Wait, Did You Say Recession? The OOH Industry Braces for an Economic Downturn
Signs of Trouble
by Benny Taubman, OOH TODAY Reporter
Sometimes, it feels like things couldn’t get any worse – until they do. In the time since the pandemic, businesses across the globe have had to grapple with macroeconomic conundrums such as supply chain breakdowns, the highest inflation in decades, and sharply rising interest. However, even if these challenges sound bad, most economists are predicting something even worse: an economic recession in the next year or so.
It’s no secret that advertising is one of the industries that fares the worst during a recession; When companies enter an economic downturn and forecast plummeting profit margins, cutting advertising spending is the least pernicious way to preserve a bottom line. Consequently, each recession results in considerably reduced revenues and layoffs across the advertising industry. OOH is certainly not exempt from this principle.
In the wake of the Great Recession – which began in late 2007 – the OOH industry idled for a year before keeling over and experiencing a staggering 19% decrease in total U.S. revenues, a decrease to $5.9 from $7.3 billion in revenue a year prior. Slowly but steadily coming back to fruition, it took the industry nearly seven years to build back what had been lost.
During the record-breaking severe recession, financially well-kempt OOH companies experienced layoffs at worse while the least fortunate businesses had to close their doors completely. Woefully for the little guys, smaller, typically family-owned OOH operations usually bear the brunt of economic downturns.
“The word “recession” is a scary one, so I am certainly not excited about it,” said Dean Manone, a Partner at Red Star Outdoor, a small but well-known OOH owner in Chicago. “In 2008, I think we did a pretty good job on the revenue side. On the cost side, we lowered our costs by double digits. So, while doing a “look-back” I think we made the right choices. But it certainly wasn’t fun.”
Manone says that during the Great Recession, his company engaged in three strategies to stay afloat: reducing unnecessary expenses, focusing its budget and stringently sticking to sales goals, and conducting exhaustive analyses of ongoing projects and strategically focusing resources on its most important goals. Although Manone points out that RedStar fared particularly well amidst the 2008 Recession – especially when it came to the company’s revenue – he points out that a recession in 2023/24 has many more variables, so RedStar will have to tweak its strategy going forward.
In addition to a smaller, regional OOH owner, OOH Today also had the opportunity to speak with a large, national OOH operation: WNDW (formerly known as PMD). Dean Stallone is a founder and CEO of WNDW, an OOH owner with the 5th largest audited OOH network in the U.S. and faces in over 45,000 storefronts. Stallone says that he is not worried about an upcoming recession but acknowledges that “the steady drumbeat of dread is starting to be annoying.”
“We have never really “prepared” for recessions, they just seem to hit all of a sudden, and there you are,” said Stallone. “2008 was long and deep, it took a good year to bounce back. Covid-19 was even deeper, but it took only a few months to recover. We’re really efficient over here, we scale back where we have to and double down on the business development, and we survive.”
Stallone also shares his strategies for a potential recession and the effects of a recession on larger OOH firms compared to smaller ones.
“One thing that’s important; having cash on hand, or access to credit. Being able to bridge the cash gap that inevitably follows a downturn is vital, said Stallone. “In all things, the larger WNDW becomes, the bigger our complications are. I can only imagine what some of our friends over at Clear Channel and Outfront had to deal with in the past couple years with the pandemic, the problems must be exponentially bigger.”
Although there are many reasons to worry about the destructive financial potential of a future recession, there are also plenty of reasons to set back the doomsday clock and to not be so anxious. First, despite aforementioned headwinds such as high inflation and supply-chain issues, data from the OAAA shows that, in 2022, the OOH advertising industry defied expectations and boasted phenomenal revenue growth compared to the year prior.
Another reason not to fret is that OOH advertising is less expensive than other advertising mediums and still provides a high ROI, making it a cost effective solution for enterprises trying to market their product or service on a budget. Additionally, leviathan brands such as Apple or Coca-Cola – which seemingly have an endless stream of funds – also take recessions as a cheeky opportunity to crowd out smaller rivals and increase their own market share of advertisement space. The final silver lining is that economists haven’t even reached a consensus that a recession is a definitive outcome. In a survey published by Bankrate on Jan. 4, the average forecast of economists says that the U.S. has a 64% chance of going into a recession.
Whether a recession occurs or not, it never hurts to be prepared and take the fundamental business precautions necessary to ride out a potential change of fortune. As Stallone expresses: “Just stick to the fundamentals, make sure all our people are doing what they need to do, working as hard as we can, taking care of each other, and we’ll come out on the other side just fine.”