When Phil Clemas left APN Outdoor after eight years and subsequently announced he was starting his own outdoor advertising company, there were some eyebrows raised to whether we really needed another outdoor provider. New Zealand does, after all, have a number of established operators, covering the cityscape with glowing rectangles.
“APN Outdoor is a great business and it’s big. QMS is aggressive and big. Adshel is a good product and it’s also big,” says Clemas, admitting the nation is well supplied in the outdoor department.
“I knew Lumo had to be different.”
Clemas couldn’t compete with the other players in terms of scale, so, along with his partner Kent Harrison (pictured right), they set up Lumo to be a niche operation, specialising in premium roadside sites.
Clemas and Harrison have created a checklist of prerequisite requirements, which must be met before they are willing to invest in a site.
The site must have a key market location (Auckland, Christchurch, Hamilton or Tauranga) in the inner city or CBD fringe alongside a controlled intersection that has high traffic flow.
“It’s all well and good to have a big screen that looks good, but if it’s on the back street of some small town that’s going to be of little help to an advertiser,” says Clemas.
In addition to the specific site location requirements, Clemas and Harrison have invested in quality LED technology to ensure Lumo’s billboards don’t dim in comparison to the other sites around the city.
At the moment, Lumo has sites at Beach Road and Victoria Street West in Auckland and at Grey Street in Hamilton, with a fourth set to be unveiled at Auckland’s Anzac Street in June.
This, of course, is tiny when compared to the bigger operations in the market, but Clemas doesn’t see the diminutive size of his operation as a problem.
“We struggle to provide the volume to compete with the big guys, but we’re in a quality, not a quantity game,” he says. “Just because you have more doesn’t make it better.”
He draws a parallel with online advertising, which has also become flushed with inventory over the last few years. What we are seeing now is a transition from just getting ads into cyberspace to a greater emphasis on where those ads are and whether they are in fact seen by anyone.
This trend is also now taking shape in digital outdoor. Whereas digital billboards previously sold out months in advance in the earlier days, advertisers are now becoming more selective about the sites they deem worthwhile.
“From what we understand in the market, there are now some products that are selling out in advance and there are others that aren’t,” says Clemas.
“With more screens, there’s a mixed bag of quality. There are some high-quality screens, some medium quality screens and then also one or two poor quality screens. And with the range of quality, you’ll also get a range of occupancy levels.”
The point Clemas makes here is that it doesn’t really matter to his team whether they have the most sites, as long as the sites they own have high occupancy levels.
Going digital also means that Lumo can keep its staff overheads to a minimum. The partners run a lean operation, supported by Jamie Shaw on design and technical support, and Stacey Gattsche on media sales.
“Digital offers a very efficient way to operate a business,” says Clemas. “With digital, it’s all managed electronically through the internet. The client will email us the content for their ad, we then upload it via the cloud and then you’re in business. You don’t need lots of staff to manage the operational side of the business.”
Gesturing with his mobile phone, Clemas explains he doesn’t need people to climb outdoor sites to put up new ads; everything is controlled remotely.
The decision to go digital also allows the available inventory to stretch a bit further, with a carousel of six ads giving Lumo greater revenue potential. But while there’s certainly more money to be made in digital outdoor, Clemas says it isn’t quite as much as some might think.
“There is a perception by some that you make huge money out of digital billboards, but the reality is that it’s not quite as exciting as that, despite our attempts,” he laughs.
“We use a rough guideline that it’s usually two to two and half times the static revenue when you convert to digital.”
As the industry matures and more digital sites emerge, he expects this figure to plateau—eventually leading to competition along the lines of quality.
A gap in the numbers
Another major shortcoming Clemas identified when setting up his business was the lack of an accurate measurement system in the industry.
“There’s no across the board independent accountability for the industry,” he says.
“The best we have is what they refer to as a daily traffic visual (DTV). It’s better than nothing, but not by much. A DTV sources its information from council or NZTA data, so it’s just raw traffic count data, which is in some cases up to ten years old and it’s not specific to the location of the billboard. It will be a point on the road and usually main roads. If you have a billboard on a secondary road it’s even more difficult.”
Clemas also sees a shortcoming in measurement systems that rely on census data too heavily.
“The thing to remember about outdoor advertising panels is that it’s not the small number of people who live around the billboard; it’s all the people who come into that area from elsewhere. Using census data has its limitations. It can provide a component of some measurability but I’d love someone to explain to me how it’s relevant to most of the audience that goes past a billboard.”
Clemas saw these issues as an opportunity to introduce something better, and so invested in smart technology from the US that measures the actual number of cars passing a specific point in real-time via a camera attached to the billboard site.
The camera also records the speed of the vehicles passing by, giving advertisers access to the average dwell time of the cars passing the site.
Clemas says there are also plans to further augment the technology so that it can recognise the top 30 most popular car brands in New Zealand, adding another layer to the data available.
Clemas has—for obvious reasons—signed an exclusive two-year partnership with the provider of the tech but says he hopes to see something like this rolled out across the industry eventually.
Alongside the traffic counting tech, Lumo has also introduced tech that counts the number of smartphones passing a site.
“It’s a piece of technology that sniffs out Wi-FI signals from mobile phones, and we collect that data. This gives us another measure complementary to the traffic count that some advertisers will find useful.”
As New Zealanders become more concerned about being tracked—whether online or offline—measures such as these will inevitably become major talking points, particularly if users aren’t given a means to opt out.
And one thing that’s clear is that the outdoor industry needs to be careful or risk facing the equivalent of the adblocking trend that has led to users cowering from online advertising.
A bit of Roy Kroc in the mix
Another interesting point of difference with the Lumo’s approach lies in the investment in commercial properties.
“Lumo’s business is only outdoor, but a separate part of our business is focused on property investment,” says Clemas.
“It’s not exclusively for building billboards, but it’s a bit of sideline business where we invest in commercial properties. And if we can add a digital billboard on it, then that’s a nice bonus.”
The advantage of investing in properties is that it gives Lumo greater control of in the event the team is able to develop an outdoor site.
“The biggest reason why we want to go down that track is to ensure long-term tenure without the risk the of the lease going up after ten years. Because, as you know, rent only goes one way and that’s up.”
Developing the sites by adding a digital billboard also gives it an ambient source of revenue (which isn’t shared with a landlord) that could in turn, inflate the value of the overall property.
Although Clemas didn’t take inspiration from the McDonald’s approach, it is quite reminiscent of the turning point in The Founder, when financial advisor Harry Sonneborn (played by BJ Novak) advises Roy Kroc (played by Michael Keaton) that his real commercial opportunity lies in owning real estate where the restaurants are located.
With that in mind, Clemas certainly wouldn’t mind his business growing at the rate that McDonald’s did under the control of Kroc. But for now, he’s keeping his ambitions in check.
“We’re planning for another five sites by the end of the year… and we’re aiming to have 20 screens by mid-2019,” he says, reminding me again that he’s happy to play the long game.