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18 CHAPTER FOUR ADVERTISING RATES AND REVENUES The primary reason for accepting advertising is to raise revenue for the transit agency. This chapter reviews current advertising rates and revenues derived from advertising. Key aspects to this discussion include the critical impact of the size of the metropolitan market on advertising rates and revenues; differences between large, medium, and small transit agencies; and differences between bus and rail advertising. Each of these factors needs to be considered to understand the revenue potential from the sale of advertis- ing space. ADVERTISING RATES Advertising rates are one determinant of transit agency revenues from advertising sales. Rates vary depending on the market, with larger metropolitan areas commanding higher rates. Size and placement of advertisements also critically affect advertising rates. In many cases, the amount actually charged is lower than the rate card (published) rate because advertising sales contractors can negotiate lower rates with advertisers on a contract-by-contract basis. Bus Advertising Rates Most bus advertising is likely derived from advertisements on the sides of buses, most commonly exterior king adver- tisements. These displays command the highest rates in large metropolitan areas. Among large transit agencies in the top 20 media markets, exterior king bus advertisements sell in the range of $520 to $735 for a 4-week posting, based on rate cards from SEPTA, WMATA, CTA, and the San Francisco Municipal Railway (Muni). Tails sell for somewhat less, in the range of $400 to $500 for a 4-week posting. Interior advertising generates far less revenue because of the smaller audience of on-board customers as opposed to drivers and pedestrians outside the bus. Interior car cards are priced at $16 to $24 per 4 weeks at large agencies. Advertising rates are considerably lower for advertising in small- and medium-size metropolitan areas. Exterior king advertisements generally sell for $300 to $450 per month per advertisment in medium-size markets such as Madison (Wisconsin), Fresno (California), Milwaukee, Kansas City, and Louisville (Kentucky). In small markets such as Akron (Ohio), Grand Rapids (Michigan), Peoria (Illinois), Worcester (Massachusetts), Des Moines (Iowa), and Chattanooga (Tennessee), king advertisements sell for $100 to $300 each. As with the large transit agencies, tails in smaller and mid-size agencies generally sell for 75% to 85% the price of kings. Interior car cards offer much lower prices, less than one-tenth the cost of kings, which benefit from a broader and larger audience outside the bus. Even at those prices, interior cards are less likely to sell out than the exterior space. Notably, the range of advertising rates is relatively nar- row in major media markets and wider in other markets. As will be discussed later, this pattern carries through to total revenues from advertising realized by transit agencies. The narrow range in pricing and revenues in large markets sug- gests that these are well-developed, mature markets and sales processes. The larger range outside the major markets suggests greater variation in the level of competition and competence in advertising sales. Advertising rates are lower on a per-month basis for longer postings; for example, the price for a 26-week post- ing is less on a per-month basis than for a 4-week posting, and a 52-week posting costs less per month than a 26-week posting. For example, exterior king advertisements at large agencies are $60 to $150 less per 4 weeks for a 52-week posting than for a 4-week posting. The difference reflects quantity discounts and the labor costs of posting the actual advertisements. Larger advertising displays on bus exteriors command premium rates. The most lucrative displays are full bus wraps. At large agencies that offer bus wraps and submitted rate cards, full bus wraps are priced at $5,300 to $7,700 per month. Long-term commitments of 12 weeks or more may be re- quired for bus wraps because of the cost of wrapping a bus. Bus wraps can generate far more revenue overall than conventional-size advertising sold for each side of the bus. At large agencies, for example, the individual rates for a king-size advertisement on each side of the bus and a tail and headlight advertisement total $1,400 to $1,800, ap- proximately one-quarter the price for a full bus wrap. At medium and small transit agencies, full bus wraps sell for 5 to 10 times more than kings and half sides sell for about twice the price of kings.
19 Premium advertising displays for each side of the bus go part of the way toward the value of bus wraps. Super king exterior bus advertisements are priced at $650 at SEPTA and $2,000 at Muni and other San Francisco-area transit agencies. Full back advertisements are priced in the range of $1,200 to $2,500 in Chicago, Washington, and the San Francisco Bay Area. Headlight domination advertise- ments (requiring the advertiser to buy the entire fleet), are priced at $85 to $105 per bus in Chicago and San Fran- cisco. Financially, it is in the advertising sales contractorâs interest to wrap as many buses as possible, or at least to use the larger displays, even considering the higher cost of wrapping a bus. However, this is not always possible or even desirable. Transit agencies sometimes limit the num- ber of larger displays for aesthetic reasons. More funda- mentally, the number of advertisers who want to buy bus wraps and other large displays is limited. Wraps are attrac- tive for product roll-outs and major branding campaigns, where their greater impact is desired. However, for day-to- day advertising, advertising dollars can be spent with greater effect on a larger number of kings than a smaller number of wraps. Rail Advertising Rates Although the value of bus advertising flows primarily from its ability to reach people outside the bus, the value of subway, light rail, and commuter rail advertising is based on its ability to reach transit riders in stations and on trains. The mainstays of this advertising are station posters and in- terior car cards. Both types of rail advertising show more variation in rates than do exterior bus advertisements among large agencies that submitted rate cards. The rate for a 4-week display of two-sheet station posters ranges from $250 (SEPTA) to $495 (WMATA), with CTA and BART/Muni priced at $270 and $300, respectively. The rate for interior 22-in. by 21-in. car cards (typically placed next to doors) ranged from $45 at CTA to $105 at BART and Muni. Inte- rior car cards above the windows, measuring 11 in. by 28 in., cost $24 at CTA and $100 at VTA. Rates quoted here are for a 4-week posting and are somewhat less on a per- month basis for longer postings. Various premium advertising displays generate substan- tially higher prices. Station dioramas are priced at $650 at CTA and $1,260 at WMATA for a 4-week showing. Station clock advertisements cost $350 and brand trains $333 in Chicago. A wrapped CTA train costs $15,000 per 4 weeks for a 3- to 6-month term and $11,500 per 4 weeks for a year-long run. REVENUES DERIVED FROM ADVERTISING There is a significant range in revenues derived from ad- vertising sales. Small transit agencies such as Ben Franklin Transit (Richland, Washington) and Star Tran (Lincoln, Nebraska) reported approximately $50,000 in 2002 reve- nues. In the middle range, Fresno (California) Area Ex- press, Kansas City Area Transportation Authority, and Metro Regional Transit Authority in Akron brought in $150,000 to $300,000 in revenue from advertising in 2002. Somewhat larger agencies in San Antonio, Milwaukee, Connecticut, and Maryland had revenues of $500,000 to $1 million in 2002. Large transit agencies in top 20 media markets such as BART, VTA, SEPTA, NJ Transit, and the Massachusetts Bay Transportation Authority (MBTA) in Boston reported revenues ranging from $3.5 million to $20 million in 2002 (Table 6). Many factors affect revenue levels from advertising sales, the most obvious being agency size. Transit agencies with a large number of buses can generate more advertis- ing revenue than agencies with smaller bus fleets. Like- wise, multi-modal agencies with both bus and rail opera- tions can generate higher revenues than bus-only or rail- only agencies. Another important factor is the size of the metropolitan area; larger metropolitan markets offer greater opportunities for higher revenues. One additional factor that has proven particularly important in recent years is the timing of bidding for advertising sales contractors. Some agencies that bid out their sales contracts during the boom years (through approximately 2001) have relatively high revenues from these contracts. Although they can be substantial in dollar terms, adver- tising revenues are quite small as a proportion of total tran- sit agency revenues. Among the agencies surveyed, total revenues from advertising sales were 1.5% of total operat- ing funds, with agency revenue levels ranging from 0.1% to 3.2%. (These figures are based on National Transit Da- tabase expenditures for fiscal year 2001 and 2002 advertis- ing revenues as reported in the survey.) However, advertising revenues appear more significant if viewed in light of fare revenues. Total advertising reve- nues for those transit agencies surveyed were 4.4% of these agenciesâ total revenues from fares. Advertising revenues constitute between 10% and 21% of fare reve- nues at the San Mateo County (California) Transit District (SamTrans), Community Transit (Everett, Washington), Utah Transit Authority (Salt Lake City), CityLink, and VTA. Many transit agencies experienced rapid growth in ad- vertising revenues in the late 1990s. Of the agencies sur- veyed, 32% saw advertising revenues grow by at least 40%
20 TABLE 6 S UMMARY OF ADVERTISING REVENUE Vehicles in Peak-Hour Service Agency Name City/State Ad Sales Revenue, 2002 ($thousands) Unlinked Passenger Trips, 2001 (millions) Who Sells Advertising Buses Heavy Rail Cars Light Rail Cars Commuter Rail Cars Top 20 Media Market, Large Agency Washington Metropolitan Area Transit Authority (WMATA) Washington, DC 20,000.0 378.9 Viacom 1,212 628 Chicago Transit Authority (CTA) Chicago, IL 18,500.0 484.8 Viacom 1,627 988 Massachusetts Bay Transportation Authority (MBTA) Boston, MA 15,000.0 364.3 Viacom (some in- house) 884 320 155 376 Los Angeles County Metropolitan Transportation Authority (LACMTA) Los Angeles, CA 14,200.0 398.1 Viacom 2,026 70 51 Southeastern Pennsylvania Transportation Authority (SEPTA) Philadelphia, PA 11,600.0 318.1 Viacom 1,106 308 108 291 New Jersey Transit Corporation (NJ Transit) (Statewide), NJ 8,300.0 225.9 Viacom 1,838 31 733 King County Department of TransportationâMetro Transit Division Seattle, WA 7,250.0 101.0 Viacom 976 3 Metropolitan Atlanta Rapid Transit Authority (MARTA) Atlanta, GA 6,000.0 164.1 Viacom 603 186 Santa Clara Valley Transportation Authority (VTA) San Jose, CA 4,241.5 57.3 Viacom 452 41 San Francisco Bay Area Rapid Transit District (BART) Oakland, CA 3,464.5 103.9 Viacom 507 Metro Transit Minneapolis, MN 1,700.0 73.3 Viacom 792 City of Phoenix Public Transit Department Phoenix, AZ 1,560.0 31.6 Transit Advertising Group 338 San Diego Transit Corporation San Diego, CA 1,006.3 41.8 Michael Allen Associates 258 Maryland Transit Administration (Statewide), MD 1,000.0 111.0 Gateway; Viacom (bus shelters) 773 66 49 110 Other Transit Agencies in Top 20 Media Markets San Mateo County Transit District (SamTrans) San Carlos, CA 2,100.0 18.1 Viacom 278 Golden Gate Bridge, Highway and Transportation District San Francisco, CA 950.0 11.6 Viacom (some in- house) 233 Snohomish County Transportation Benefit Area Corporation (Community Transit) Everett, WA 750.0 9.1 Viacom 217 Pierce County Public Benefit Authority Tacoma, WA 700.0 14.5 Viacom 172 Potomac and Rappahannock Transportation Commission Woodbridge, VA 294.7 1.3 Viacom 65 Livermore Amador Valley Transit Authority Livermore, CA 150.0 2.2 Orion Outdoor 50 Tri Delta Transit Antioch, CA 42.5 2.2 Orion Outdoor 45
21 T ABLE 6 (Continued) Vehicles in Peak-Hour Service Agency Name City/State Ad Sales Revenue, 2002 ($thousands) Unlinked Passenger Trips, 2001 (millions) Who Sells Advertising Buses Heavy Rail Cars Light Rail Cars Commuter Rail Cars Mid/Small Media Market Utah Transit Authority (UTA) Salt Lake City, UT 2,140.1 25.9 Freeway Advertising 529 33 Port Authority of Allegheny County Pittsburgh, PA 1,800.0 74.8 Viacom 848 47 Connecticut Transit Hartford, New Haven, Stamford, CT 839.5 27.3 Obie Media 309 Milwaukee County Transit System (MCTS) Milwaukee, WI 587.9 71.2 Obie Media (buses), Clear Channel (shelters), Transit Television Network (transit TV) 453 VIA Metropolitan Transit San Antonio, TX 574.0 47.0 Gateway 402 Transit Authority of River City (TARC) Louisville, KY 350.0 16.6 Viacom 208 Madison Metro Transit Madison, WI 300.0 10.5 Obie Media 166 Metro Regional Transit Authority Akron, OH 298.0 6.4 In-house staff 145 Greater Dayton RTA Dayton, OH 271.8 14.9 In-house staff 174 Kansas City Area Transportation Authority (KCATA) Kansas City, MO 271.0 15.6 Obie Media 235 Greater Peoria Mass Transit District Peoria, IL 155.0 1.9 In-house staff 42 Fresno Area Express Fresno, CA 150.0 13.3 Vista Media Group 84 Interurban Transit Partnership (The Rapid) Grand Rapids, MI 85.2 5.2 Princeton Media 92 Duluth Transit Authority Duluth, MN 77.0 3.2 Houck Motor Coach Advertising 63 CityBus of Greater Lafayette Lafayette, IN 74.4 3.1 In-house staff 48 StarTran Lincoln, NE 56.0 1.6 Houck Motor Coach Advertising (some in- house) 47 Sun Tran Tucson, AZ 54.0 15.9 Attention Transit Advertising (bus wraps in-house) 159 Ben Franklin Transit Richland, WA 53.0 3.8 Obie Media 61 Lake Erie Transit Monroe, MI 3.1 In-house staff Muncie Indiana Transit System Muncie, IN 1.9 1.4 Burkhart Advertising (some in- house) 25 Worcester Regional Transit Authority Worcester, MA na 4.8 In-house staff Transportation District Commission of Hampton Roads Hampton, VA na 16.6 In-house staff 280 Notes: na = not available. (Sources: Survey of transit agencies; National Transit Database.)
22 FIGURE 11 Change in advertising revenue, 1999â2002. (Total agencies responding: 35.) FIGURE 12 Advertising revenue and ridership, large agencies in top 20 media markets. Note: Line is drawn to best fit observations indicated as diamonds. R-squared is 0.99. Note that advertising revenues are gross revenues to the transit agency. In-house costs are not subtracted from the gross revenue figures. and an additional 20% of the agencies experienced revenue growth of 20% to 39% (Figure 11). Revenues at Large Transit Agencies As would be expected, advertising revenues are greatest for the nationâs largest transit agencies. These agencies benefit from the size of their transit operations and ridership and from the attractiveness to advertisers of the nationâs top markets. Figure 12 illustrates the relationship between agency size and advertising revenues for large transit agen- cies in top 20 media markets. Agency size is measured by Revenue growth was particularly rapid among the 14 large transit agencies in the top 20 media markets; 64% experienced growth of at least 20% compared with 43% of other agencies. Several large agencies saw their revenues climb rapidly when two large companies bid aggressively for the contracts.
23 ridership (annual unlinked trips). Ridership captures in at least an approximate way the amount of available advertis- ing space for sale (the more riders, the greater number of buses, rail stations, and rail cars). Ridership also tends to correlate with the number of motorists and pedestrians ex- posed to exterior bus advertisements. Therefore, ridership would be expected to reflect the overall size of the audi- ence, both riders and nonriders. The 13 large transit agencies in this analysis showed a strong linear relationship between 2002 revenues and rid- ership. In 2002, revenues were between 3.3 and 3.9 cents per trip for most of this group. Notably, the agencies on this list are quite diverse, ranging from BART, which oper- ates only rail service, to the Los Angeles County Metro- politan Transportation Authority, where bus ridership sub- stantially exceeds rail ridership. Three agencies showed 2002 revenues that were well above average: WMATA (5.3 cents per passenger trip), King County Metro (7.2 cents per trip), and VTA (7.4 cents per trip). These three agencies benefited from a vibrant advertis- ing market and strong competition for their contracts when they bid out their advertising sales contracts between 1997 and 2000. The bursting of the Internet bubble and the over- all decline in the advertising market changed the picture, as shown by new contract terms for VTA and King County Metro. VTA rebid its contract for 2003 for bus and light rail advertising and obtained a guarantee of $1.5 million; the contract will bring in about 2.6 cents per passenger trip. King County Metro extended its advertising contract for 2003 with a $3.5 million guarantee, or 3.5 cents per pas- senger trip. Advertising sales revenues at WMATA, which began a 10-year contract in 2000, have not been affected by the changed economy. Even accounting for agency size, large transit agencies showed higher revenues than smaller transit agencies. The large agency average of 3.5 cents per passenger trip compares favorably with an average of 2.2 cents per trip for transit agencies not in the top 20 media markets. The latter group is primarily bus-only agencies, which will be discussed next. Revenues at Bus-Only Agencies Revenues from advertising sales at transit agencies that operate bus service but not rail service correlate strongly with the size of their bus fleets. This is not surprising, be- cause the revenue from advertisements on the outside of the buses provides the bulk of the revenue. Counting buses is akin to counting billboards. Figure 13 shows 2002 revenues from advertising sales and ridership (unlinked trips) for the 14 bus-only agencies that responded to the survey. Revenues for most agencies FIGURE 13 Advertising revenues and fleet size, transit agencies in medium and small media markets. Note: Line is drawn to best fit observations. R-squared is 0.92. Note that advertising revenues are gross revenues to the transit agency. In-house costs are not subtracted from the gross revenue figures.
24 were between $1,100 and $1,800 per bus, with an overall range of from $870 to $3,700. Excluding the highest and lowest values, the average was $1,472 per bus. Two factors explain why five agencies shown in the figure have relatively high revenues per bus. First, three of these agencies benefited from bidding out their current contracts during the peak of the late 1990s economic boom. These three agencies are in Madison, Fresno, and Louisville, which caught the tail end of the boom in 2001. Second, two agencies with relatively high revenues per bus (Akron and Peoria) sell their advertising in-house. Both have sold a high percentage of their inventory and appear to have aggressive and effective sales personnel. Smaller Transit Agencies in Large Metropolitan Areas The final group is made up of small- and medium-size agencies located in major metropolitan areas. This group tends to show relatively high advertising revenues consid- ering the size of the agency and includes agencies that op- erate suburban bus routes with substantial commuter ser- vice into the central city or between suburbs, or both, such as the Golden Gate Bridge, Highway and Transportation District; SamTrans; Potomac and Rappahannock Transpor- tation Commission (Woodbridge, Virginia); and Commu- nity Transit. In 2002, revenue for these agencies averaged $4,900 per bus and 12.8 cents per passenger trip. The agencies benefit from the attractive demographics of both their own ridership and surrounding automobile drivers, which attract a higher-end mix of advertisers than central city bus systems. Some, such as SamTrans, also benefit from restrictions on billboards in their service areas, which drives up the value of bus advertising. Other small agencies in large metropolitan areas include agencies in secondary cities such as Tacoma, Washington, and suburban agencies such as in Livermore and Antioch, California. No clear patterns emerged from analyzing revenues among this small sample.
