How does your network stack up in terms of attracting investors?
Eric Zinterhofer, partner of Searchlight Capital, New York, gave an in-depth look at the digital out-of-home industry and its positives and negatives as investment opportunities for his company.
[1]To give an idea, Zinterhofer looked at one company’s list of attributes as an example of things that would start to attract investors in terms of: audience scale; measurability; audience quality; experience quality (sight, sound, motion); standardization and ease of buying; owned vs leased network; commodization avoidance.
And his comments elicited many questions from the audience of about 100 of the industry’s top players.
Zinterhofer made it clear that his company ia looking to invest in as many as eight companies in the coming years, and that the media and communications sector are of particular interest. DOOH is interesting because its growth and its growing share of advertising – although consolidation is necessary, and agencies still see it as a tactical rather than a strategic buy and, for the most part, the agency buying structure is a challenge. In addition, not all verticals are carefully positioned.
“However, it’s a robust industry with diversified networks and venues and with increased penetration,” said Zinterhofer. “And although there are 200 operators and more than 500 networks across the U.S., only a few generate more than $10 million in annual revenues.”
Zinterhofer said that once horizontal consolidation occurs, there will be several very big players. But the fact that agencies are not structured well today to buy DOOH media, is a real hindrance.
“Agencies are used to buying at scale, and it lowers the effective cost of overall media campaigns.
“Of course, the industry must also have a defensible ROI proposition to be successful. And companies must market their audience to the appropriate advertisers. Further, keep in mind that the existence of other media around yours may distract from yours.”
Noting that standardization and ease of buying are “largely imperfect”, Zinterhofer made several recommendations, including that companies be part of measurement companies such as Nielsen, and that they should be able to compare themselves against other companies.
“And if you don’t own your network, you can get squeezed,” he said.
What is his company looking for?
“Leaders in their vertical; representing a platform for further industry consolidation; providing a high quality consumer experience; and with a strong management team that has a clear vision.”