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September 10, 2008

The booming OOH business

Business Standard has a feature on the outdoor advertising / Out of Home (OOH) media business.
City development in India is riding on the back of advertising support from OOH media companies. Local governments and municipal bodies have discovered value in making outdoor companies invest in basic infrastructure development in lieu of the media rights to those properties, a standard practice in much of Europe, the US and Singapore.

...Clearly, OOH action is gathering momentum. Even as city municipalities push their infrastructure projects through private-public partnerships with outdoor media companies, national and international players are pumping money into the sector. Projects worth Rs 1,200 crore to Rs 1,400 crore are being picked up by a host of Indian companies such as Big Street, Laqshya and Parivartan City Infrastructure Ltd, as well as foreign players like Stroeer, ETA Star Holdings and JC Decaux.

...The new infrastructure-related outdoor projects are priced too high. Outdoor companies invest the capital, maintain the property, and also pay a licence fee to the government. For instance, Parivartan, which has put up bus shelters in the Municipal Corporation of Delhi’s areas for about Rs 15 lakh each, is also paying the corporation Rs 1 lakh a month for each shelter as the licence fee. This is on the assumption that it is making money from the advertising rights. The trouble is that while the outdoor company pays the government in advance every quarter, its own income from advertisers has a 120-day cycle.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.