The Economics of Everyday Things
00:04:18 · Anna Bager, Zachary Crockett
[00:04:18] S6: Some of the earliest examples that we know were when a circus started to promote their business by putting up large posters to advertise their traveling shows. [00:04:28] S4: These posters, from the likes of Barnum and Bailey, were hung on barns along major travel routes and featured bright illustrations of exotic animals and acrobats. By the eighteen seventies, a small industry had emerged around building billboards and renting them out to clients. And as cars and highways proliferated in the twentieth century, so did billboards from brands like Palmolive, Kellogg, and Coca Cola. Today, there are so many billboards in America that it can be hard to count them. [00:05:00] S6: One billboard can actually be two billboards facing in different directions, sometimes three. But as of structures, there's about 350,000 static billboards in The US and more than 30,000 digital billboards. [00:05:13] S4: To the advertising industry, billboards are a part of a category called out of home. [00:05:19] S6: You can think about it as any type of advertising that happens when you're leaving your house. In your house, you would watch television. You would be on your phone. You'd be on your computer, and you see ads there. But when you leave your home, you're exposed to advertising too. And out of home ads can be anything from billboards, large digital screens in Times Square, to advertising in the subway or on buses or in airports or in shopping malls or in cinemas. You know, we're everywhere outside of the home.
00:05:19 · Anna Bager, Zachary Crockett, Dan Levi
[00:05:19] S6: You can think about it as any type of advertising that happens when you're leaving your house. In your house, you would watch television. You would be on your phone. You'd be on your computer, and you see ads there. But when you leave your home, you're exposed to advertising too. And out of home ads can be anything from billboards, large digital screens in Times Square, to advertising in the subway or on buses or in airports or in shopping malls or in cinemas. You know, we're everywhere outside of the home. [00:05:49] S4: America's 370,000,000,000 advertising industry is largely driven by the Internet. Think Facebook and Google. Out of home only makes up a small sliver of the pie, but it's still a $9,000,000,000 business, and it's thriving. As other traditional ad mediums like print and cable TV have declined in revenue, billboard ads have continued to grow. Bager says this is partly because they enjoy a special advantage. [00:06:19] S6: Think about a huge billboard. You're driving past it sometimes several times a day. Sometimes you're stuck in traffic. You tend to spend more time with physical signage than I think you do with any other form of advertising. [00:06:32] S4: There are a number of small local companies across the country that own and operate billboards, but around 65% of the industry is controlled by three big national players, Lamar Advertising, Out Front Media, and Clear Channel Outdoor. [00:06:49] S5: We have in excess of 60,000 billboard faces across the country.
00:06:49 · Dan Levi, Zachary Crockett
[00:06:49] S5: We have in excess of 60,000 billboard faces across the country. [00:06:54] S4: Again, that's Dan Levi, chief marketing officer at Clear Channel Outdoor. [00:06:59] S5: On a day to day basis, I'll work with some of the largest multinational advertisers, Disney, Apple, Netflix, Morgan and Morgan, who's the largest advertiser from the legal services space. But I'll also work with local advertisers. It's a part of the way that they've told their story in their community for years. [00:07:20] S4: Some of these billboards are what are called wallscapes. They're on the side of a building or on the top of a building in the downtown area of a big city. But the more common billboard is the classic bulletin. [00:07:33] S5: Those are the billboards that everyone knows, the large billboards on the side of a major freeway. Most of them are horizontal. The standard size is a 14 foot by 48 foot. [00:07:43] S4: In a desirable area, getting these billboards up and running is a competitive process. [00:07:49] S5: It's something that we don't really talk about that much externally. So we have a real estate team, and our real estate team works with landowners who can benefit from the presence of billboards on their property. And that's everything from government bodies all the way down to individual landowners and small businesses that have either a structure on their property or an interest in working with us to build something.
00:07:49 · Dan Levi, Zachary Crockett
[00:07:49] S5: It's something that we don't really talk about that much externally. So we have a real estate team, and our real estate team works with landowners who can benefit from the presence of billboards on their property. And that's everything from government bodies all the way down to individual landowners and small businesses that have either a structure on their property or an interest in working with us to build something. [00:08:16] S4: Sometimes, Clear Channel will buy land outright and build a billboard on it. This can cost hundreds of thousands or even millions of dollars. Other times, they may work out a lease deal where they pay the landowner a monthly rent for the right to build and operate a billboard on the property. Landowners either get a flat monthly fee or a percentage of the advertising revenue, generally anywhere from 10 to 30%. [00:08:42] S5: There certainly are landlords who recognize that there's value in having billboards on their property, and they will either build it themselves or they'll work with a company like Clear Channel to build it. We plan to do the necessary testing of the land, the engineering work, the design, architectural designs, and then actually do all the construction ourselves. [00:09:04] S4: Building a new billboard is costly. You're usually looking at a $100,000 or more for a standard 14 by 48 foot bulletin along a freeway. That includes permits, steel poles, foundation work, ground testing, installation, and labor. But these days, many billboard transactions involve preexisting structures.
00:09:04 · Zachary Crockett, Dan Levi
[00:09:04] S4: Building a new billboard is costly. You're usually looking at a $100,000 or more for a standard 14 by 48 foot bulletin along a freeway. That includes permits, steel poles, foundation work, ground testing, installation, and labor. But these days, many billboard transactions involve preexisting structures. [00:09:26] S5: The way that companies like Clear Channel and other larger national companies have grown is oftentimes driven by acquisition Because you'll have small business owners who start a billboard company or build a handful of structures and then build a viable local business that at some point, they sell to a larger company to take over the operation of those structures. [00:09:48] S4: On broker websites like billboardsales.com, billboards with proven ground traffic in a desirable location can run upwards of $600,000. It's a big upfront cost, and companies like Clear Channel make their money back by renting out the blank canvas to advertisers. These deals can work in a few different ways. [00:10:11] S5: Most larger advertisers will buy a collection of locations, But then you also have local advertisers who have one store, and they just want that billboard that's down the street from them. [00:10:20] S4: And is there a standard time period that you commit to for a billboard when you rent a billboard space?
00:10:20 · Zachary Crockett, Dan Levi
[00:10:20] S4: And is there a standard time period that you commit to for a billboard when you rent a billboard space? [00:10:26] S5: So a four week period used to be the standard, but Apple, Disney, Netflix, Verizon, GEICO, so many brands do long term contracts for specific locations that they don't wanna ever give up. And so the inside baseball language for that is oftentimes referred to as a perm or a permanent contract, where it's a long term contract for that location where they change the creative out throughout the contract. [00:10:54] S4: For advertisers, billboards can be an affordable way to reach a lot of people. Nationally, the average cost is around $4,000 a month, but the actual prices can vary a lot depending on the market, the specific location, and the size of the billboard. [00:11:11] S5: We have billboards that will cost you hundreds of thousands of dollars to rent for a few weeks, and we have billboards that cost hundreds of dollars. [00:11:21] S4: What's a $100,000 billboard? [00:11:23] S5: Times Square, Sunset Strip, places that are so in demand. [00:11:27] S4: Whether a billboard is in Times Square or on the side of a freeway in Arkansas, the ad has to be carefully designed to attract attention. What works in other mediums often doesn't work on a billboard. It would make sense to assume you could take