The Digital Signage Insider

DOOH Ad Pricing Varies Widely on a Per-Spot Basis: Survey

Published on: 2011-12-15

Regardless of what the cool kids (and analysts) say, I often encourage my DOOH customers to adopt pay-per-screen or pay-per-spot ad pricing. I've been making this recommendation for a long time now. Yes, media planners hate it. And yes, it's different from how an advertiser might buy any other kind of medium. But based on my experience, the typical DOOH ad seller is usually a small network, not some huge agency. And the ad buyer is far more likely to be a small, local business than McDonald's or Coca-Cola or Chevrolet. Consequently, the costs and complexity of calculating a reach metric and using that as the basis for pricing isn't justifiable for the bulk of the people who are buying and selling DOOH media. Still, our survey has told us that most people today do use reach-based pricing, and in fact, that's how they would prefer to buy/sell DOOH media when given the option. So, where does that leave per-spot based pricing strategies? Luckily, we collected a bit of data on that as well.

Buying DOOH ads on a per-spot or per-screen basis

To begin with, when asked "When I buy/sell DOOH media on a per-spot basis, I expect to charge/pay...", our respondents said the following:



This chart gives us a nice idea of what respondents feel is a fair price to pay for... well... something. While plenty of people -- nearly 40% -- outright admitted that they didn't know how to price DOOH media this way, others were more than happy to pick some numbers that they felt reflected reality. Unfortunately, there was a flaw in the methodology that prevents me from drawing a conclusion as to the typical pricing of DOOH media on a per-screen or per-spot basis. In short, responses like "$21-$40/spot/month (per screen or venue)" and "$21-$40/spot/month (network-wide)" can be taken to mean different things. When I wrote up these choices, I was making a distinction between deals where a buyer is allowed to purchase spots on individual screens of a network a la carte versus deals where an advertiser has to purchase spots on every screen in a given network. However, survey-takers could have interpreted the "across the whole network" options to either mean "I'd pay this much per screen when I buy ads on every screen in the network" or "I'd pay this much in total to have my ads play on every screen in the network." That's obviously a pretty important distinction, and even if we knew that most responses were based on the latter interpretation, it'd still be impossible to figure out a per-spot, per-screen price -- since network sizes vary from a single screen up to the thousands.

So, looking at it from any one of several different directions, maybe the average cost per spot is about $49/screen/month. Or maybe it's $90/screen/month across the whole network (whatever that means). Over the years, I've anecdotally heard everything from $10/screen/month to well over $200, so I really don't have much of a feel for which of these numbers might be most indicative of today's market. Of course, that position might turn out to be the most accurate: as multiple respondents noted in their comments, DOOH advertising networks are so diverse and heterogeneous that there probably isn't a mean or median price that reflects what most spots on most networks truly sell for.

Comparing the perceptions of buyers and sellers

With all that said, it's interesting to observe that buy-side respondents tended to skew toward higher price ranges, while sellers perceived a much wider range of pricing options:



As we discussed earlier in this article series, it's possible that our buy-side survey takers came exclusively from big agencies accustomed to buying premium placements on big networks for big fees. Or, it could be because we only had a handful of exclusively buy-side respondents, and it's easy for a small sample size to skew the results. Whatever the case, the dynamic that I expected to see -- namely, DOOH buyers trending towards lower prices and DOOH sellers trending high -- didn't show up. So, we can take comfort in knowing that the overall data isn't significantly biased toward one group or the other.

Sadly, my shoddy survey-putting-together skills mean that for now, we still don't have a good answer to the question of how to price DOOH media on a per-screen or per-spot basis. Still, I continue to like this model a lot. It's simple, it's easy to explain, and when pitched by the right networks to the right audience of advertisers, it offers an equitable way to value screen time without the need for any fancy metrics or methodologies.

Does pay-per-screen or pay-per-spot pricing still have a place in today's DOOH advertising world? Leave a comment with your thoughts! (If you're viewing this in your email or RSS reader, click through to /blog to comment.)


Comments   

0 Dave Lawrence 2011-12-15 20:02
Bill, I started a post on Linkedin DSA digital siganage group. The inital post asked to hear from anyone who has started or is running a small regonal ad supported DS network. I recieved a few responses from actual operators and a some other responses. It appears that you have done some research regarding this part of the industry. The following is my last entry in the post, but the last of your blogs specifcally related to the general viablity of ad supported networks was in 2007. I appreciate your comments. WhatTMs interesting is that there appears to be a consensus that small regional ad supported networks are not viable. From what I can ascertain, after a year of researching the DDS industry, there doesnTMt appear to be any research regarding small regional ad supported networks. I think that the negativity, regarding ad supported networks, stems from the fact that the industry pun dents have experienced the demise of grandiose attempts at developing very large ad supported networks. Without doing any research they have extrapolated, from the afore mentioned, that all ad supported network business plans are suspect and inevitably suffer the same fate. ITMve spoken to about a half dozen operators of small regional ad supported networks, most with 15 or less venues. All of them report a positive experience based on hard work. They are experiencing various levels of financial success, but all feel that they will eventually have a viable business. I agree that these small network operators must maintain a keen understanding of the latest technology including sms, qr, interactive, mobile, etc. My experience in the static sign world has shown that some of the most aggressive innovators of new technology are the small value added resellers and end users. I think the successful small ad supported networks have learned that they must place their screens in venues that provide long dwell times with specific demographics. They become visual communication consultants to their clientTMs, develop an appropriate ad and match their ads to the appropriate venue. TheyTMre hands on face to face with clients as opposed to someone attempting to sell them advertising programs over the phone. ITMm a realist and understand that developers in any industry want to penetrate the McDonalds and Wal-MartTMs. Most will not get these opportunities. The alternative is focusing on vertical markets like health, education, corporate, etc. but there are limited numbers of these opportunities. There are unlimited numbers of small to medium local businesses that need advertising. Maybe ITMm missing something, but for the above reasons I think the DDS industry is remiss in not doing research focused on this segment of the DDS channel.
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0 Bill Gerba 2011-12-15 21:44
Hi Dave, I don't think you're missing anything. While small networks are definitely not under-served from a vendor perspective, they don't get anywhere near the respect and coverage of their much larger counterparts. Your insight is correct, and I'd guess that as much as 80% of the demand base for digital signage comes from people planning networks of 25 screens or less. I would LOVE to put together some research focusing exclusively on local and hyperlocal network techniques. Unfortunately, while I talk to people who run these types of networks all the time, I've yet to come up with anything remotely resembling best practices for them. In general, successful small networks might have some unique understanding of their market, they might have insanely hard workers, or they might just be lucky. I simply don't know of any commonalities that we could write about and say "if you do this, you'll be successful." With the bigger players, on the other hand, there are some very clear DOs and DON'Ts, which makes it easier to cover (plus, with so few "big" networks, it's a lot easier to do research). Thanks for the great comment!
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0 Sung Kim 2012-08-20 02:36
Good day! Which would be the standard of Pay per screen, Pay per spot, Pay per interactive, Pay for sales and Pay for what? Thanks.
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