Going underground – what can the Tube tell us about the future of advertising? By Glen Wilson, MD, Posterscope

For all the grumbling about the crowds, prices, temperatures, delays and the occasional crippling strike, Londoners have it pretty good with their public transport system. The services mostly run on time, are relatively reasonably priced and are certainly the easiest way to get around the city. The systems also run on a non-profit basis – all the revenues TfL produces are funnelled back into the network to improve the quality of service.
One of the most universal experiences of public transport in London is our exposure to advertising. TfL controls some of the most valuable and influential advertising inventory OOH networks in the world. Combined with the London Bus Shelter contract, the London Underground OOH contract represents 15 to 20 per cent of the UK’s total OOH market, collectively worth in excess of £1bn over the duration of the contracts. The London Underground contract is one of the biggest of its kind in the world, and demonstrates not only the power TfL holds, but also a dynamic unique to the OOH sector.
TfL is a landlord, which means that media owners must bid for the right to buy and sell ads on the network. The pitch process for the London Underground OOH contract recently opened, while the London bus shelter OOH contract has recently been awarded to JCDecaux, a change from the incumbent media owner, Clear Channel’s Adshel, for the first time in 30 years.
This relationship, in which media owners must rely heavily on winning contracts from third party landlords, is unique in the media industry to the OOH sector. The major contracts held by TfL are just the tip of the iceberg. There are roughly 7,000 individual contracts in the UK. These include local authorities controlling media space around public spaces, private companies with extensive inventory networks and individuals that happen to have a billboard on the side of their home.
However, in spite of its importance to the OOH sector, the pitch process for third party contracts isn’t nearly as well understood as that of media and advertising pitches. Huge amounts of work go into each and every contract tender, as media owners constantly seek to demonstrate to landlords the value of their expertise, the quality of their technology and the way in which they will maximise revenue for the landlord. This gives every tender the capacity to change the landscape of the OOH industry, both today and in the years to come, particularly when the tenders are for major inventory networks like TfL’s London bus shelter contract, or indeed London Underground.
The influence held by OOH landlords will be buoyed by the strong performance of the OOH industry recently. Even as traditional media’s audiences are declining, OOH audiences continue to grow. In February this year, Outdoor Media Centre found the industry had enjoyed its strongest quarter ever, with revenues close to £300m. In addition, the sector grew by 6.1 per cent in the fourth quarter of 2014 to reach annual revenue in excess of £1 billion, with overall annual growth at three per cent. OOH also saw higher growth than any other media industry over the last decade, apart, of course, from online.
With performance so strong, bidders for the London Underground contract will need to demonstrate how the industry’s success and growth will be reflected in the revenues they can generate. TfL is a public body, and as such has a responsibility to the taxpayer. It currently has a goal to generate £3.4bn in non-fare revenue. This means that the more revenue contract bidders can promise TfL the more likely they’ll achieve their goal, and thus the more likely the pitch will be successful. However, there are challenges media owners must address when credibly promising an increase in revenue. TfL’s inventory is predominantly fixed – the number of buses, bus shelters, tube trains and stations isn’t going to change too much over the next decade, so the amount of advertising inventory is unlikely to increase either.
Instead, successful bidders will need to focus on the one factor that can change, and provide real additional value – innovation. Delivering new exciting, high value, easily accessible, dynamic advertising propositions that resonate with the public is how media owners will be able to differentiate their offering. Innovation gives bidders a credible way to demonstrate how greater value can be driven through OOH media, by enabling campaigns to be more impactful, more engaging and more relevant to consumers.
That the purity of media innovation alone can be so influential to a successful OOH contract pitch shows how unique the dynamic of third party contracts is for the industry. However, it also forces the industry to consistently put its neck out, to push boundaries and break new ground. It transforms those of us working in the sector into pioneers, a cultural necessity that has a fantastic impact for advertisers.