Insider pointed out last week that Lamar has a higher market cap than Outfront and Clear Channel Outdoor because it is less reliant on short term transit and airport advertising contracts and less reliant on international revenues. Here’s a chart showing the dependence of Outfront Media, Clear Channel Outdoor and Lamar on transit revenues.
Source: 2016 10k reports for Outfront Media, Clear Channel Outdoor and Lamar.
If the market values transit revenue at a lower multiple than billboard revenue then what’s the argument for investing time and management resources in growing a transit business? Insider can think of four reasons.
Transit Advertising is growing faster than billboards. take a look at the chart below. Transit revenues grew at a compound rate of 5%/year from 2005 to 2016 versus compound growth of only 2%/year for billboards.
US Out of Home Advertising Expenses By Category 2005-2016
Million $$$
Source: OAAA
Transit advertising has little opposition. Insider has run lots of articles over the past year on city councils and activists trying to cap, limit or eliminate billboards. Insider can’t think of a single attempt to eliminate transit advertising. Cities depend on transit ad revenues to help fund transit budgets.
Transit advertising is counter-cyclical. Insider was surprised to see that transit advertising rose 30% during the 2009 recession while billboard revenues declined 17%. Maybe more people ride the bus in bad times which means more transit advertising. Maybe there were some large transit contract changes or renewals. Insider would like to hear if any readers have a good explanation.
High traffic locations made for digital screens. You can see the potential for digital screens and transit in this video Outfront prepared after winning the MTA contract renewal. And unlike a car, everyone who sees a screen can also interact with the screen via a mobile phone without being distracted from the primary task of driving.
Tomorrow we’ll look at the difference between the big three in reliance on international revenue.
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