JCDecaux is the world’s largest outdoor advertising company and is known for its innovative products. It has a presence in many outdoor environments, including airports and billboards, but is especially well-known for street furniture “that adds ambience to the environment”, says media guru Gordon Patterson.
JCDecaux, founded by Frenchman Jean-Claude Decaux in 1964, was built up partly through the acquisition of smaller advertising companies all over the world. Today, it has a presence in North America, North Africa, the Middle East and Europe.
It was consolidated in South Africa in November 2010 and began to operate this year – though their presence hasn’t been significantly felt, say industry players.
Patterson, group MD and strategic director at Starcom MediaVest, wrote an article for The Media late last year in which he enthused about JCDecaux bringing much-needed streamlining and competitive stimulation to the South African industry. The advent of a big multinational with deep pockets and immense know-how would provide “seamless outdoor alternatives” and “disrupt the cosy relationship that exists between current outdoor players”, wrote Patterson.
He believed that the new giant, familiar with the comparatively straightforward approvals process of Europe, would lessen their tolerance of the local city’s strict controls and stimulate an improvement in the existing ‘constipated’ process.
More than six months after he wrote that article, Patterson tells The Media he has not changed his mind, even though JCDecaux appears to be struggling to have sites approved. The outdoor industry constantly complains about a lack of transparency and overly strict regulations on the part of municipal officials. In Johannesburg, outdoor sites belong to the city that leases them and uses the revenue to upgrade municipal infrastructure, like bridges and stormwater drains. Outdoor leases are managed for the city by the Johannesburg Property Company (JPC).
The JPC conducted an audit that ended in 2013 to weed out illegally occupied sites. All advertising companies had to resubmit their existing portfolios to the JPC so they could sort out which were compliant and which weren’t. According to Patterson’s article, the JPC is processing up to 3 000 applications.
Omar El Shaarani, sales director of JCDecaux South Africa, declined to be interviewed, saying the company believes it is too early to speak to the media. However, it is generally known that JCDecaux have put in 100 applications for sites and have so far been awarded three or four.
Patterson says JCDecaux will prevail. “They have been aggressively following official processes, challenging the delays. Over time, this approach will succeed.”
But major outdoor players do not share Patterson’s optimism about JCDecaux. Primedia Unlimited CEO Ken Varejes says they are “no silver bullet” to the inefficiencies plaguing the industry. “I don’t agree [with Patterson] at all. All of a sudden council will start behaving? All of a sudden they will kowtow to a French company? You could be anyone, you could be Obama’s brother, there’s nothing to make council comply.”
He says that while JCDecaux are strong, shrewd worldwide operators, “the environments they are used to are strong on the rule of law… [In South Africa] they are going to get taught a lesson”.
Varejes says Wideopen Platform, part of Primedia Unlimited, recently took the City of Johannesburg to court – and won – over an issue of access to information. He says that council’s transparency is one of the big issues facing the outdoor industry and something that a company with little local knowledge will struggle to negotiate.
In order to succeed, says Varejes, JCDecaux could buy up an existing company. Or they could try to gain a foothold in an environment where they can outbid everybody else. The latter approach might take a decade, during which time they will not be making money, and will require the kind of local knowledge they do not currently have access to. “If they are happy to lose money, that’s fine. But is it really worth it?”
Continental Outdoor CEO Bazil Lauryssen says he is very surprised that JCDecaux does not seem to be looking to merge with any established outdoor businesses and are apparently embracing an organic growth model instead. This will not work if they intend to use South Africa as a springboard into sub-Saharan Africa, as Patterson suggests is the case. Says Lauryssen, “They would have to buy in to the continent. To set up a grassroots operation here is too complex and time-consuming. Organic growth won’t work.”
Lauryssen should know. Continental has a presence in 14 sub-Saharan countries (including SA) and got there over 20 years of ”slow and painful” pioneering, says Lauryssen. Over 20 years, following expanding corporations like South African Breweries, they established themselves in these markets. “They have to get sales people, business development people, build the business up, get the traction,” he says. And for this they need local knowledge. JCDecaux do have a black economic empowerment partner, previously the partner of Provantage, who apparently left Provantage under a cloud. This could not be confirmed as Provantage MD Jacques du Preez declined to speak to The Media on this issue.
Patterson says, however, that JCDecaux will find expansion easier, if that is their goal. “The outdoor industry in Africa is huge but badly regulated. South Africa and Nigeria are natural springboards into the continent. I think we’ll see a lot faster transition in African markets than here. When you know your destination, the journey is much quicker. They will accelerate to where the industry in South Africa is now,” he says.
Patterson believes that whether here or further north, JCDecaux will focus on what they do best: “I think they plan to be not so much a volume player but more bespoke, more boutique. That is what they are known for in Europe. It is distinctly different to our marketplace, which is characterised by strong production and presence. JCDecaux would be smart not to go that way.”
Lauryssen, however, says street furniture and the like are just not feasible in a situation like South Africa’s, where public transport and commuter culture are nothing like what they are in Europe. He says: “European consumers consume outdoor media completely differently… Our consumer is a vehicular consumer who goes from work to a mall, perhaps, to have dinner. European consumers are out and about, on foot, on a bicycle. They have all this sexy technology.” JCDecaux bus shelters in Paris, for example, are equipped with wifi and cellphone charging points and interactive screen displays.
Lauryssen says he has the greatest respect for JCDecaux, who are not world leaders by accident. But the offerings of JCDecaux South Africa have left him “under-awed”. Continental’s strength has been adapting leading edge technology from the first world for developing markets, says Lauryssen. One such innovation is the Citilite, a slightly smaller, internally illuminated billboard (Primedia Outdoor’s equivalent is called the PrimeLite). Lauryssen says that JCDecaux’s current sites are really just imitations of Citilites – and poor imitations at that. “They should have arrived in their Ferrari, but they brought their Tin Lizzie instead! We haven’t seen the excellence that should come through. And we’re all for the big global players. JCDecaux would bring all the big fashion brands with them.” Lauryssen says JCDecaux’s Paris-based research and development wing alone is bigger than any outdoor company in South Africa, so there really is very little reason for them to produce such uninteresting products.
Varejes and Lauryssen do not believe that JCDecaux can compete with the local outdoor offerings. Especially not when it comes to billboards, which are overtraded in the local market at any rate, says Varejes. But Patterson says they have what it takes to hang on. “The outdoor industry is evolving and JCDecaux can only add to this… You are deluded if you think that an international player is going to run out of resources… They are one of the biggest players in the world. They will never pack up their tent and go back to Paris.”