We received some excellent reader comments on creating value with digital billboard conversions.

Grey Outdoor Founder Grey Vick says digitals take more sales time

Great digital locations are lucrative and effective for advertisers. Operators need to factor in an increase in the cost of sales for any digital conversions.  The sales cost is greater because reps are constantly selling it and it takes more time for the account executives shuffling artwork and client needs on a regular basis.  This takes up a lot of the account executives time thereby increasing the cost of the sale.

A static sign you are renting for a year and potentially not touching it until the end.  The only thing salespeople need to do with static is just check in every 90 days and make sure they are happy.  Digital is another animal because you are renting it out by the day/week per period, with a lot of short term.

Huntington Outdoor Founder Justin Powell says you need to think about digital billboard replacement costs

Great article on digitals displays today.   There’s a strange quirk in this industry that I’ve never quite understood when it comes to calculating BCF and digital billboards. With a static billboard, you typically don’t include capex expenses, which makes sense because there is essentially none (or very little).  With a digital billboard, however, we know they’ll last 10-12 years (I’ve heard of some lasting 15, though I’m not sure I’d ever want to push it that far). This means that capex expenses are very real. You’re essentially consuming 10% of the useful life of that asset every year. So, if you have $200,000 worth of displays, they’re costing you $20,000 a year in “real” additional expense.  I understand how this looks from an accounting standpoint, but it seems to me that if you want to calculate actual returns, you’d have to factor in that cost.

Hughes Outdoor Founder Steve Hughes agrees…

Clearly you need a real depreciation expense deducted from cashflow.