Outdoor Advertising Outlook, Trends, Challenges

Billboard Companies Hit by Gasoline Prices, Then Financial Crisis

Oct 31, 2008

OAAA says outdoor boards still "attractive medium," but Lamar Advertising stock drops from $52 to $15 and CBS reports a four percent decline in its billboard business.

A steep decline in the Lamar Advertising stock prices in late 2008 indicates that outdoor advertising is apparently experiencing some of the same misery being reported by other segments of the advertising world. Lamar, which promotes itself as the nation’s largest outdoor ad firm, saw its NASDAQ stock price fall from $52.70 on October 30, 2007 to $14.96 on October 30, 2008.

On that same date, Soleil Securities downgraded its rating of the Lamar stock from hold to sell and lowered its price target from $28 to $12. Just two days earlier, Caris & Company, an investment bank, had changed its Lamar stock rating from "above average" to "below average."

Soleil said its lower ratings reflected "a deteriorating advertising environment and our expectation that a weak economy will drive lower ad revenue well into '09." Outdoor advertising companies were hit by record high gasoline prices in mid year and the nation’s financial crisis later in the year.

CBS Billboard Business

CBS also reported that its huge North American outdoor advertising business declined four percent in the third quarter of 2008.

Lamar, which was founded in 1902, says it operates over 150 outdoor advertising companies in more than 40 states and has over 70 transit franchises across the United States, Canada and Puerto Rico. It provides advertising on standard billboards, digital billboards, bus shelters, benches and buses.

Lamar says it is also the nation’s leader in the highway logo sign business with operations in 19 states and Ontario, Canada. The company is headquartered in Baton Rouge, Louisiana and is headed by Kevin P. Reilly Jr.

On September 29, 2008, the Outdoor Advertising Association of America (OAAA) reported that the out-of-home advertising industry, which is primarily outdoor advertising, increased 1.7 percent in the second quarter of the year. The association said that "despite a softening economy" the industry had generated $2.2 billion in advertising.

Stephen Freitas

Stephen Freitas, OAAA’s chief marketing officer, said "the reach of outdoor advertising is unchanged despite changing travel habits, and that makes it a very attractive medium as other media suffer from fragmentation and declining audiences."

OAAA’s second quarter statement said "despite high gas prices, consumers are commuting, traveling, and using methods of public transportation which contribute to the bottom line of outdoor advertising’s core audiences."

According to OAAA, billboard advertising increased from $4.3 billion in 2006 to $4.8 billion in 2007. Total outdoor advertising grew seven percent, from $6.8 billion in 2006 to nearly $7.9 billion in 2007.

For 2007, Lamar reported net revenues of $1.210 billion, an eight percent increase over 2006. Its operating income was $227.8 million.

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