Outdoor media could be one of the best-performing advertising segments over the next 3 to 5 years if recent growth can be sustained. The sector has recorded:
- 8% compound average revenue growth in the four years to 2013, and
- 10% annual audience growth in the three years to mid-2014.
This is more than double the growth experienced in the fiercely competitive TV and radio advertising sectors.
Market Leaders
Newly-listed groups APN Outdoor Group Ltd (ASX: APO) and oOh!Media Ltd (ASX: OML) control approximately 60% of the local out-of-home advertising market, with competitors AdShel and then JCDecaux accounting for the rest. The sector includes outdoor billboards on buildings, bus stops, highways, park benches, and airports, among others.
Technological Revolution
APN and Ooh!Media are benefitting from greater scale, technical innovation and a growing audience for outdoor ads, which is more than can be said for companies like Fairfax Media Limited (ASX: FXJ), which are struggling to adapt to the changing newspaper and television markets.
Outdoor media is somewhat protected from the digital revolution, and in fact, the sector is benefitting from the innovations that improved technology is bringing. Ooh!Media, as the sector leader, has paved the way with digital billboards that can change advertising depending on the time of the day. For instance, McDonalds could advertise pancakes at breakfast time, coffee at 10am, burgers at lunch, and McCafe meals in the afternoon. This flexibility drives customer satisfaction and allows Ooh!Media to charge clients more while lowering employee costs.
Reasonable Price and Dividend Potential
Both companies trade on forward price to earnings ratios of around 15, which seems reasonable based on the structural competitive advantages that the groups have.
APN and Ooh!Media have established relationships with vendors, already control the prime advertising sites, can readily invest in new technology and functionality, and will likely be offered first right of refusal by existing customers to new sites.
These advantages are essentially exclusive to the outdoor media market and coupled with a growing market, APN and Ooh!Media are in a terrific position to be consistent and big dividend payers in the coming years.
