The structural shift in the outdoor sector, with digital screens making the media more like a broadcast medium, is starting to make a big difference in Australia.
This is one of two main reasons market analysts like oOh!media, the local market leader in out-of-home. Growth is built in as electronic screens replace old billboards.
The other is the sharp lift, post pandemic restrictions, in road traffic, pedestrians, commuters and flyers heading to the airport for work and holidays again.
Local market leader oOh!media returned to profit in the year to December with revenue jumping 18% to $592.6 million as outdoor media advertising surged.
oOh!media is the only traditional media stock that Macquarie has as an Outperform recommendation.
At Morningstar, equities director Brian Han says the results are enough to justify the about 20% jump in oOh!media shares since the start of 2023.
“The post-COVID-19 recovery is in full flight,” he says.
He sent a note to clients titled: A Big Outdoor Renewal Year in 2023 for oOh!media in Every Sense of the Word
Going digital is the big factor, attracting ad spend from other media sectors.
oOh!media CEO Cathy O'Connor told AdNews: “Digital revenue is now 64% of sector revenue. And not only the fact that a digital billboard or sign can obviously do a lot more than a static in terms of the number of different brands that can participate but it allows you to do a lot of things with data and contextual advertising, and gives you the flexibility and immediacy and a real time nature that wasn't there traditionally.
“Those things mean there's a lot more bases upon which advertisers can explore creative executions with out-of-home, and that's what's happening.”
O’Connor, who took over as CEO from founder Brendon Cook in 2021, says oOmedia is the largest and most diversified of OOH players with big formats for roads, street furniture and retail.
“We’re also exposed to the office environment and airports,” she says.
“And all of those are recovering nicely now from the woes of 2020, and 2021. And that's going to play into more upside for our media because we are more heavily exposed to those formats.
“I think it speaks to the diversity of our portfolio and that just means there are a number of bases upon which we're seeing growth.”
The market
O’Connor says the advertising market is short and has been for some time.
“And the beauty of digital out-of-home is that it can participate in a short market,” she says. “And that's certainly what we're seeing at the moment.
“Our Q1 (march quarter) pacing is 8% up year-on-year. And I note that that is a better position than some of the listed radio and television companies that have reported thus far this year.”
“If you stand back from our results and look more broadly at the sector, the structural shift towards out-of-home that is now starting to play out.
“And we saw that in 2022. In the SMI data this sector achieved a 1.9% percentage point growth in share of total media to 12.4%.
“If you just look at Q4 (December quarter) alone, that was 13.7%.
“Obviously, what's playing out there is this digital evolution of the sector. It's the benefits of the new measurement system that we've put in in January with move 1.5 and that those improvements will continue with the advent of (mesurement tool) Move 2.0
“Then also it's an audience proposition. We are not seeing a decline in our audiences. As a matter of fact, they are getting stronger as populations grow and cities expand.
“I do note some of the linear forms of broadcasts are really starting to see structural declines.
“We are the only established media that has this privileged place of growth in mass reach. That's a very strong, vital sign for the sector. Along with all the digitisation, that’s really resonating now with advertisers who are looking for mass audiences in a cost efficient way.
“Just think about the common sense argument for out-of-home. It is not being disrupted by streaming platforms. It is a mass reach medium, which is increasingly broadcast and digital. It has all those attributes. Behavioural patterns with advertisers take a while to shift but it's certainly shifting now.”
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