Advertising Boosts Transit Budgets

New York, Chicago Test Digital Displays to Help Cover Revenue Shortfalls

By Andrew Hampp

Published: October 27, 2008

NEW YORK (AdAge.com) -- For New York and Chicago commuters, ads are starting to seem unavoidable, cropping up everywhere from subway turnstiles to digital banners on buses to the entire exteriors of subway cars. But the ad revenue has become essential to the long-term sustainability of the cities' transit authorities.

Take New York's Metropolitan Transportation Authority, which is projecting a $900 million deficit for 2009 and needs all the extra revenue it can get before it resorts to hiking fares for millions of commuters. Jeremy Soffin, the agency's spokesperson, said the MTA was able to generate $106 million in ad revenue in 2007, and anticipates finishing 2008 with $125 million. However, should pilot projects with advertisers continue on a permanent basis, the agency anticipates a lift in ad revenue as high as 25% in 2009.

"The advertising revenue is a small fraction of our total budget," Mr. Soffin said. "We get about half of our funding directly from customers through fares and tolls -- mostly government subsidies, taxes and other revenue sources. But obviously every bit of additional revenue helps close that gap."

The MTA is in the midst of a 10-year contract worth $800 million with Titan Worldwide, an out-of-home-advertising company. Earlier this month, Titan began testing the first digital ads on buses in both New York and Chicago, bringing external video-enabled ads to public transportation for the first time. Advertisers in the test include Oreo, Dunkin' Donuts, Sleepy's mattresses and Sony Pictures, for the James Bond flick "Quantum of Solace."

Don Allman, president-CEO of Titan Worldwide, said the first round of tests have already started to show how the ads enhance the commuter experience. "We had it parked outside one of our clients' headquarters on Madison Avenue, and people stopped and stared and walked up to us," he said. "It showed us this is going to create incremental, non-fare-box revenue."

Ads with benefits
Titan is rolling out similar tests in Chicago, with which it has a separate 10-year contract signed in April and expected to generate about $101 million in new revenue, according to Chicago Transit Authority spokeswoman Catherine Hosinki. The extra ad dollars have become crucial for Chicago as well, which by law must cover 50% of its annual budget with revenue generated from fares, advertising and investment income.

Provided the new tests go well, Ms. Hosinki said she expects the CTA to equip 100 city buses and all 144 rail stations with 1,500 digital displays by next summer. An expansion is also being made to the city's subway platforms to keep riders informed with real-time travel information. "In addition to providing a venue for advertising, the digital display boards create a new channel for the CTA to communicate with its customers," Ms. Hosinki said in an e-mail.

Of course, transit ads aren't limited to ticketed venues. NBC Universal and ABC have been active in programming New York City's taxicabs with content and advertising in the past two years. Earlier this year, NBC expanded its out-of-home efforts under the umbrella of a new organization, NBC Everywhere, to include everything from gas stations, sports stadiums, grocery stores and maternity wards.

Up next is NBC in Transit, which will bring TV screens to Port Authority of New York and New Jersey PATH trains in the first quarter of 2009. Mark French, the group's senior VP-general manager, said the company is actively creating a dedicated programming schedule for the new network comprising networks such as NBC, MSNBC, CNBC, Bravo, Oxygen, USA and Sci-Fi during different parts of the day. "We're creating relevant content that you can display in some informative way and at the same time entertain and inform someone utilizing visuals," he said. "What you will not see is repurposed TV programming with closed captions scrolling at the bottom of the screen."

With the influx of ads destined to become a permanent part of New Yorkers and Chicagoans' daily commutes, customer research is already being conducted at each transit authority to gauge initial reception of the new ad formats. "Obviously in a city like New York, advertising can be pretty ubiquitous, so we have to be very mindful of the fact we're responsible for one of the city's great public spaces," the MTA's Mr. Soffin said. "It's a very democratic space. It's just about finding the right balance."

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