Digital advertising is going big—very big—and will soon be everywhere. The out-of-home advertising market (OOH), which includes everything from billboards to posters to Jumbotrons, is finally making a big push into the digital landscape, changing what used to be static canvases into dynamic advertising displays.
This is more than just a bunch of dummy flat screens flipping through ads at random, but rather advertising directly targeted to specific audiences based on time and location. And unlike the digital ads that appear on a computer browser or mobile phone, OOH digital ads yield real-life impressions via interactions with passersby, giving marketers peace of mind that their digital ad dollars are being used effectively and not being eaten up by a bunch of hungry bots.
The first glimpses of this new reality have started popping up on street corners and inside subway stations in New York City. Last week saw the opening of TurnStyle, a new retail development located inside the redone Columbus Circle subway station on 59th street, which gave weary commuters something to do on their way to the train besides staring at rats fighting over sunflower seeds. It also gave them a glimpse into new digital advertising: As the new storefronts took the wall space once reserved for advertising posters, the MTA’s advertising partner, Outfront Media, decided to replace those paper posters with dynamic digital displays.
Down the block-long shopping concourse, Outfront wrapped several of the station’s cast iron columns with dynamic digital displays that show everything from ads for Clariton to subway traffic announcements from the MTA. Commuters can interact with the displays, access a directory of stores, participate in promotions, and connect with social media platforms.
The new screens are based on technology that Outfront acquired from Videri, a cloud-based app-linked ecosystem, which allows Outfront to push advertisements to the screens and reports back with audience metrics gathered, at least in part, from those passersby who interact with the ads via their mobile phones.
This isn’t as creepy as those hologram adverts that stalked individual pedestrians in Minority Report, at least not yet. For now, Outfront can change the screen ads in real time based on the general demographic of the people in the hall at a given time of day. On a Sunday morning when the concourse is full of tourists on their way to explore Central Park, for example, the displays might change from hangover medication to adverts about Hop-On, Hop-Off bus tours of Manhattan or a two-for-one couples special down at the Museum of Sex.
Fortune sat down with Outfront executives and its CEO, Jeremy Male, to get a better idea of how OOH advertising works and how digital fits into that landscape. The following interview has been edited for publication.
FORTUNE: You used to be part of CBS, right?
OUTFRONT: That’s correct. We were part of CBS (CBS) for around 15 years, known as CBS Outdoor. A couple of years ago, though, CBS decided to focus more on content creation and spun off the outdoor business. The company was reborn as Outfront, which we then quickly converted into a Real Estate Investment Trust (REIT).
FORTUNE: How can you make sure your OOH ads are being seen by the right audience?
OUTFRONT: Well, the hardware, those bright digital displays we developed, is just one piece of the puzzle. More importantly, though, is our DMP, the data management platform, which informs those screens in real time as to the audience in front of it.
FORTUNE: How granular does this audience data go? Will these displays know who I am when I walk by?
OUTFRONT: It’s not keyed in to an individual. We never want it keyed in to an individual.
FORTUNE: Okay. So people like me?
OUTFRONT: Right, so like young professionals in NYC, who are going down to Wall Street to work. So from 8 a.m. to 9 a.m., the screens will be showing Netflix stuff and millennial stuff. We can infer that they work on Wall Street because their mobile phone sits at the stock exchange from 9 a.m. in the morning to 5 p.m. every weekday and that particular phone sleeps in the East Village every night. So now we can make inferences so that we can deliver the right ads at the right time.
FORTUNE: How far along are you in rolling out this new technology?
OUTFRONT: We’re effectively in trial in a number of places, so we have 24 screens deployed in the MTA subway stations and we got a deployment just kicking off in Washington.
FORTUNE: You seem to be facing some serious competition for the MTA contract for the first time in decades. Is digital going to be your ace in the hole?
OUTFRONT: The competition, in our view, don’t have the same scale of sales operation to do the job. We have 400 sales people across the U.S. that can be deployed for the MTA in terms of building their revenues. Right now, you’ve got $200 million plus in revenue that just needs selling and we have the operational logistics to do it—it is something that we’ve been doing forever. We’ve had this close association with the MTA that goes back nearly 80 years. We get their business, we understand it, so there are a number of reasons we believe it’s the right decision for the MTA to choose us.
FORTUNE: Intersection’s LinkNYC Wi-Fi kiosks are popping up all over New York in spots that used to house pay phones. The company seems to be making a strong argument that they are the future of outdoor.
OUTFRONT: Well, we are also moving very quickly into the digital landscape, as you have seen with our new digital screens at the Hudson Yards and now the Columbus Circle stations we opened this week. We simply believe that our hardware is better and lower cost than the competition, which means we should be able to deploy it faster and at lower rates than anyone else.
FORTUNE: How about growth through consolidation? Any deals in the works?
OUTFRONT: We are also taking a look at acquisitions. In fact, we just completed one in the last few weeks, a company called Reynolds down in Dallas, which should increase our footprint in the south and other key markets. Right now there are three big players in this market, including ourselves, that control around 70% of the market. The balance is well fragmented; probably like 100 companies make up the remaining 30%, so we are looking at some of those.
FORTUNE: When do think all billboards will become digital? Will I see a “print” billboard in, say, 20 years?
OUTFRONT: In the U.S., digital billboards make up only 2% of all the billboards out there—so we have a long way to go. If you go through airports, the majority of ads are digital now, but there is still demand for analogue advertising. For example, there are a number of companies like Apple, who is one of our biggest clients, who don’t do any digital. They don’t want to share space with anyone else. They want that beautiful image plastered with nice lights on it 24-hours a day. But internally, I think, everything will be digital in that 20-year time frame you laid out. I really don’t think we will be posting a two-sheet ad with a brush and paste.
