Memo From Frank
March Madness is one of the sports features of this month. It’s exciting because you never know who’s going to win and upsets are commonplace. But on top of that, there’s something about college basketball that the NBA doesn’t have any more and that’s “passion”. Warren Buffett (America’s richest person and the top stock investor of all time) once said “without passion you have no energy, and without energy you have nothing”. That’s true in any endeavor, whether it’s basketball or billboards. When you’re passionate about something, you put in longer hours and play harder. You try every possible angle and think like a “deal maker” and not a “deal killer”. And being “passionate” gives you that extra edge in building your business and being persistent against all odds. If you want to get into the billboard business – or build bigger portfolio of signs – the key is to be passionate about what you’re doing. That’s the key trait of those who succeed.
The Effectiveness Of Billboards For Advertisers Is Legendary
One of the top award-winning movies of 2017 was “Three Billboards in Ebeling, Missouri”, which focused on the attention and developments around some billboard ads in a small town. But billboard advertising has been highly effective for a hundred years. What makes it so potent?
When you are an advertiser, the most important component of effectiveness is timing. You want to reach your customer at the exact time they are thinking about buying and their options. This is called “point-of-purchase” and is the most sought after timing in advertising. And billboards deliver on this like no other alternative. When McDonald’s advertises in a newspaper, it can’t time that you will see the ad at the exact same time you are walking by a McDonalds’s. When McDonald’s advertises on a billboard at it’s exit on the highway, the billboard hits the customer precisely at the right moment.
Hits only your target market
When you advertise in the newspaper, a whole bunch of that viewership is wasted. You reach people who are geographically nowhere near your store. But a billboard hits only people who are within a hundred yards of your store. Each person you reach that is within steps of your business is worth a thousand of those who are far away. This is incredibly important.
Breaks through the clutter
Billboards are unique. There is a limited number of them. And they are huge and stand above everything else on the horizon. In a world of advertising on everything from transit benches to magazines, billboards rise above the advertising clutter. This allows them to offer greater effectiveness due to greater visibility and memorability. This has always been true – even a hundred years ago. That’s why so many famous advertising campaigns began with billboards.
Another one of the unique benefits of billboard advertising is that it is legendarily cheap for the quantity of viewers reached. This mathematical formula is called CPM which stands for “cost per thousand viewers”. Billboards have always led the pack on having a low CPM, which means that they offer a tremendous financial value for the advertiser.
Billboards are a powerful force in advertising. They are big, bold and inexpensive. They have the ability to reach customers right at the exact moment they are considering making a purchase. Just as they are portrayed in the movie “Three Billboards in Ebeling, Missouri”, they can be a gamechanger for any endeavor.
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What The Perfect Sign Looks Like
This is a highly successful billboard. Why is that? How is it different from other billboards you might see along the highway? There are several hallmarks of a good, solid billboard investment.
No risk of re-development
The way this billboard is oriented to the property, there’s virtually no risk of it ever being torn down. The first factor is that the property is already developed – and with a successful commercial building. When you build a billboard on raw land, there’s always the risk that the land will be purchased for re-development. But when there’s already a building there, there’s little risk that another one will one day take its place. Additionally, this sign has its pole located in a spot where there’s no interference with the parking or operation of the property, which might annoy the land owner. This is possible because of the use of a “full flag” sign structure that allows you to put the sign on the edge of the property line.
On a major artery
The key feature of any billboard is the quantity of traffic that drives by it. In general, the higher the traffic, the higher the ad rents. And this sign is located on a major artery that provides a constant flow of viewership and in-demand ad space. How much traffic does a good billboard need? Highways typically have 24-hour traffic of around 50,000 to 150,000 cars per day, while major secondaries hit around 10,000 to 50,000 per day. With those kinds of numbers, there’s no doubt that advertisers will benefit from the sign.
This sign has no visual obstructions, when approaching from either direction. The worst thing for a billboard are obstacles that block the view. How far back can the blockage be and the ad space still desirable? Most advertisers are O.K. with signs that have roughly 400’ of clear read. In certain cases, you can get by with even less visibility, as long as the location is hotly in demand and you have enough “V” to the sign to make it viable.
Near a lot of potential advertisers
A sign in the desert may have no obstructions and no development risk and decent traffic, but the problem is that there may just be very few potential advertisers, besides the gas station 40 miles ahead. But in the case of this sign, the advertisers are abundant and come in every industry and size. Even the businesses located directly under this billboard are potential advertisers. My favorite signs are ones that have 50 to 100 advertisers at that exit, since that gives you so many shots at adding “Exit Now” to the design.
Because this sign has so many positive traits, it is fully occupied, with a paid advertiser on each side. You should have no problems in renting the ad space on signs that have everything in good order. And these are typically signs that will have high levels of retention, where advertisers renew over and over. That retention saves you from the time and expense of finding new advertisers.
This sign is fully lighted, and that’s an important feature of the best billboards. Non-lighted billboards are not appealing to business that are open at night, such as restaurants, hotels and gas stations. Lighted signs, on the other hand, appeal to all categories of customer.
This is a great billboard sign. It scores high in every category from location to lighting. There are hundreds of thousands of these in the U.S. Go build or buy one.
Out-Of-Home Advertising Is Bigger Than Just Billboards
One of the interesting facts about the billboard business is its amazing adaptability. It’s merely one part of the greater “out-of-home” advertising sector. But the cool thing is that all of these various business models are almost identical as far as the business plan. This photo is of a transit advertisement venue in Quebec City, Canada. But even in Europe, you can use your billboard skills in a number of applications. So how does it all work?
Find a method of reaching a high volume of peoplet
Make a list of all the places in your city or town that have a high quantity of people that pass through. These can range from malls to parking lots to sports and entertainment venues. These locations are all possible placements for an “out-of-home” advertising concept. The key is sheer volume of people and viewers.
Come up with a standardized advertising format
How do you reach these people? You will need to come up with an advertising plan of where the signs would go, how big they would be, and how many of them you would build. Make this into a complete program that is extremely specific, with a diagram of where the signs will be, and a sketch of what the ad units would look like.
Create a pricing metric
Now let’s look at pricing. Get the ad rates of every competing form of advertising in the market, from billboards to radio and television. See what you think the market would bear for your venue. Be realistic and support your ideas with a comparison of cost-per-thousand viewers (CPM). Also calculate the cost of the program and the potential profit.
Build a “sales book” on the concept
Once you think you have a winning plan, it’s time to attract the permission of the venue owners as well as potentially raise investor dollars. I call this your “sales book” because that’s what you doing – persuading people to see your dream and support it. Test your book out on others before you hit the real customers, and make sure they can see your vision and it’s presented well.
Get permission from the venue owner
This is critical. You have nothing if you don’t convince the venue owner to let you install your ad program. They will want money, and also a general feeling from you that you can succeed and will maintain your property well. Most of these venue get a percentage of the gross revenue, but some may also want a guaranteed minimum amount for the time and trouble. You need to really think about this before you meet with them, and have your arguments ready.
Sell advertising space
Once you have the agreement hammered out with the venue owner, you will now need to get in motion on renting the ad space. For that you’ll need a new type of sales book – one that is written from the perspective of the advertiser. It should address all of their potential concerns, as well as make the case on why it’s a great place to advertiser and how affordable the rent is. The hardest thing in selling is something that’s a prototype, so you’ll have to knock on a lot of doors to get those first contracts.
Install the ads
Since this is something new, all eyes will be evaluating everything you do. Make sure that the ads are exactly as promised to the advertisers, and that they exceed their expectations. Steve Jobs always pursued the “insanely great” product, and you should, too. Make the program something you can be proud of.
One you get those first ads installed, it’s no time to rest on your laurels. Make sure you stay as excited on day 91 as you did on day 1. Keep the ads immaculate and make sure that advertisers are pleased. The success of this first prototype venture is critical (as discussed below).
Scale the concept
Once you have perfected that first venue, it’s time to use it as a portfolio piece to expand into more markets. If you can come up with a venue that produces $20,000 per year of profit – and you expand that to include 50 cities – that’s $1,000,000 per year to you. Scaling these type of businesses is where the big money is.
While you are growing the concept, don’t forget to continue refining it, and making it better. Sometimes, the ultimate version of something barely resembles the original (just look at the Model T Ford vs. the new Mustang). Keep learning and tinkering and making it better.
The “out-of-home” industry is much larger than just billboards – but the basic mechanics are nearly identical. Always be watching for opportunities that extend beyond just billboard signs and, when you se one, go after it. Even the largest billboard companies always have side-businesses that deal in mall and airport advertising. It’s all part of one big family.