something going on. There’s a lot of excitement in the industry. All of the publics had unbelievably good earnings calls just before — Outfront posted some great numbers, Clear Channel — well, one thing Scott Wells told me was, “I finally had an incredible quarter and I’m not doing conference calls anymore because they’re going private.” The industry is in a good place.
The economics of a digital conversion
The returns have been remarkably consistent — board number one that went up 20 years ago and board 5,000 that went up 18 months ago have the same return profiles. I think that’s a testament to the fact that as we get more digital inventory out there and our customers get more used to using the platform in wonderfully inventive ways, the demand is there. So picture a billboard making, let’s call it $3,000 a month…the advertiser is paying $3,000 a month, and they also have to buy the substrate — what they print on — which probably costs them $1,000, amortized over a 6-to-12-month contract. That’s the economics as a static board. Now it’s digital and we have six to eight slots. The advertiser typically pays about the same absolute dollars — probably still $3,000 for them to be on it…we’ve got the opportunity to put six to eight customers up there paying almost the exact same amount. So we were making $3,000, now we’re going to make $15,000 to $18,000. The incremental margin contribution is somewhere between 65% and 75%, depending on how well we manage the real estate…
Lamar has budgeted $20 million to buy easements this year
If we’re paying somebody $40,000 a year to have a billboard on their property and they’d rather have one lump sum of $400,000 — that’s the kind of conversation we want to have. Those people are out there, and it’s a good use of capital. It’s a no-brainer, a riskless return…We have around 160,000 billboard faces, and we own the real estate under roughly 20,000 of them.
Good news on measurement
There’s good news. The industry and the buy side are united — we’re walking in lockstep. We’re abandoning the data provider that used to feed Geopath, a company called MotionWorks, and we’re going with a globally respected brand called Ipsos. They do the measurement in Australia and the UK, for example, where out-of-home is a larger share of total media spend. I’m excited about measurement for the first time in my career — and I’ve been doing this a long time. Lamar, Outfront, Clear Channel, the independents on the sell side, and all the agency players that care about our space are all singing from the same hymn book, all pulling in the same direction. I feel good about this one.
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