If there is one thing that can be said for private landlords, they are well-versed in identifying viable earning opportunities.
The latest example of this is provided by the form of digital billboards, which are being integrated with commercial real estate to provide additional and lucrative revenue streams to supplement tenant leases. This also increases the bottom line value of structures, particularly those that boast prime locations and benefit from high levels of footfall.
In this article, we will look at this marketing innovation in closer detail, and analyze the trends that are shaping best practices.
A Marriage of Convenience: Why Have Landlords Turned to DOOH?
Commercial property owners, both large and small, can benefit financially from this practice depending on influencing factors such as location, lines of sight and the audience demographics that they can reach. The marriage of strategically-placed real estate with digital out-of-home (DOOH) is also one that fully realizes the potential of the medium, which is gradually reshaping the perception of advertising while emerging as one of the fastest growing formats in outdoor media.
At the heart of this is the ability of digital (and traditional) billboards to reach and engage consumers, and there are numerous statistics that bear this out. An estimated 71 percent of consumers claim to view and absorb billboard messaging, for example, while the media itself is constantly accessible within a natural context. This contrasts sharply with marketing channels such as television and radio, which can be easily avoided and often appear as intrusive in the eyes of customers.
Similar issues affect those who invest in paid adverts online, with ad-blocking software increasingly prominent and accessible to users. By 2020, the practice of ad blocking is projected to cost advertisers and publishers between $16 and $35 billion in lost revenue, as customers look to streamline the experience of browsing online.
In contrast, billboards are managing to bridge the gap between lead generation and conversions, with those who interact with outdoor advertising being an estimated 17 percent more likely to engage with an affiliated brand through their mobile. Similarly, recruitment brand Monster recently reported that the rate of Google searches for relevant keywords increased by between 20 percent and 25 percent after a sustained OOH campaign, highlighting the engaging nature of the channel and its ability to drive conversions both on and offline.
Most importantly from the perspective of commercial landlords, billboards represent just 17 percent of OOH advertising media and yet account for 65 percent of the sector’s revenue. Clearly a lucrative practice, it is one that commercial landlords have been keen to leverage for their own financial gain.
The Core Financials: Appraising the Cost and ROI for Landlords
We have already touched on how commercial landlords and advertisers can identify key billboard sites, with traffic counts and demand profiles crucial in determining cost and ROI. There is also a rigid formula used to assess sites, which also helps to create a viable working arrangement between landlords, OOH suppliers and the clients themselves. In general terms, sites are usually assessed on a rate and occupancy formula, before commercial rental levels are determined on an equitable basis.
It is also commonplace for the OOH provider to maintain the wall or the ground area where the billboard is located, which provides additional incentive to landlords who can look to significantly better their properties.
Given the factors we have already discussed, revenue from digital billboards will vary from site to site. They are particularly popular among commercial landlords, primarily because they enable them to charge a higher premium, which is more than double the rental value of a static board in some instances. As this pricing guide highlights, the average cost of a digital billboard in a premium location can amount to £1,250 per week (or $1,629 USD).
This is another key consideration for commercial landlords, who derive value from an annual lease fee and the length of an agreed term.
The Trends That Are Shaping This Burgeoning Market
As we can see, there is a compelling argument for commercial landlords to leverage digital billboards as a way of increasing revenues and the underlying value of their property. After all, not only does this platform allow them to benefit from higher price and rental premiums, but the digital signage market is also expected to expand at a compound annual growth rate of 8.94 percent between now and 2020. This underlines the growing demand for digital billboards and the precise opportunity that exists for landlords.
In terms of current and future trends, there are a couple of developments for landlords to focus on. Marketers have begun to realize that OOH and digital billboard experiences need not be restricted to the outside of commercial structures, with individual lobby and foyer areas also providing potentially lucrative ad locations. This depends on the purpose of commercial buildings and audience profiles, of course, but this presents an opportunity for landlords to further increase their revenues.
If we look further into the future, we also see that certain companies are experimenting with augmented reality and high-speed light scanners to display digital ads without the need for a billboard. Utilizing technology called ECHO, the Lightvert brand is striving to project images from reflective strips that can be placed on the side of taller structures. This creates the visual effect of detailed images being beamed directly into the sky, negating potential planning permission barriers and changing the face of high-value advertising and signage.
This will also enable landlords to monetize their buildings like no other technology can, while it is expected to be marketed exclusively at the owners of exceptionally high-value properties.
The Last Word
While the first commercial units of this type could be launched within 12 months, the prohibitive price of such technology makes it a concept for the future. For now, it is enough for commercial landlords to monetize their buildings and increase revenues through OOH and digital billboard channels, as the world of advertising continues to evolve at a rapid and relentless pace.