LED “digital” billboards can serve a useful purpose – but most of the time not in the manner the buyer or builder hopes for. Sure anyone can strap an LED onto a billboard panel (assuming you can get the permit) but is that really the right decision? That’s the topic of this Billboard Mastery podcast and we’re going to review what makes LED work and what does not and how to make that decision.
Episode 20: Why Digital Is Not The Answer Transcript
As society we are obsessed with LED, digital. The bright shiny lights of signs that are constantly changing and we're drawn to them kind of like a moth to a flame. But kind of like a moth to a flame, that relationship is not always healthy. This is Frank Rolfe with the Billboard Mastery Podcast. We're going to talk about LED and digital is often not really the answer.
Here's the problem. To succeed with a digital sign you have to meet the following characteristics. Number one, you have to have an extremely desirable location. It can't just be an average location. It has to be something that is really top of the line, something that's remarkable. Something that basically you've got many, many advertisers that want to appear on that sign, and the whole point of LED is to share that space for a higher rate because you've got so many people that want to be there that they're standing in line, and therefore you're able to sell that face not in a static manner but one advertiser gets the whole sign for a matter of months or years. You're going to sell that time by the second, that's how important it is. If you don't have a location that's that desirable, one that the advertisers are lining up and beating down your door to advertise on you probably do not have a suitable location to succeed with a digital sign.
Number two, you have to have unbelievable visibility. Typically the sign has to be a right hand read, which means it's on your right hand side as you're the driver in the vehicle. Those signs are closer to you physically than the left hand read, the ones that are across the highway. It also doesn't hurt I you have a curve in the road exposure so your car is driving kind of head on into the sign. It doesn't work when you have a left hand read that's way across the highway. It doesn't work when you've got a sign that has a tree in front of it. To have a digital sign that works you have to then have not only a desirable location but unbelievable visibility in that desirable location.
But yet there's more. You also have to have extremely high rent in your market. It can't be a market where the average sign is renting for $800 a month. There's no way you're going to be able to get people to pay a hefty sum by the second when they can rent the whole sign for $800 a month. So to have a successful LED sign you need the rents on the signs surrounding to be $5,000 a month, $10,000 a month, $15,000 a month like they are in some cities in America. You're just not going to make it if you have the signs not that expensive. Any advertiser is going to look at that sign and they're going to do comparison shopping. They're going to say okay well, what would it cost if I didn't buy the digital sign where I'm buying it for the second or buy a static sign where it's my sign 24 hours a day? If the rate is very low for the static sign, you know where they're going to head. They're going to say well, you know that sign may be a little bit better but gosh I think I'll just take a whole sign for about the same amount of money.
Also you have to have low supply of signs which makes your sign very unique. Think back on all of the LED signs you've seen that always seem to be full. You know there's one in your market. You drive by it all the time. What do you notice about that sign? What makes it special? Well, typically there's not many other signs around it. Most of the top LED signs in the United States are in positions where they're almost a monopoly. That's why advertisers are willing to pay for that ad space by the second because they know it's their only shot to reach that exact location. There's a sign in Chicago, it's a right hand read with the whole city skyline behind it and there's no other signs for the longest time, either before or after it. That's the makings of a successful digital sign. But if you're just one more sign with signs every 500 feet with 100 of them in a straight row, that just does not seem to be desirable enough that someone wants to rent that by the second. They're probably going to opt for one of those static signs because typically when you have that many signs, at least one of them is vacant. And the one that's vacant, well it's just not that bad.
Finally, digital signs must work economically ,and this can be a real hurdle for a lot of signs. Because for the digital sign to truly succeed, it's going to have to bring in a lot more revenue than it costs, and you're going to have a big cost issue because digital signs are not cheap. On a 1448 digital sign, you're talking the sign face alone is probably going to run you nearly $100,000, and it doesn't last forever. Those things burn out in seven or so years and you'll have to pay that money all over again. Often, the digital face on the sign can be as much or double the cost of the sign itself. So it's a big, big thing, big burden to carry around trying to make economic sense. Not only the sign location, all the other factors of those with static signs have to deal with, but the additional burden of having that giant debt service or trying to repay yourself for the money you've expended because of that digital sign.
You also have to look realistically at what you can rent that sign for. Just because it's digital doesn’t mean people are going to pay ridiculous amounts of money. They're going to compare that to all their other options. So you've got to have a situation where that sign under very, very reasonable amounts of rent and occupancy can show you a profit. Nobody wants to get involved in a sign where you're stuck trying to make the payments every month. You're trying to make money here, you're not doing this for fun. And the problem is in many cases that digital sign is so expensive and the numbers are so far off base that any sane person would say no, no, this is not a good investment.
So when you're looking at signs, don't take the natural concept hat oh well, I can't be cool, I can't be new wave unless I'm digital. Static for most signs is still the way to go. And don't forget the digital signs come with some other operational problems. For example, you have to rent a whole lot of ad space. When you rent a billboard, a static billboard, you typically rent it to one advertiser and their contract lasts a year or so. You don't have to worry about the sign for a year once you put up the ad. All you do is collect the rent. Well with a digital sign you're almost like you're your own television network. You've got space to fill every day. You don't even know who you're going to have on there. You're scrambling trying to find advertisers all the time. There's also operational issues like trying to make sure that the sign doesn't get scrambled or injured in the weather, or just parts of it burn out. So you have to constantly stay on top of the sign. On a static sign, you can check on that sign just periodically but on digital sign, oh my gosh you have to check on that constantly every day. Make sure that it's working. And guess what if it isn't working? You don't get paid anything. The ads aren't even running if the thing breaks. The static sign, the only time you'd ever have the sign truly break would be if a windstorm came and blew the whole sign down. So there's just so many reasons that you need to think beyond the digital boundary.
Now there's nothing wrong with digital signs if you've got the location and meets all the speccs I just talked about, well that's fantastic. But there's too many people putting up digital signs in locations that make no sense. I drove by one recently, had everything in the world wrong with it. The location was not special, there were many other signs around it. It was a left-hand read. It was a short read. It actually had what they call negative V which means the sign face angles away from the road. Why in the world was it digital? Well, because somebody had this bright idea that they digital, that's where the money is. That's not where the money is necessarily. Again, in certain locations with certain signs, sure digital is the correct answer. But it's not going to work on every sign. If it worked on every sign then I could tell you how you could prove that point. If you look, the largest owners and operators, people like Clear Channel and Lamar, do they have a digital on all of their signs? No, they don't. Fairly rare actually. There's not really that many digital signs in use because they know better. They've learned that it doesn't work on every single sign.
Now this has been known for the longest time because digital, prior to digital, there was a product called Trivision. Trivision allowed you to rent signs to three different advertisers that had triangular panels that changed every so many seconds. So when digital came out, it was really just an enhancement of Trivision. Now with digital you can have eight advertisers, whereas Trivision only had three. But it was still the same concept because Trivision was not cheap. It was expensive. And people learned from Trivision what worked and what didn't work. And they learned you have to have that desirable location with that great visibility, and a super high rent market with very low supply to make those numbers tie together. So again, keep an open mind. Look at all signs. Don't just think all signs have to be digital. Digital is not always the correct answer. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.