Turning public transit ads into powerful digital tools

Turning public transit ads into powerful digital tools

Digital advertising can have a transformative effect on transport operators, by providing revenue, engaging the customer and offering a rich data source to improve operations | 🕒 8-min read.

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Many public transport authorities are exploring ways to introduce advanced out-of-home advertising across their transit networks, illuminating formerly dark tunnels and sterile stations with targeted advertising through digital screens and personalized advertising through mobile devices.

Digital advertising can have a transformative effect on transport operators, by providing a significant source of additional revenue, creating tools and platforms to engage the customer, and offering a rich data source to inform and improve operations.

New public transport revenues lie below the surface

Since they handle hundreds of thousands of daily commuters, major transit agencies are recognizing the often-under-tapped potential revenue to be gained by positioning strategically placed eye-catching ads across their labyrinth-like transit routes and onboard their vehicle fleets. Considerable advertising income can be earned by providing advertisers with access to this captive audience of travelers who spend hours staring at station walls or engrossed in their smartphones.

Transport authorities are tendering out their advertising concessions to specialist media partners who eagerly oversee the program and split infrastructure costs to install digital screens, saving the transit agency upfront investments in often-overdue technology upgrades.1

Data for optimized advertising and operations

At a basic level, digital advertising and interactive screens can bring more vibrant, appealing ads to commuters, which net premium rates and can unleash an array of sponsorship arrangements between transit agencies and advertisers.

With easily-changeable electronic screens rather that static print signage, transit authorities gain the ability to lease the same space to multiple parties and optimize the ad rates by time period and target demographic. For example, they could charge different advertising rates at rush hour or peak holiday periods. And, transport authorities can utilize these same screens to publish valuable passenger information about transit services or disruptions.

The level of sophistication can rise dramatically by adding features like Wi-Fi and Bluetooth tracking to gather information about each traveler’s movements and habits. This enables geo-targeting, so different content can be presented to the traveler on their smartphone, with customized marketing messages or personalized offers relating to a nearby retailer, in addition to journey planning tools and in-station wayfinding.

Beyond the commercial benefits, transport authorities could gain the ability to see their customer’s entire journey and predict their behaviors, enabling them to better plan transport capacity and system improvements geared to traveler needs. They could potentially apply the data insights to dynamically manage operations schedules and staffing.

Transit operators could also enhance their day-to-day operations by adding functionality to their digital advertising systems. For example, cameras, environmental (temperature, light and humidity) sensors and motion detectors could instantly alert transit control centers to changing capacity, comfort and safety conditions across the network, creating another set of ‘eyes and ears’ across the system to optimize staffing. In-station equipment connected via the Internet of Things, including ventilation systems and escalators, could be quickly adjusted. In tandem, transport agencies could issue immediate bulletins through their trip planning apps to commuter smart phones, redirecting them to less crowded, alternate routes.

A clear route to digital transport innovation

While the potential described above is impressive, newer transit authorities in emerging markets often have an easier journey, since they can introduce the latest digital communications platforms as they construct their networks from scratch. In contrast, older transit systems sometimes find themselves playing catch-up to inject digital innovation without disrupting existing operations.

That’s the case for one of North America’s largest transport authorities, which operates several thousand miles of tracks and hundreds of rail and bus routes. Although agency executives have a clear vision to introduce digital screens across the network, they face the challenge of replacing their traditional, existing print-based advertising and passenger notification signage in hundreds of stations.

To do so, they must evaluate complex bidder proposals for their transit advertising concessions, and scrutinize their advertising and revenue plans and their end-to-end technology specifications to design, install and support the system. Ultimately, they must choose the best partner to execute their ambitions. And, in light of the rapid pace of digital innovation, they must ensure that their digital system and vendor offer the flexibility to evolve with technology advancements and customer demands over a 10-year contract period.

While it sounds complex, one of the world’s oldest transport operators, Transport for London (TfL), London’s integrated transport authority, is a pioneer in the digital advertising realm. TfL has built out a sophisticated network of traditional and digital displays across its network, enabling advertisers to reach commuters on their 31 million daily journeys through its Tube stations, train depots and bus shelters.2 The system has produced significant revenues for TfL.3

Regardless the stage of digital transformation a transport agency is in, there are a number of best practices for monetizing a transport system’s assets to consider. Among them:

  • Start with a blueprint of the transport agency’s business and operations objectives: Ensure that the program takes into account related customer, digital and mobile technology priorities that respond to current and future customer needs. Determine to what degree the program should be managed internally or by an outside specialized provider.
  • Enable a culture shift: While transit agencies must maintain their focus on providing public transport, they may need to embrace a culture shift and recognize that private sector partnerships to introduce technology and content can complement their customers’ needs and preferences. They may need to build broader partnerships with aligned objectives between agency and provider rather than traditional/transactional supplier relationships.
  • Examine vendor proposals from all dimensions: When assessing new digital advertising concessions proposals, transport agencies must evaluate these submissions from various dimensions including financial, customer experience and hardware/software capabilities. In addition to scrutinizing the vendor’s financial assumptions regarding advertising, revenue share percentages and minimum guaranteed payment levels, they must rigorously assess their marketing, technology and support and evaluate their own digital and mobile capabilities. They also need to ensure that the new solution could be successfully integrated with the agency’s existing web of operational technology.
  • Preserve the brand and customer trust with clear policies and practices: Set clear guidelines on the types of advertising that are suitable and brands that are appropriate to associate with. Emphasize the public benefit and ethical considerations in program decision-making and set clear guidelines on what customer data can and can’t be used and provide customers with clear opt-in/opt-out and feedback mechanisms.
  • Ensure program coherence with other digital initiatives in the customer experience lifecycle. These could include fare payments, journey planning and passenger information services that, historically, transport authorities have provided through multiple digital solutions. Now, convergence of these solutions is possible.
  • Don’t overlook non-digital options: Remember that not all demographic groups or customers are willing or able to engage with digital solutions so provide alternatives to meet all customer needs.
  • Think bigger picture data implications: In addition to resolving the requisite privacy and security safeguards to protect passenger data, transport agencies must ensure that vendor agreements precisely outline data ownership rights. They will want to retain ownership of the customer relationship and be able to leverage customer data for effective transport planning as well as potential future revenue streams from monetizing passenger data. This speaks to the reality that, in the near future, the consumer data itself generated through their communication systems may be far more valuable than the pure advertising revenues generated on the screens themselves. However, keep in mind that future open data initiatives could help develop innovative new customer-facing solutions by third-parties, at a minimal cost to the transport authority.

Bright opportunities at the next transit stop

In summary, transit authorities would be wise to consider more holistic approaches to monetize their advertising opportunities. With the advent of digital and mobile technologies, and with the increasing need to provide riders with an exceptional customer experience, it is increasingly possible for transit authorities to ask (and demand) more of their advertising concession partners. The best partners must still be able to demonstrate the sales, marketing and financial savvy it takes to maximize short-term advertising revenue. And increasingly, they must also be able to demonstrate integrated technical capabilities, operational credibility and a strategic vision to integrate these core elements for the benefit of the transit authority. It is therefore imperative that transport agencies carefully consider what exactly they need in a partner and be able to recognize the broader benefits and risks each bring with them. The good news is that the rewards could be as near as the next bus stop or station platform in light of the potential to create a truly dynamic digital communication system that maximizes advertising revenue while helping deliver the right customer experience and capturing rich data to create an efficient, financially-sustainable transit network.

About KPMG’s Global Public Transport Network

KPMG’s Global Public Sector Transport network works with public transport authorities to embrace emerging technologies to help increase capacity, optimize asset lifecycle, leverage existing data and improve customer experience.

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