Billboards and Other Businesses

The vast majority of the 525 out of home companies in Insider’s database are independently owned and operated.  When does it make sense for an out of home company to be part of another business?  Here are Insider’s thoughts.

A sign company owns billboards  (excellent business case)

  • Examples:  Astro Signs, Avaira Signs, Avery Outdoor, Effective Advertising, Carlson Signs, Cuerden signs, George Lay Signs, Stein Sign Display
  • A sign company has trucks which can install and remove vinyl and work on signs.
  • A sign company has expertise constructing and and maintaining signs.  Most sign companies already do billboard work.  Billboard construction, maintenance and vinyl changes can be performed in-house at a cost savings.  Insider asked Carlson Outdoor’s Peter Carlson about the synergy between a sign business and outdoor and he said this: “The two businesses really work well together, we fabricate, install and maintain the billboards with the same employees that do the on-premises work.”
  • A sign company has relationships with landlords by virtue of doing on-premise sign work.  Can help identify and secure good billboard leases.

A real estate company owns billboards (great business case)

  • Examples: McWhorter Investments, Marin Ventures,
  • A real estate company has expertise buying and managing real estate.  It can identify good billboard sites.
  • A real estate company has expertise managing construction.
  • A real estate company has clients which can advertise on billboards.
  • MV Outdoor’s Grant Leschin talks about the benefits of owning real estate and out of home: “We have found our commercial real estate development experience to be an invaluable resource in operating and developing our outdoor plant. There are many similarities between the two and our extensive development experience in California has opened up many opportunities for us. There are also certain “cross pollination” effects. Our shopping center tenants have been some of our best clients in the outdoor business. On the development side, our expertise in navigating complex entitlements and land use issues has been extraordinarily helpful. We pride ourselves on being skilled deal makers and consummate negotiators. There’s always something new and exciting, even after 27+ years. We love the outdoor advertising business!”
  • Josh Mcwhorter of McWhorter Capital Partners adds: “For us (MCP), being primarily in the real estate business, OOH was very complimentary at first – vertical integration. BCF offered consistency to offset the lack of cashflow & sometimes lengthening timelines in real estate development. As we dove into the business we really enjoyed it.”

A newspaper or radio station owns billboards (good business case)

  • Examples: Mollman Outdoor, Tyler Media, Morris Multimedia, Global Radio, iHeart, Eagle Media
  • Customer base which can be cross-sold.  Matthew Mollman told Insider “it has been our fortunate experience that once we have an advertiser place whichever media (radio/OOH) they are not currently using into their advertising plan they are less likely to cancel either media form from their marketing budget.  Plain and simple radio and OOH are two of the most complimentary forms of advertising that exist.
  • Expertise designing ads.
  • Works well if company is small enough that there is one budget and fiefdoms don’t get in the way.  Insider doesn’t think this scales.  It certainly didn’t for iHeart.  See Bob Pittman’s comments below.  Time will tell for Global Radio/Primesight/Outdoor Plus. The bigger a company gets the harder it is to convince the radio people to cross-sell out of home and vice-versa.

An ad agency owns billboards (average business case)

  • Example: Design Angler
  • Ability to place advertising clients on own billboard plant.
  • Creative expertise means ad design can be done in-house.
  • A drawback of this structure is that this may create a fiduciary conflict of interest for the agency.  An ad agency is supposed to get clients the highest return on ad investment.  There’s a conflict if a company wants to place clients on it’s own billboards when there are better or cheaper billboards nearby.

A tower company owns billboards (average business case)

  • Examples: American Towers
  • Expertise in managing leases can be transferred to managing a billboard lease portfolio.
  • Expertise in finding and developing sites in a not-in-my-backyard environment.
  • Additional revenues possible by installing small cell cites and weather cams on billboards, especially in urban areas.

A holding company owns billboards (average business case)

  • Examples: Link Media, Standard Diversified, Stewart Company, Mac Haik Enterprises
  • A holding company can raise capital cheaply to fund billboard expansion.  Frees management to focus on growing billboard business without capital-raising distractions.
  • Limited operational synergies.  Works best if billboard company is run in independent, stand-alone fashion.
  • A caution about the holding company strategy: A holding company which owns billboards together with several other unrelated businesses will be harder to value than a standalone billboard company.  When this happens the whole may become worth less than the sum of the parts.  Insider thinks of iHeart CEO Bob Pittman’s recent comment:…splitting the outdoor company from the iHeart Media segment, which is primarily audio, allows us to align the company’s better for investors.  Because what we found was…the investors that really love outdoor are not necessarily the ones that really love audio and vice-versa.  So we’ve not got some pure plays for them.

What about Netflix?  Insider doesn’t think there’s a compelling business case for a b-to-c, streaming company to own a b-to-b out of home company.  See Rethinking the Netflix Regency Billboard Purchase and Comments on Rethinking Netflix Regency.

What do you think about billboards and other businesses?  Let Insider know using the form below or email Insider (billboardinsider@gmail.com)

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