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LAMAR: YEA or NEA

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September 23, 2007 – Comments (2)

Billboards in places like Hollywood and Westwood are good money makers since these cities aren’t allowing new billboards, that makes ones there more valuable. Since the movie industry does well even in recessions those billboards should do well. The bad thing is even though Lamar is from the L.A. area I haven’t seen their billboards in these good locations, it is dominated by Clear Cannel and CBS. Where I do see Lamar is in the suburbia areas that once were underdeveloped and now populated. From what I understand Lamar brags about buying these billboards over the last few years. So basically they bought them during a boom time.

During the recent boom in housing and economic spending the price of advertising on billboards have grown as much as 400% as every real-estate broker, mortgage company, home builder and furniture retailer were advertising like never before.

The annalist are hopeful that the new digital billboards will revolutionize the industry with four to ten times the earnings per billboard. The digital boards are not usually animated, during the day they look the same as a regular billboard. But the ad can be change from a computer. They have several advertisers per sign and they each show for about six seconds. When they change it might catch your attention which is good but at 60mph you will only see one of the six or more advertisers. But they are better then the paper billboards and the ad can be changed at little cost. I have not seen them at night but since they are most likely very noticeable.

A few digital boards have been out for a while and Lamar’s earnings went down. The cost of installing the boards is about 400 to 500 thousand. The red tape of getting city’s to allow these are most likely very inhibiting. There are compliant about the boards and concerns about distracting drivers. To appease the proponents Lamar offers using the digital bill boards to display emergence information similar to Amber Alerts.

All and all the digital boards are good for business, but is there enough business to be had? Since Lamar’s income is based on the smaller business and not the National and International business how long will it be before they have to lower their rates? If their rates went up do to high demand from “building boom business” then it stands to reason that there rates will go back to pre boom levels. If they loose 25% to 75% of their rate per billboard that is hard to offset with even the most hopeful new products.

In the short term I have notice that the companies most hurt in the hosing slow down are the ones advertising the most. They appear to be desperate to bring up sales. Advertising is most effective when there are customers looking for that product not when they are done buying. You don’t advertise Christmas trees in January. So Lamar is selling to companies that are desperate and soon they will not be able to advertise because of their budget.

When bills are hard to pay business pay the money makers first. If advertising does not make them money then they are less apt to pay that bill. It seems to me Lamar’s sells will slowly diminish, bad debits will increase, and their prices for advertising will recede.

2 Comments – Post Your Own

#1) On September 23, 2007 at 7:45 PM, FourthAxis (< 20) wrote:

I used to like 'em, but I think ad spending will be declining soon.  We'll see.

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#2) On September 23, 2007 at 8:43 PM, kristm (99.75) wrote:

If a new digital billboard costs $500,000 to install (plus the cost of leasing or buying land, taxes, and powering them 24/7) how much are they charging per advertiser per side? Sure the ads rotate but you can't charge as much for an ad spot if it changes every thirty seconds vs. one that stays up permanently. If they're charging enough for these ad slots to break even, nobody can afford to buy them.

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