Is ATM advertising still alive?

Peter Kulik

The results of KLCI Research Group's Trends and Futures research study suggest that third-party ATM advertising is viable; and that based on experience gained in pilots, ATM advertising has the potential to generate up to about U.S. $40 per ATM per month, about 10 percent of an ATM's monthly surcharge/interchange revenue.

This result is based on independent ATM deployers; for banks and other financial institutions, research suggests that targeted advertising of their own products will be more profitable than third-party advertising. Successful advertising pilots publicized over the past few years have led to tremendous attention -- and hype. Some successes with ATM advertising include:

• EDS - broadcast advertising (i.e. untargeted adverts) on high-volume ATMs in 1997-98. (see related story In the beginning);
• Wells Fargo - reported to have been successful showing movie trailers at ATMs near theaters in California;
• Euronet - reported to be successful in Poland with advertising campaigns for companies like McDonalds and BP, including advertising on the welcome screen, pre-printed receipts and vouchers;
• Nationwide Building Society - completed a highly publicized pilot with myOyster.com adverts in some high-volume London locations (see related story Sky's the limit).

However, from the third-party advertisers' point of view, the ATM has not yet proven its value as an advertising medium. In the classic model of supply and demand, the demand side (the buyers of advertising space) is today in a position to make the rules under which it will purchase.

To prove the ATM is a valuable advertising media, deployers will first need to work within these rules -- i.e. pricing based on CPM (cost per thousand impressions). After the value of the ATM has been proven, the industry will be in a stronger position to increase profitability by negotiating higher CPM rates, etc.

Research identified six patterns of success that highlight the best opportunities to deploy ATM advertising; the top three include the following:

• In-store promotions -- promoting goods available within a store adds value for the consumer, merchant and manufacturer.
• Integrated coupons and vouchers -- high redemption rates make this an effective approach that can be implemented using a low-tech strategy.
• Full-motion graphics -- draws more attention to advertising images, though not feasible on many of today's ATM screens.

In addition, some research participants cited several corollary benefits; representative comments include the following:

• "Increased transaction volume 15 percent on machines with a topper."
• "May not drive additional revenue, but may drive incremental transaction volumes. For example, if offer two drinks for one, may drive more people to the ATM."
• "Assist with convenience charges. For example, it may cost $2 for a transaction, but if you watch an ad it's free. Benefit to merchant and consumer."
• "(Can) trade free advertising for space in the store."
• "Would work in support of a deal with a merchant to add value, as well as give cash machine increased footfall, and more cash into the till for the merchant."

Of course, this discussion so far has focused on the revenue opportunity side -- but based on the experience of successful and unsuccessful forays to date, it seems that the cost side is more difficult to get right for ATM advertising. Based on study results, the total cost per-ATM must be less than about $40 US per ATM per month, or 10 percent of the ATM's gross monthly revenue.

Said again for emphasis -- for profitable deployment of ATM advertising, the cost to create and deploy ads must be kept less than about $40 per ATM per month, or 10 percent of the ATM's gross monthly revenue.

Clearly, this size revenue opportunity does not justify large amounts of up-front investment. Also, though at this level of revenue it may be viable for larger ATM networks, the perspective of individual ATM owners may be quite different.

Now it's your turn to sound off -- do you think ATM advertising could be viable at $40 per ATM per month? How could the cost structure be kept low enough for it to be profitable? Send your ideas to Ann All at anna@networldalliance.com, and we'll compile feedback to share at a later date.

With more than 15 years experience in the financial services industry, Peter Kulik has published and spoken widely on topics ranging from ATM Operations to Outsourcing to CRM.  He is Managing Director of KLCI Research Group, and focuses on research for banking and independent ATM deployment. Some recent clients have included CIBC, Halifax plc, NCR, and RBC Royal Bank; he also spoke on CRM in the ATM Channel at the 2001 BAI RDS conference.