Shared Use Mobile Advertising Model

A French Company, named Mobil Affiche, developed the original mobile scrolling advertisement system in 1993 and established the first dedicated advertising vehicle (DAV) in Europe. A distinctive 7-poster system was highlighted in their trucks with a 5’ x 8’ display on its three sides. The tri-vision advertising truck was designed by Delroy Cowan in 1995. Cowan’s invention integrated an Isuzu NPR truck with a truck bed that was costumed and three tri-vision symbols that he bought from a manufacturer in the Europe. Cowan’s two trucks were the first multi-image steadfast advertising vehicles in the USA. 

Few years down the line, a similar but polished DAV conceptualization emerged from organizations calling themselves Brands in Motion, Billboards in Action and Admobile.

The DAV theory from each mobile ad pioneers were versatile, but they all advocated the shared-use model of advertising.

Previously, we explored how one can attain a reasonable return on investment by committing a DAV to an individual client. The single client model forgoes higher advertising rates and substantial potential revenue for lower risk and stability. Nonetheless, this is the most potentially profitable model for generating income compared to the shared-use model. Precisely, the shared-use model authorizes advertisers to procure as little or as much of the available ad space they need. The mobile advertising provider should devise a program that is effective, credible, verifiable and of a good value to support a strong rate card.

Effective

Effectiveness is the foundation of any advertising medium. In mobile advertising, effectiveness is hatched by combining creative ad design, operational logistics, hours of operation and the local traffic patterns. 

Credible

The distinction between closing a contract and leaving a candidates office with a polite, “I’ll think about it” is the observed credibility of a mobile advertising company.

A proposal to purchase advertising on a single DAV the client has never witnessed before limits confidence in a potential advertiser. There is an unrealistic expectation that an overwhelming figure of fresh DAV owner’s mistake those 30-60 days of “pre-sales” will allow them to take delivery of their first truck with a sold-out slate of advertisers.

Demonstrating credibility is a solitary strategy to build credibility. Your DAV clean, on the road each day during the peak hours will definitely model your company’s credibility. Although originally it may be considered as curiosity, it will possess acquire credibility with time.

Verification

Most commonly the clients ask if you can guarantee how many people will view the ads. The actual question must be, “How can I be sure that the DAV is not parked behind your office while I am remunerating for it to be moving through the peak hours of traffic?” The solution to this question is Verification.

For $30 a month, you can possess a real-time and historical GPS location that serves as a proof of performance. It’s not mandate to give a client online access to the GPS system, but it is a must to provide the clients with a monthly and weekly GPS reports on request.

If the first three essentials-effectiveness, credibility, and verification are manifested, good value becomes apparent to the customer.

Value

We have never discussed price till this point of time. Mobile advertising is not driven by price. If you market mobile advertising as a very inexpensive form of advertising, you will be selling your hardly used DAV in less than a years’ time.

A few of the DAV owners happily charge over $1000 a week with a minimum commitment of 13 weeks for a single face of advertising on their DAVs. The advertisers tend to trust that they received a good value for money and that the advertising was as effective as expected in delivering results for their business. The client could also verify if the DAV actually operated in the schedule it was paid for.

PLAN FOR OVERHEAD

The shared-used model has a maximum operating overhead than any DAV business model versions. Almost all shared-use models portray amalgamation of the below elements.

  • Operation in a particular road.
  • Visibility during peak hours.
  • Illumination whenever necessary.
  • Non-exclusively for advertisers. (although it is allowed for two competing restaurants to advertise)
  • Minimum contract period of 13 weeks or even a month sometimes.
  • Ads are not wrapped around the truck. They are priced by face. 

A weekly running of five days a week between 7AM to 7PM requires manpower of several drivers and a salary of at least 50 hours. It is fine to have a few hours of down time when the traffic is less. The perception that their ad is on the road, practically non-stop throughout the week assists clients to make peace with the thought that their ads will share the space with other ads.

It will time-testedly cost $77,000 per annum to operate a DAV this way or say roughly around $6500 per annum. 

  • Truck payment : $1500 (60 months term on a $70,000 truck, and nothing lesser)
  • Insurance : $300 (varies from $150 to $500)
  • Drivers Salary: $2817 (50 hours a week, $8 per hour, $5 per hour taxes and benefits.
  • Fuel : $1517 (200 miles per day, 10 MPG, $3.50 per gallon)
  • Maintenance : $250 (oil changes, tires, brakes)
  • GPS service charge : $30

Total monthly expense: $6,414

An overhead of $6,500 per month remains the same for every month with 20 advertisers on board, or a single advertiser. Almost all the DAV owners that function with this model charge something between $400 – $700 per week per ad, having a minimal contract period of 13 weeks. They also control the number of ads per side to not more than 4 at a time, to improve the ad frequency, even if the display structure can accommodate 15 to 20 ads.

This is a practice that attracts most DAV owners towards mobile advertising. Assumptions of the pricing ground rules are as follows 

  • Established base rates for one week of advertising on one side.
  • Side faces cost at least 20% lesser than back faces keeping the motorists in mind who can view the ads for a much longer duration.
  • Front, over the cab ads cost 1/3rd the price of side ads although they are excellent for branding.
  • A maximum of 4 ads per side is allowed.

Formula for your Excel Spreadsheet: 

Maximum monthly truck revenue = {(8 side faces x base rate) + (4 back faces x (base rate x 1.2) + (4 front faces x (base rate x .33)} x 52 weeks/12 months.

If we use a base rate of $500 per week, the calculated work out will be –

  • 8 sides x $500 = $4,000
  • 4 backs X $600 = $2,400
  • 4 fronts x $165 = $660
  • Maximum weekly income = $7,060
  • Maximum monthly income= $30,593.33
  • Maximum revenue per annum = $367,119.96 – which is a big number!

When the big number manifests on your calculator or at the base of your Excel spreadsheet, it makes the $77,000 annual overhead per truck seems quite justifiable.

According to this model the gross operating profit is about $290,000 per truck, which suggests a massive 79% gross margin. The overturn of 79% gross margin is a 21% break-even ratio. It is essential to sell at least one out of five ad spaces on your DAV at an average rate of $500 per week before the owner affords to exercise his payroll and remunerate the office and other and administrative expenses.

The shared-use model hits the bull’s eye if the operation exceeds or even touches the margins above.  The big number is what magnets many into this business. DAV owners should tailor their enthusiasm for mobile advertising mechanics with the truth of operating successful sales performance. If the blaze of direct sales is what prompts and inspires you, you will find the entice of the big number inviting. The shared-use model is probably the ultimate for your mobile advertising endeavor.

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