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Ooh Media’s Cathy O’Connor on why OOH’s in-market position is no match for other channels
After Australia finally breaks out of COVID lockdowns, Emma Shepherd speaks with Ooh Media CEO Cathy O'Connor about the company's FY21 financial results, and how the growing adoption of digital screens along with new innovations in automated trading and data has elevated OOH’s in-market position.
Ooh Media posted impressive revenue numbers this week, with full-year results showing the out-of-home (OOH) provider had an 18% lift in revenue to $504 million, compared to the prior year.
The diversity of the company’s assets across a range of OOH formats ensured Ooh was able to deliver this revenue uplift despite substantial lockdowns in Q3 CY21 and early Q4 and some formats (Fly, Office, Rail) continuing to be impacted by the pandemic.
Ooh Media CEO, Cathy O’Connor (pictured)
Ooh maintains significant operating leverage to grow earnings faster than revenue which resulted in a 24% increase in underlying EBITDA (pre AASB16) despite lower rent abatements and no Government wage subsidies in CY21 compared to CY20.
As a result of Ooh’s strong financial position, the company will recommence dividends to shareholders for CY21.
Ooh Media’s CEO, Cathy O’Connor tells Mumbrella, if you look at the full-year results from 2021, it was really the formats of Road, Street and Retail that is really driving that recovery for the company.
“We had record revenue for the road sector in November and December last year pushing up past the levels of 2019 which is a great sign for the industry.”
She adds: “During 2021, we had a more stable environment in Western Australia, South Australia, and to a lesser extent Queensland. However, the majority of the revenue was driven out of Sydney and Melbourne.
“Q3 was the lowest point in terms of the revenue impact that OOH felt. Having said that, the Q4 rebound was very emphatic in November and December, and most of the growth was driven from Sydney and Melbourne.”
The Company’s financial position continued to strengthen during the year with net debt at 31 December 2021 of $64 million; a reduction of 32% from 30 June 2021. Credit metrics continued to improve with the company’s gearing ratio (net debt / underlying EBITDA) as at 31 December 2021 of 0.8 times, compared to 1.8 times at 31 December 2020.
Street Furniture and Rail (formerly Commute)
Revenue in Street Furniture and Rail (formerly Commute) increased by 23% to $182 million as audiences continued to return, notwithstanding lockdowns in NSW and Victoria in the third quarter. Street Furniture revenue for the month of December 2021 was nearly flat with December 2019 (pre COVID). Revenue in Rail continued to be impacted by passenger declines in key stations in Sydney and Melbourne.
Road
The Group’s Road (billboard) division continued to be the standout performer in the portfolio continuing its strong result from the first half. Revenue increased by 34% to $158 million. Following a soft third quarter, which included the New South Wales and Victorian lockdowns, revenue rebounded very strongly in November and December which were both record revenue months for Road.
Retail
Revenue in the Retail segment rebounded significantly from the prior year with an increase of 18% compared to CY20 to $125 million. December 2021 was a record revenue month for Ooh as it successfully leveraged audience growth in this segment.
Fly
COVID-related restrictions in air travel continued to impact revenue in the Fly segment beyond what was experienced in the key Street Furniture, Road and Retail formats. However the re-opening of state borders resulted in a stronger performance towards the end of the year with revenue approaching 40% of 2019 levels in December. Full year revenues declined by 46% to $12 million.
Locate
Revenue in the Locate format continued to be affected by employees working from home during lockdowns and the pandemic more broadly. Revenue was $12 million, noting that location predominantly has a variable rent profile.
Looking ahead, O’Connor believes programmatic advertising is an important part of the incremental growth ahead for the OOH industry.
“I do think there will be a large percentage of our customers that continue to interact with OOH in the current way,” she says. “I would say those advertisers, which is a substantial amount of the blue chip advertisers in the country, that want mass reach, broadcast campaigns, frequency, often come to us with broad marketing briefs and insights, and are looking to develop campaigns and ideas, while working with us. Those campaigns will continue to trade with OOH in more of a face-to-face way.”
She adds that the emerging programmatic category is really more about the tactical uses for OOH, which are all now possible with digitisation.
“As a result of that, we’ll see classes of new advertisers that haven’t used OOH before,” O’Connor explains. “They might be digital advertisers that are currently trading through DSPs (demand-side platforms), and doing their own digital marketing, and really using OOH the way digital is used, adaptably, in real-time, with flexibility.”
O’Connor says with the growing adoption of digital screens along with new innovations in automated trading and data has elevated OOH’s in-market position as OOH has not been disrupted by data businesses like other dominant media channels.
“OOH is not a medium that’s been disrupted by data businesses and streaming platforms like Spotify, Netflix, and all of the digital businesses that have first-party data as a core part of what they do,” says O’Connor. “OOH is a mass reach medium, its one-to-many, and in an environment where the evolution away from cookies and digital targeted ad serving is becoming harder, and harder, it plays beautifully into OOH’s one-to-many proposition.”
A one-to-many medium means that several people are likely to be looking at a screen at any given moment, meaning that one play of an ad needs to be counted as several impressions.
O’Connor says there will be an emergence in the industry of what she calls “Hybrid OOH” that we will see more of in years to come.
“This means that customers will do both. They may do no less of their large mass-reach campaigns, and look to extend reach, or perhaps extend the geographies within a national campaign because of certain operating principles or campaign objectives,” she says. “It all plays for OOH having far more ways that it can engage with customers. I think it’ll expand the customer base in the process, and I think it’s a big part of the structural work that lies ahead.”
Meanwhile, Ooh Media launched in January, as part of the Outdoor Media Association’s suite of innovations, an upgrade to the industry’s audience measurement system MOVE (Measurement of Outdoor Visibility and Exposure).
MOVE 1.5 will introduce an accurate measurement for digital campaigns and a qualitative metric, the Neuro Impact Factor, which goes beyond attention to measure the impact it has on people who see OOH signs.
In addition, MOVE 1.5 will report reach and frequency for digital signs based on impressions by accounting for audience dwell, sign dwell and share of time bought. This has been built into the current world-class MOVE system and is an interim step while the industry upgrades to a new measurement tool MOVE 2.0 in 2024
“I think the foundation of a good sector is a strong currency, and what we have now is MOVE 1.5, will continue to evolve and improve our sector with this new measurement. Whether it’s a digital or analog world, this is our greatest asset,” she says.
“In support of our digital out of home strategy, we have continued the digital transformation of our planning and buying systems. As part of this program, we are implementing initiatives to simplify the planning and buying process. We are also participating in the emerging programmatic digital OOH marketplace and further developing systems for improved yield management.
“As a medium, OOH stands to benefit from the adoption of the MOVE (measurement of outdoor visibility and exposure) 1.5 industry standard from the first quarter of 2022.
“The Industry is now united on Share of Time as the common currency which will make it easier for advertisers to plan, buy and measure Out of Home campaigns via an enhanced, more accurate and standardised approach,” O’Connor adds.
In relation to Ooh Media’s investment plans for 2022, O’Connor shares: “On the asset side, we continue to digitise our network into the areas that show high value for the company.
“So, consider in the places of road, retail, and street sectors that are leading the recovery, this is where we see good return of investment (ROI), and will continue to digitise our assets.”
She adds: “We will also continue to invest in our systems and process behind the scenes that make Ooh Media easier to buy and trade with. Increasingly, as we engage with customers around leveraging audiences a cross our formats, the ability to have intuitive and frictionless technology that allows us to optimise campaigns is going to be increasingly important and we’re making investments into that, as well.”
Ooh Media has started the new financial year strongly. Revenue for the first quarter CY22 is pacing at 15% higher than Q1 2021 and at 93% of Q1 2019.
While the impact of the Omicron variant on overall demand for advertising media has been limited, there has been a pronounced impact on audience environments which have seen substantially less foot traffic than pre COVID such as Offices and Airports Capital expenditure for the full year is expected to be between $45 million and $55 million and remains focused on revenue growth opportunities and concession renewals.
“Our strategy is focused on Ooh being a more digital and digitised OOH business generating enhanced leverage from our portfolio of existing assets and disciplined investments in building our assets and capability to deliver further growth.
“During CY21, we added over 30 digital locations to our metropolitan and regional roadside billboard portfolio which means we now have over 200 large format digital signs across Australia,” O’Connor concludes.
topics
Cathy O'Connordigital out of homedigitisationDOOHfinancial resultsFY21Hybrid OOHinnovationsMeasurement of Outdoor Visibility and ExposureMOVE 1.5MOVE 2.0oOhOoh Mediaout of home
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