Talon viewpoint on the new London Underground contract

Exterion Secures £1B London Underground Ad Contract

In significant news for the OOH industry, the London Underground outdoor advertising contract has been retained by Exterion Media. The TfL contract, the world’s largest single OOH deal, is believed to be worth around 1 billion over eight years, with the final decision coming down to a showdown between incumbent Exterion and JCDecaux, the largest media owner in the UK market and recent winner of TfL’s London bus shelter contract.

The implications for the OOH industry do stretch beyond Exterion’s success, particularly around TfL’s role commercially. The contract and the road ahead seems much more than an advertising contract.

Notwithstanding the outcome, the OOH industry is set to benefit from the transformation of one of its crown jewels. At Talon, as the sector continues to fundamentally evolve, we feel excited about changes ahead and the revenue-growth potential of the London Underground format.

The decision will now have some knock-on effects; around TfL’s role as mentioned, but also around the current status quo of media owners, the further growth and impact of digital OOH and the smart use of data around audience targeting. One thing’s certain, the OOH industry is not one that’s standing still.

TfL’s Role              

TfL has backed the incumbent, one who’s current management and ownership teams – led by Shaun Gregory – has a clear vision for the future rooted in intelligence and data and transformational ideas. This said, above all the contract will be sustainable, with TfL taking full responsibility for developing assets and transforming our Tube journeys into experiences.

The ten-year deal will invest time and money across the environment. We’ve seen dramatic change to our rail, shopping and airport environments in recent times. TfL will oversee an even more dramatic overhaul of the Underground as London continues to showcase its offer to the World.

Quality, high impact sites; more digital screens (but not a 100% transition as the value of classic OOH in reaching this valuable mobile London audience is not understated) will complement the technology improvements already underway in Wi-Fi access and other smart data initiatives. Interaction with smartphone usage will only grow in this environment, driving engagement with people’s purchasing, social lives and social media creating a strong and unlimited opportunity for most brands.

TfL’s commercial expertise, in harness with Exterion and many strategic partners will create a communication-led destination that sanctions property, retail, content and experience enhancements on an unprecedented scale. The tender document has already stated that the “venture has no commercial ceiling”. By the time Crossrail launches as the Elisabeth Line in 2017, commercial opportunities extending well beyond traditional advertising will have materialised; a premium showcase for strong and disruptor brands alike.

Audiences continue to grow in the environment and this is the real value of Exterion’s gain. Desirable demographics, light TV viewers and an urban generation like no other offers the potential for improved, less cluttered and technology-led OOH to drive a better quality of engagement and interaction.

Changes to the Status Quo?

With extensive (and largely supportive) private equity backing across the industry, we are still expecting to see further ownership changes in the months and years ahead. JCDecaux’s strong heritage may see an opportunity to grow further through acquisition, and we shouldn’t rule out the emergence of a global or wider media investor expanding into UK OOH. The UK market may even witness further consolidation of the main players or assets as the waters are now clearly less muddied around future prospects, with Exterion now even strongly placed to further strengthen its hand at the top of the market.

TfL’s decision clearly reflects a strategy of working with strong but different partners and the industry welcomes seeing three of the strongest players (JCDecaux, Exterion and Clear Channel) now developing high quality assets in London and across the UK that will mark a critical step-change in confirming digital OOH’s ability to drive fame, impact and reach. And beyond London, we are seeing great assets and investment levels from the likes of JCDecaux, Clear Channel, Ocean Group, Forrest, Primesight and others.

Perhaps the real battleground now amongst the OOH players, including JCDecaux and Exterion Media, will shift to Europe where both have ambitions for growth and scalable influence through particular formats across transport, retail and roadside.

The true impact of such levels of digital OOH investment is being seen through the effectiveness and ROI that smarter planning is delivering. Full flexibility, the use of real-time data and contextual messaging has lifted the OOH offer in terms of effectiveness and has driven brand count to the sector.

In summary, the award of the contract won’t be the end of the story, but just the beginning. The market already looks a stronger place and the major players have clear development programmes that will bring OOH to a critical junction. Any further ownership consolidation will likely create an even stronger industry with strong individual businesses taking us to a new dimension.

From Talon’s perspective our role as a specialist OOH agency and partner becomes more fundamental to help agencies and advertisers achieve value for money from scale across all developing and established OOH formats, whilst leveraging the changes in technology and behaviour that will maximise the benefit and ROI of the medium.

Using data and collaboration to reach quality audiences in new ways across improving environments with partners including TfL, Exterion, JCDecaux and others is the new template for the OOH sector, where ideas, innovation and insight forms the basis of smarter and more effective communication.

Talon, March 17th 2016