Pics via @protestencil
As Google considers its own strategy, Netflix and Alibaba both boost their out-of-home advertising credentials with some serious investments. Dominic Mills looks at the strategies behind the deals
It’s childish, I know, but I always get a little thrill when I see some clever poster vandalising, in this case the artist known as Protest Stencil making an entirely valid point about Facebook.
It’s ironic nonetheless that this comes in a month when no less than two digital giants – big users of OOH both – have succumbed to Victor Kiam syndrome.
This, for those too young remember, recalls an advertising campaign for Remington. It featured entrepreneur Victor Kiam who would shout: “I loved the shaver so much I bought the company.”
Despite Facebook’s obvious love of OOH as a medium – you can’t walk around London without avoiding its presence at the moment – I can’t see it buying up an OOH contractor any time soon.
Meanwhile – as of a few days ago – there are suggestions that Google is coming at OOH from a different angle by offering up its programmatic platform to the industry.
Against this, something bigger is happening.
First up is Netflix, which last week completed a deal to buy 30 large-format sites from US OOH contractor Regency. You can see the transaction tombstone placed by investment bank PJ Solomon here.
But not just any sites. Bus shelters…no way. Six-sheets…pah![advert position=”left”]
They are all, to borrow US practice with superlatives, ‘spectaculars’ on a 1-1.5 mile stretch of Sunset Strip linking West Hollywood with LA. Over time, it will convert them to digital.
The deal, trailed by Reuters two months ago, is said to be worth around $150m – about $5m each.
The second is the purchase by Alibaba in China of a stake in Focus Media, China’s largest digital screen operator and with an estate – roadside, transport and indoor screens – said to have a footprint in more than a hundred cities and a reach of 300-500m middle-class citizens. The financing is complicated, but effectively Alibaba has paid more than $1bn for a 10% stake.
Let’s not get too carried away with the obvious irony here or hail a U-turn in the remorseless growth of digital – two giant digital natives buying into the world’s oldest medium doesn’t mean Facebook or Google suddenly decide TV or local newsbrands is where it’s at and buy ITV/Johnston Press.
Instead, there are a number of other forces at work…some common to Netflix and Alibaba, some discrete.
Let’s start with the discrete. For Netflix, Sunset Strip is clearly a premium location both in volume and demographics for its subscribers. It’s Piccadilly Circus or the Cromwell Road golden mile on steroids. But it could reach those people in other ways, if it so chose.
Here, the real value is in an audience subset – the actors, producers, film-makers who colonise the LA/Hollywood area. Those are the talents it really wants to impress, and $5m a pop for a single site is cheap if it helps Netflix land the mega talent.
And of course clever executions will drive social media coverage by the influencers who are obsessed with the minutiae of Hollywood. Getting talked about is the thing. If Hollywood were a country, its currency would be fame, not the dollar.
I don’t doubt too that there’s a certain competitive kick that Netflix will get from blocking out any of its competitors, whether that’s studio-produced TV series or Disney blockbusters.
For Alibaba, the game is a little different. I’m not sure I fully understand the dimensions of its scope, but it is enormous. And while it lags Amazon in market capitalisation ($450bn versus Amazon’s $930bn – but still three times that of Netflix) it has fingers in as many pies, including e-payments, logistics, a third-party seller platform and food delivery.
And like Amazon, it too has a growing advertising business, including selling transactional and customer-journey data. It describes the purchase of the Focus stake as a brick in its ‘New Retail’ strategy, which it doesn’t explain clearly but seems to revolve around upping the tempo of its physical operations and using OOH/DOOH as a means to bridge the gap between that and its huge digital footprint.
But even if you put that to one side, taking a stake in Focus adds to its advertising credentials, whether it chooses to use them for its own benefits or to sell to its merchants who use its platform.
Looking at the bigger picture, these deals also tell you something about some basic media truths.
Number one is that, for all the clever stuff you can do with digital, old-fashioned one-to-many impact (broadcast, in old money) is still an immensely powerful weapon – and, judging by the price Netflix and Alibaba have paid for those OOH assets, worth a hefty premium.
Number two is the value of unimpeded cut-through offered by OOH. Clutter is bad here, but in the US and China it is overwhelming. And if you think we spend too much time glued to our phones here, it’s even more of a factor in China. In that case then, more digital advertising is not the answer. But something that’s hard to dismiss or ignore is.
Number three is that, if you’re going to acquire assets in legacy media, OOH is the one that technology is most friendly too. For the others, tech is more a threat than it is a friend.
It remains a medium where there is sufficient fragmentation for consolidation to be a driving force. But does that mean we’ll see Google move into bus shelters or Amazon buy anything close to a shopping mall?
I don’t think so, but you could posit that to properly demonstrate its programmatic credentials in DOOH Google might find it helpful to buy itself a contractor.
Those in the game think these deals will encourage outsiders to look at acquiring OOH assets, but not until they see how – or if – Netflix and Alibaba make them work.
