One of the most common questions I get from investors is “should I buy or build this or that LED billboard?” They are often shocked when I say “not if you’re trying to make money”. Isn’t LED the future of the billboard industry? Although many would like you to think that, it’s far from the truth in terms of creating wealth with billboard investing.
What’s wrong with LED?
LED is certainly an interesting concept – the idea of changing a billboard message continually (kind of like a television screen) would be unthinkable until modern times. However, there are some financial hurdles that make it a poor choice for making money except in certain extreme cases. These problems include:
- They are extremely expensive, coming in at around $300,000+ for a double-sided LED sign (not even including the sign structure itself).
- And those LED screens mentioned above only have about a 10-year shelf life, so that $300,000 will have to be repeated every decade.
- LED signs have large operational costs in electricity and repair.
- There is very large overhead required to rent the many 8-second spots on the sign, as opposed to one static advertisement.
Then how come so many LED signs have been built across America?
The truth is that they haven’t. LED signs represent an incredibly small number of the total billboards in the U.S. – maybe around 5,000 out of 500,000+ billboards (that’s just 1%). Just count how many LED billboards you see in your market vs. how many of the old-fashioned signs are present. And you probably live in a city. In rural areas (which are 95%+ of U.S. land mass) there are pretty much no LED signs at all.
What a location would have to possess to be an LED success – and why most don’t
There are certain attributes that a billboard must possess to succeed with LED:
- It must have a prominent position on a major road with huge traffic and superior visibility.
- It must be a right-hand read and a longer-than-normal length of visibility
- It has to be in a very large metro area with high rates and lots of advertisers.
Anything less than these three traits and your chances of renting the ad space are minimal. And that means that only a very few locations have the potential to be successful with LED.
Remember that it’s all about making money – nothing more
Billboard investing is all about … investing. Making money. Not trying to impress the Jones. There’s nothing to be proud of in building an expensive LED sign and making no money with it (which is sadly the standard procedure). There are many other sign options that have a much higher rate of return, such as wooden telephone pole signs and wallscapes. These have lower net income, but also much lower cost to build. The interrelationship between what you invest and what you earn is called “rate of return” and the higher the better. Most LED signs rank very low on that scale.
Conclusion
LED is cool technology. Great for big-screen TVs. Fantastic to see on a giant wall or building. But not that great at making money. Don’t be a sucker. Focus on making money with your investment dollars and explore the other billboard options that make high rates of return.