Outcast Is Pumped, Flexed

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Outcast Is Pumped, Flexed
Chief Executive Matthew Stoudt with one of Outcast’s gas pump screens at the company’s Santa Monica office.

You’ve seen these people: the busy guy stopping for gas on his way to or from the office. The young woman on the treadmill at the gym long after the sun has set.

They don’t spend much time on their couches, and they rarely look at a TV or a magazine. But advertisers want the get their attention somehow. So in recent years they figured ways to catch them outside the home.

And now for some evidence that this advertising phenomenon isn’t a passing fad: Outcast Media in Santa Monica, a company that puts video screens atop gas pumps, has merged with two of its competitors to make more money hosting ads at gas stations and gyms.

“Traditional media reaches part of the market, but our role is marketing to that active, on-the-go consumer,” said Matthew Stoudt, Outcast’s chief executive. “We looked at the demographics at health clubs and our gas stations and found both locations had a significant number of these consumers.”

In the deal announced Feb. 14, Outcast combined with Irvine-based Pumptop TV, a longtime joint-venture partner. Both companies had specialized in video screens in gasoline stations. The merger also included Health Club Media Network, a Woodland Hills company with screens in gyms.

Outcast now has screens in 1,100 gas stations and 4,000 health clubs across the country, which together reach 68 million consumers each month. Their accounts include America’s biggest companies, such as Pepsico and American Express; the companies pay more than $1 million for a single six-month campaign that runs on all the screens.

In conjunction with the merger, Outcast received a cash infusion from Parthenon Capital Partners, a San Francisco private equity firm that bought a majority stake in Health Club Media Network in 2008. Outcast also secured debt financing from Silicon Valley Bank. The money will fund Outcast’s acquisition of other out-of-home ad companies, Stoudt said.

“We are looking at other markets with a slight overlap with our current advertisers,” he said. “Going forward, you can assume double-digit growth.” Outcast declined to provide revenue figures.

For now, Outcast will concentrate on absorbing its new acquisitions. All local employees will remain in their respective offices for three months: 17 workers at Outcast’s Santa Monica headquarters, 35 at Health Club Media Network in Woodland Hills and 14 at PumpTop TV in Irvine. After the spring, there may be some shifting. Sales offices in Chicago and New York will immediately be consolidated among the three companies.

Two channels

For its advertisers, Outcast plans to operate two channels – gas stations and health clubs for the moment, then gradually integrate them. Most of the screens at gas stations are digital, allowing them to show video and multiple advertisements in a four-minute loop. Nearly all of the health club ads are simple illuminated signs.

With fresh capital from Parthenon, Outcast plans to upgrade the health club screens to digital. The company will then give advertisers access to both the gas station and health club audiences in package deals.

Outcast has about 160 advertisers, but few of them buy space in both gas stations and health clubs. The merger will allow the company to offer large advertisers both audiences even if they sell them different products. For example, Stoudt said General Motors could advertise Chevrolet at the pump and the upscale Cadillac in the clubs. Pepsico could sell its soda at gas stations and Gatorade to the workout crowd.

Most campaigns on the gas station video screens last between one and six months, with a cost between several hundred thousand dollars up to more than $1 million. Stoudt said the company has a 70 percent rate of renewal, or advertisers returning after their first campaign.

The company faces formidable competitors. They include Gas Station TV, based in Birmingham, Mich., and GSA Media in Plymouth, Minn. The larger sector of out-of-home digital advertising hosts PlayNetwork in Redmond, Wash., which specializes in retail stores, health clubs, hotel lobbies and banks, and New York-based AdSpace Network, which places screens in malls. Scores of smaller companies provide video advertising in medical and dental offices, restaurants, carwashes and university common areas.

Brian Alexander, senior account executive at Billboard Connection Outdoor Advertising in Los Angeles, said the number of companies, territories and ad formats represents a major challenge.

“The obstacle is fragmentation,” Alexander said. “Sometimes you can target a specific location, while other times you have to buy a spot that shows simultaneously on a network across the nation, a region or a city. It’s hard for advertisers to sort through all the options.”

Stoudt believes that the choices will become clear when large players emerge in the industry – and he plans to be one. He declined to discuss specific acquisitions plans.

He sees the high level of competition as proof that the medium is effective.

“I view the real competition as traditional media,” Stoudt said. “If we can shift a little bit of advertising budgets from traditional media to alternative out-of-home advertising, that’s more than enough business for all of us.”

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