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Media Budgets Shift

Advertisers Are Beginning To Shift Money To Alternative Media To Target Messages More Efficiently As Budgets Get Tighter.


September 9, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

The ‘In Your Face’ Era

The Struggle To Overcome Consumers’ Indifference To Traditional Advertising Has Opened A Whole New Market For Alternative Media That Aim To Shock, Stand Out From The Crowd, And Produce The Sale.

Cuts in advertising budgets, media fragmentation, changing consumer habits, and technological advances have all affected the way advertising media are consumed in Puerto Rico, turning out-of-home, or alternative, media into an $8 million business last year, according to experts. This amount is expected to increase to $10 million by the end of 2004 and to $17 million in 2005.

On the U.S. mainland, the out-of-home advertising industry had posted $1.3 billion in revenue at the close of the first quarter of 2004, a 5% increase over the same period in 2003. This growth trend has remained consistent over the past year.

The significant increase in alternative-media expenditures is the result mostly of consumers’ greater mobility and growing immunity to traditional advertising vehicles, as well as advertisers’ mounting urgency to reach those consumers. To that end, alternative-media companies are redefining the category to go beyond billboards.

"Over the past few years, the alternative segment has recast outdoor [advertising] as a niche marketing tool, offering businesses more-creative ways to reach specific types of on-the-go consumers," said Tere Guerrero, media director at Arco Publicidad.

"Within the alternative-media category, we may find moving billboards as well as ads on gasoline pumps, bus shelters, cars, buildings, and elsewhere. Innovative methods and outlets will continue to surface, which will enable the advertising industry to reach more markets," added Guerrero.

"Alternative media’s ability to break through the glut of advertising and get the right message to the right audience at the right time makes them an attractive buy," said Helga del Toro, media director of De La Cruz Group. "Any media planning, however, must take into account what is best for clients and what is the right media mix to achieve their advertising goals. Only after in-depth analysis of the market’s behavior can we pinpoint whether alternative media are the right choice for a particular client."

Even though the alternative-media segment has grown at a fast pace in recent years, many in the advertising and media industries say it is too early to say who will thrive and who will fail.

"[Advertising] budgets are the same, but now they need to be spread among a wider media range to get through to hard-to-reach consumers," said Toro. "This means some [companies] may succeed and stay while others, not having enough clients, will have to quit and close." Some of these clients include direct media buyers and advertising agencies with products in categories such as financing, insurance, retail, automobiles, entertainment, health, and restaurants.

"Right now, we have many companies offering tactical [alternative] media, but not all will be around in a few years," said Eduardo Galindez, partner of Tactical Media Group. "Only those developed through careful analysis and planning will be able to mature and keep growing."

Tactical Media is considered one of the fastest-growing alternative-media companies in Puerto Rico. The five-year-old company acquired Zoom Media in June and aims to become a $5 million operation by year’s end, a 67% increase from its $3 million in billings last year. For 2005, the company hopes to increase billings to $6 million.

Tactical Media’s products include on-the-move advertising (moving billboards and display units), fuel ads (ads on gasoline nozzles), Shelf Vision (electronic shelf talkers at points of sale), Med Media (ads in medical offices), and Zoom Media (bathroom advertising in shopping centers, universities, and bars).

Responding to consumers’ changing lifestyles

In the past few decades, factors such as globalization efforts, which have increased demand to work more hours; the clutter of ads aimed at the masses; and the wide range of entertainment choices have caused a shift in consumers’ lifestyles. With this shift has come a change in the way advertisers reach consumers.

"That more people are spending more time away from home has become a real challenge for media experts," said Toro. "Media companies and advertising agencies are facing the fact that they have to be more assertive and resourceful now. Things have changed, and we can’t use the same strategies as before."

People spend more time commuting every year; today, the average consumer in Puerto Rico spends six hours on the road each week. According to Arbitron’s "Outdoor Study," consumers spend a daily average of 27 minutes on their way home or to work, or almost one hour round trip.

"The heaviest commuters, super-commuters, spend nearly two hours a day getting to and from work. Heavy commuters spend 19% less time reading newspapers and are less likely to be reached by local TV newscasts, especially the evening news," said Arbitron. "[In addition] one-third of Americans say they shop most near their work or split their shopping between home and work."

"Consumers today spend more time on the streets and tend to pay less attention to traditional media such as television, radio, newspapers, and magazines," agreed Arco Publicidad’s Guerrero. "Therefore, agencies and their clients have been forced to find new ways to reach those consumers in an efficient and targeted manner."

Consumers’ shifting lifestyles and tastes have also prompted advertising and media companies to invest more in research, learning what their target customers are doing with their time (including how much of it is spent working) and figuring out how an advertising message previously directed to the masses can be delivered directly to the targeted consumers.

"Only a thorough study of the market will reveal the right media mix, which in many cases includes alternative media," said Toro. "The beauty of these ad forms is the targeting they provide and their synergy within niche markets."

This shift in consumers’ lifestyles, tastes, and behavior suggests that media departments will have to become more efficient to reach consumers when they are away from home.

"Media departments can’t be held solely responsible, however, for making these adjustments since this shift affects all areas within an agency," said Guerrero. "This fragmentation of audiences makes us acknowledge where the consumer is and when he or she is most open to receiving an advertising message, which lets us know what to say and how to say it."

Alternative media vs. traditional media

Just as consumers’ lifestyles have changed in the past two decades, so have advertising media changed with the proliferation of new options in television, radio, magazines, and, of course, the Internet. In giving consumers more media choices, advertisers have encountered greater difficulty reaching their target audiences. Traditional-media companies have realized they must adapt and develop new sources of revenue.

Many traditional-media segments have struggled during the weakened economy of the past few years. The outdoor segment, however, has been relatively unscathed, in large part thanks to the strength of local sales, as both national and regional local brands have shifted a significant portion of their advertising dollars to alternative media and grassroots promotions. Although alternative media are as varied in their pricing as in their approach, they are generally considered cheaper than most traditional outlets such as TV and magazines but more expensive than outdoor vehicles such as billboards.

"Traditional media will have to make adjustments to keep up," said Guerrero. "Some of them have already started; for example, television has added dekocast [small rotating ads at the bottom of the screen], TV billboards, and telenotas [commercial segments during a news broadcast in which a client talks about his or her product]."

According to Guerrero, radio and print media have also introduced new products to attract consumers’ attention. "In the past few years, radio has added promotional vehicles and events, and print media has created newspaper wraps and printed bags," she said.

"If the growth of alternative-media companies has affected any traditional media, it has been radio," said Ricardo Lozada, president of Organic Media. "Billboards also seem to be experiencing difficulties with clutter, as we can now see many blank billboards."

Experts strongly suggest using alternative media as a complement to traditional media, not as a substitute. "Alternative media will never replace traditional media, and we don’t pretend to be taking away all the budget from traditional media. Alternative media are a cost-effective complement to traditional media," said Lozada.

Alternative media are efficient at targeting advertising messages to specific geographic neighborhoods and markets, an important consideration given the way in which consumers are bombarded with ads every day. A recent study conducted by Fallon Advertising in the States found that the average American is exposed to 2,904 marketing messages per day. Of these, only 52 will get noticed, 24 will be read in detail, and a mere four will get a consumer response.

Alternative media strive to stand out from the crowd and reach consumers on the way to make a purchase or at the point of sale. The latter is key for advertisers since 70% of all buying decisions are made at the point of sale.

"Out-of-home [alternative] media can help in an era of information overload because of their ability to break through to consumers and instill memorability," said Lozada. "Their mere presence invites inspection and their ubiquity ensures brand access when the consumer is ready to act."

Alternative media companies sprout

Puerto Rico has seen the rise of numerous alternative-media companies in the past few years, seeking to help clients grab consumers’ increasingly divided attention.

"Some companies have limited advertising budgets and therefore need to invest in media that will create a bang with consumers," said Lozada of Organic Media. "Consumers lead extremely busy lives and are bombarded by more and more messages every day, which makes it harder for us to reach them. Our goal is to attract their attention in an unexpected way."

To that end, the company offers ads on popcorn bags and coffee cups, building wrap-arounds or meshes, laundry ads, and more. Only two years old, Organic Media is on track to record $1 million in billings by year’s end. "We expect 30% growth in 2005," said Lozada.

Industry experts agree the stakes are high for alternative-media companies and their clients, who must protect their relationship with consumers and expect quantifiable results.

"The creation of a [alternative-media] company isn’t something that can be done in a hurry. It requires a long, hard process including analysis, drawing up contracts, and securing permits," said Tactical Media’s Galindez. "Anyone who launches a tactical-media [alternative media] company without carefully planning a strategy eventually will face complications and probably failure."

Of course, some previously established advertising agencies have adapted and incorporated alternative media into their services. "For media departments, the growing use of alternative media represents more work and more responsibilities," said Guerrero. "Media departments need to be aware of opportunities in the market to analyze, negotiate, and advise according to clients’ needs. We are our clients’ media investors and should always seek the highest return on investment."

"Advertising agencies’ acceptance of new and old alternative media has grown in 2004, creating more activity and therefore more investment," added Lozada. "Clients like being the first to try a new advertising medium. They like to portray their companies as innovative and as pioneers of new trends, but they also expect service, speed, and efficient follow-up of their agencies."

Measuring success

One of the challenges of alternative media is that it is difficult to gauge their effectiveness. Just how many people notice an ad wrapped around a bus, for example? If the ad is noticed, how does it affect consumers’ behavior?

"The disadvantage of alternative media is they don’t offer enough information for us to evaluate their efficiency," said Guerrero.

"Not all [alternative] media in Puerto Rico have been measured or studied," added Lozada. "In Organic Media’s case, we conduct our own studies on how many people are coming into contact with the ads or promotions."

"Research is an important part of our business," said Galindez. "At Tactical Media, we have developed a research system that helps our clients evaluate the efficacy of their investment, but not everybody has the resources to do this."

Both Nielsen Outdoor and Arbitron Outdoor are working to develop an audience-rating system for outdoor media, which should level the playing field with traditional media with regard to measurement.

Guerrero advises caution, however. "A lot of these measurement tools rely on assumptions made about viewers based on data collected from passing traffic. Taken alone, that isn’t enough to prove effectiveness," she said.

What’s in store?

Advertising and media experts expect to see the development of many new media products in the next few years. And at least two new media companies will arrive in the Puerto Rico market by year’s end, with more expected in 2005.

"Our industry will continue to grow rapidly," said Lozada. "In the next few years, we will see the launch of more alternative-media companies and products. Eventually, the more successful products will be considered mainstream, or traditional, media."

One of the two new companies is Adhand Media Systems, which will launch a new product for placement in supermarkets. The company will put ads for items that can be bought in the supermarket on the handles of shopping carts.

"This system will help supermarkets increase their sales of products, which in turn will increase suppliers’ sales to supermarkets," said Sebastian Schenquerman, partner of Adhand. "The beauty of it is that, unlike other alternative media, this medium offers complete accounting, since it will reveal with accuracy who saw the ad, how much time they spent with the ads in hand, and how the system improved sales of the advertised product."

The system can also indicate how much time shoppers spent in the supermarket and how many stops they made and where, revealing hot and cold zones in the store. Adhand plans to enhance the system with the addition of liquid crystal displays (LCDs) on which ads and other information could be presented.

"The system will even be able to give special discounts to shoppers as they pass particular shelves," said Alexander Felgentreter, partner of Adhand. "This will entice them to stop and pick up the discounted item."

Organic Media plans to develop ads that wrap around ticket dispensers in parking lots and that appear on the tickets themselves.

Tactical Media’s plans include the creation of new advertising products. In the next few months, it will begin promoting a new advertising product for placement in local high schools; the company already has ads on the island’s main college campuses.

"We are constantly on the lookout for new products," said Galindez. "However, all of our products are developed through careful planning; none are launched if we aren’t confident they will yield results for our clients."

Tactical Media also might be acquiring other alternative-media companies. "We are analyzing the possibility and evaluating which will be the best choice to help us continue growing," said Galindez.

Technology will continue playing a big part in the creation of new advertising vehicles. "What is coming for the advertising industry in the next few years, especially in the area of technology, is exciting," said Guerrero.

Consumers might soon see cabs bearing ads that change based on the vehicles’ Global Positioning System coordinates, bus shelters that relay messages to personal digital assistants, and outdoor units that beam ads into passing vehicles equipped with smart-car technology (also known as telematics).

Puerto Rico might also see the establishment of an association for professionals in alternative media. "We are exploring the possibility of creating an alternative-media association that will help to improve the industry and even set standards," said Lozada. "Even though each company is fighting for the same goal–the investments from advertising agencies and their clients–our products aren’t the same and don’t compete directly against each other. The association could create a forum to share experiences and build a stronger industry."

Galindez supports the idea. "An association would help us stand out as an industry and develop measurement standards, which would benefit everybody in advertising," he said.

Traditional Media

TV, Radio, Newspapers, Magazines

Alternative (out-of-home) media

Product Packaging: Popcorn bags, pizza cartons, coffee cups, laundry bags, water bottles

Outdoor: Fuel ads, taxi displays, bus displays, bus shelters, wrapped vehicles, aerial signs, moving billboards, mesh, parking lot entry & exit gates

Indoor: Floor graphics, shelf talkers, moving displays, garbage cans, bathroom ads, med ads, points-of-sale, valet parking tickets

Traditional Outdoor Media

Single billboards, trivision billboards, wall murals

Illustration lists only some of the alternative-media products available in Puerto Rico.

Billboards: The granddaddy of outdoor media

Billboards can cover a market far and wide, dotting the landscape, and offering round-the-clock promotion of products, services, and anything else intended to reach a mass audience. They are considered the oldest media product; billboards have been used to promote businesses since before television and radio were invented. The first billboard in the U.S. was printed in 1835, according to the Outdoor Advertising Association of America Inc. Even though billboards have been in use for over a century and a half, some see them as an alternative advertising medium.

Local companies involved with billboard advertising have been growing steadily and robustly–to the point that media experts estimate billboards now represent a $25 million stand-alone industry. The outlook may be spoiled, however, by the intense competition and the rapidly growing number of billboards sprouting around the island.

A decade ago, there were only a few strategically placed billboards in Puerto Rico. Today, there are approximately one thousand. Many of these have trivision capabilities, allowing three advertisers to showcase their products on one rotating billboard.

"Billboards have been around for many years and have evolved to accommodate the needs of clients," said Jose Jaime Marti, vice president of operations at Red Media Inc.

An infusion of capital into the industry has fostered the propagation of vital marketing studies, pioneered the research & development of new outdoor formats, and encouraged savvy entrepreneurs to explore new approaches to the world’s oldest medium, the billboard.

"Outdoor [media] can help in an era of information overload," said Red Media Vice President Marcos Rivera. "It has the ability to stand out and break through to customers that spend a lot of time driving. Billboards have the ability to reach a group of consumers repeatedly. It can reach consumers missed by other media and enhance the exposure of traditional media."

Billings by Select Alternative-Media Companies in Puerto Rico*

Company:2003 / 2004 / 2005

Tactical Media Group (established 1999): $3,000,000 / $5,000,000 / $6,000,000

Zoom Media (est. 1998): $2,000,000 / ** / **

Organic Media (est. 2002): $500,000 / $1,000,000 / $1,300,000

Adhand Media Systems (est. 2004): N/A / $675,000 / $4,900,000

Pixman (est. 2004): N/A / $400,000 / $750,000

Up & Down Indoor Media (est. 2003): N/A / $120,000 / $300,000

A la Vista Media (est. 2004): N/A / N/A / $302,000

Others: $2,500,000 / $3,000,000 / $3,500,000

Total : $8,000,000 / $10,195,000 / $17,052,000

*Actual and prospective billings were provided by the respective companies

**Zoom Media was purchased by Tactical Media Group in 2004

This Caribbean Business article appears courtesy of Casiano Communications.
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