The Long-Tail: A Growing Opportunity for OOH - Understanding and Mastering it for Growth in 2024 🚀

Tim Rowe: Here we go. After years of uber-bullishness on digital advertising, Moffett-Nathanson is lowering its long-term ad forecast. Mind you, this was a year and a half ago, okay? So this continues to come down. This week's profit warning by social media company Snapchat was the immediate trigger. However, the firm says it has concerns about the long-term growth prospects of digital advertising overall. In new report entitled US advertising is not just a cyclical problem, revising down our long term bullish forecast. Moffett Nathanson says it's very concerned that the ad market was underpinned by both unsustainable corporate profitability. and the explosion in e-commerce activity by small and medium-sized businesses. Think back to three years ago, COVID. We were going into a phase of rising CPMs. The cost to acquire a customer digitally was already on the rise, and then lockdown. All the money flooded the internet. Everyone was obsessed with that three-year period, making lots of money, but those things are obviously weighing. The growth drivers are now succumbing to a combination of factors. As a result, the firm is lowering its long-term online ad growth forecast to a compound annual growth rate of 12.5% from 18.5%. That means they cut the guidance by 33%. That's really what that means. Six points, 33% in this case. The numbers don't factor in the impact of a recession should one occur. Guess where we are now, folks? That's where we are now. This was all assuming current course and speed and nothing got worse. But wait, there's more. It got worse. Boiling down the thesis to the most basic terms, Moffett Nathanson says the recent ad market was driven by an unprecedented spike in profitability at the largest companies. This is going to be important when we talk about the long tail. due to pandemic-related cost cutting. That enabled a bigger expansion of ad spending. That spending should be pared back as the costs rise in the coming years. Nobody did that. The report says, meanwhile, the pandemic helped speed up growth in e-commerce, creating a bubble in spending by small and medium-sized businesses that's also likely to be popped. What it's meant for the U.S. ad market as a whole is Moffett-Nathanson's revised forecast calls for U.S. advertising to grow at 9% between 2021 and 2025, so we're halfway through, down from its earlier estimate of 13%. Four points, again, four points, 33, 35% down. The top 100 advertisers will up their spend by 7% during this period, while the long tail of small and medium sized businesses will increase by 10%. The calls for all online digital advertising growth to moderate the low double digits, blah, blah, blah, blah, blah. Let's fast forward a little bit. What is the long tail? The long tail is growing faster than the top 100 advertisers. What does that mean? By three points, three points, 10%, right? So the top 100 advertisers will up their spend by 7% during this period, while the long tail of small and medium size will increase by 10%. Three points out of seven, that's almost 50%, 45%. There's 45% more money available from the long tail. Why is that good for us? So what is the long tail? In short, the theory of the long tail is the following. Through culture and the economy, the focus shifts from a relatively small number of hits, mainstream products, markets, on the top end of the demand curve to a huge number of niches in the tail. Right, so it's got this big part right at the front. Those are your few, few top hits. If it was the music industry for out of home, you can imagine that our number of small hits, it's like Times Square. It's the Sunset Strip. It's these iconic kind of the top tracks of out of home. But what's interesting is that out of home is more similar to Facebook and that 80% of the revenue comes from the long tail, which we just said has 45% more spending power than the top 100 advertisers during challenging recessionary times. So this means that the majority of all out of home spending is on a huge number of less popular out of home placements in local venues on surface roads. It's on main street, not on wall street. Hopefully that makes sense. So for TV and radio, they are less diversified overall as ad sales, meaning the majority of their spending is coming from a few big advertisers. Out of home though, we'll continue to reiterate is more like meta Facebook is that it's made up of 80% long tail revenue, which has more spending power. So what's the opportunity? The opportunity is to make it easier for you to take more money from a broader pool of buyers. But to do that with just people power is really inefficient from an effort and from an economics perspective, which means that technology is going to be your friend here. So here's the question to ask. How would Google run your company? Stop thinking like a real estate investment trust and start thinking like a media company. You're not going to build tech because that's a distraction from your core competency. So what's available off the shelf that can help you accelerate your go-to market? One of the companies I personally like for that, and they have no idea that I'm about to plug them here, is Lucid CC. Personally, if you have any element of a digital network, you have digital billboards, you have digital place-based or otherwise, you should be exploring a company like Lucid CC. They give you essentially programmatic control over all of your inventory and they give you and your client an app. So from a customer success standpoint, you've got on-demand engagement with your advertisers 24-7, 365. So guaranteed dynamic delivery for your advertisers with like a no touch execution. That means it's going to allow your people to focus on the things that drive business outcomes, those relationships. But they shouldn't be spending a ton of time doing all the mechanical paper pushing of low volume or high volume, low value work. Think about how you can partner with technology companies to unlock those efficiencies. If you have static analog inventory, it likely means you're going to do a six sigma analysis of your actual workflows to identify choke points. Then automate, delegate, or remove that choke point altogether. Because regardless of what the industry is telling you, Programmatic Digital Out of Home does not have the demand to adequately support the long tail, and help is not coming. There's a reason that PlaySpace Digital Out of Home is down 45% on the year, according to Billboard Insider. Let me come back to that. There's a reason I just lost my place. There's a reason that playspace digital out of home is down 45% on the year, according to a bill by billboard. Why is that? So billboard, billboard, billboard insider, billboard insider. I wanted to like say billboard, Dave Westberg insider. There was like a weird thing going on in my brain there. And so Dave's analysis of the Q2 numbers released by the OAAA found that the play space piece of digital out of home is down 45%. It's because the industry's not growing when you net out DSP take rates. It turns out the programmatic is a pretty crap deal for everyone except the DSP and a few of the huge hit players at the head of the tail. So when you take that magic mailbox money and you don't get paid on it for a year, you're subsidizing someone else's growth, the DSP's cash flows. When you're still waiting on all of that to get paid, keep this in mind. It's from a piece out of Digiday from a few months ago, maybe not even a couple of months ago, a couple of weeks ago. It was a report around a study by company Orex that does invoice factoring, an analysis of hundreds of payments from the most recent financial quarter. This was closing Q2. So this was going into Q3. An analysis of hundreds of payments from the most recent financial quarter found that nearly half, 46% of all payments owed to OREX were already overdue. That's nearly peak pandemic levels of tardiness, which were around 52%. Same goes for underpayments where the payments fell short of the full amount owed. That's inching towards a fifth, 15% of all payments OREX monitored in the last quarter. To put it bluntly, these trends don't bode well for the health of cash flow in the market. History tells us that when liquidity becomes an issue in the market, payment timing is one of the first things to go. This is Nick Carabia, EVP of Forex. Oryx is a company that I do partner with. If invoice factoring, if you want to get some invoices off your books before the end of the year, send me an email. I'll make an intro directly to Nick, tim at the oohinsider.com. He'll give you all the download, the skinny on what it looks like to get started. So if invoice, getting some invoices off the books would be a valuable way for you to close out the year. Just let me know. Send me an email, tim at the oohinsider. The OAAA keeps telling you the sun is shining because they have no idea how to drive revenue growth. Only how to contort a bunch of self-reported numbers into a story for membership retention. It was a great book. How to Lie with Statistics. It was written in 1954. It's even more relevant today than ever. Author Daryl Huff probes such things as the sample study, the tabulation method, the interview technique, or the way that we derive results from the figures, and basically goes on to show you exactly how data and statistics are manipulated into propaganda. Here's the truth, more competition establishes market efficiency and your ability to take more money from more places is the way you're going to establish market efficient rates and yields. What it comes down to is the opportunity to go faster. It is also the best way to insulate yourself from recessionary times and challenging market dynamics. So it comes down to defining three North stars for yourself. How can we accelerate the sales cycle? How can we close business faster? How can we increase average order value, right? Contract size or get more contracts. How can we increase, increase? The overall amount of revenue that we're generating, whether that's from a high volume of low-paying customers or from a low volume of high-paying customers, I recommend the diversified approach. And how can we extend the customer lifetime? How many times can we keep them coming back? How can we add value along the way? Do we only check in at renewal time because we have nothing else to say or we're too afraid that something isn't working? Or are we bringing value throughout the campaign and adding value beyond just the parameters of our engagement? Three ideas for your local media company to go big. One, partner with other local legacy media companies in your markets. If you're not a home company, partner with the TV company, the radio company, the newspaper company, because guess what? They all need other things to sell and you need other partners in the market. So why not work with them than work against them? Think that there's a great opportunity to develop a local or regional sales strategy. Too many words in one sitting. Develop a local regional sales strategy leveraging automated outreach. There's so many great opportunities with platforms like Instantly and Scraping Tools to develop really nice developed lists that you can start running an automated outreach campaign this afternoon that's generating local impact for your business. Or the Blip Playbook. Blip built an entire company off of running self promos on unused space and then running locally targeted Facebook ads to page admins. Why can't you do that? Why can't you run your own self promo ads and a couple of Facebook ads to drive the same impact that Blip has been doing all these years? Or if you're a big media company trying to go local, a few ideas for you, start developing thought leadership materials on zip code level targeting methods, tactics, strategies, invest in the technology. If you're a big company, you can invest in developing a local ads manager, a platform for advertisers to access your network, a la a Facebook, a la a Blip. That would be a great investment for you as well. And then also developing a system for identifying the up-and-comers of local. Those are the budding regional players. Personally, a podcast that I love for all sorts of brands and companies that are a good fit for that, The Wolf of Franchises. He interviews you know, franchisees who have 100 locations, 50 locations, and they are developing their footprint over large swaths of regional real estate. There's other ways for us to be prospecting. It's not just talking to the same people that we're always talking to. As a media company, I think there's a great opportunity for you to host local meetups to get your clients together. If that thought alone scares you, then maybe start there. There's something wrong with your business if that scares you. If you feel good about it, move on to step one. Once a quarter, a meetup at your offices, get entrepreneurs in the same room, networking, sharing value with one another. You become the catalyst, you're the connector, the facilitator, and thus, you are the authority. Someone who does this often to great success is actually the voice of the intro to the podcast, Jean-Paul Guedion over at jpghawaii.com. You can check them out. They are a vertically integrated out of home media company in that they have their own print production facility. So they use that space for awesome networking events. It's not about their products. It's just about connecting people. And as the connector, you become the plug and you live rent free in your customer's mind, not just during renewal season all year round. And for the right reasons. So how can you start going faster? How can you become more efficient? Because if your playbook isn't working now. It's definitely broken, which means it's a great opportunity to fix it. If your playbook is working, then your focus should be on adding more fuel to the fire and accelerating. Take all the chips off the table for yourself right now. I'm going to link to all the resources and the tabs that I showed up there at the top at the beginning of this in the podcast. And I'll probably just come back to this LinkedIn live here and drop them in there too, so that you can access them pretty simply. I didn't figure out a way yet to best share those live, but I appreciate you being here and joining us through this. Let's see, we've still got a few folks on here. And there's like the comment section part of the LinkedIn Live is very laggy. So leave your comments, leave your questions, and I will get back to them after the fact because I cannot see them live right now. And stay tuned for this episode of Out of Home Insider. See ya.