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Saturday, July 19, 2014

Are metro card advertisements good for business?

Municipal transportation authority revenue sources
Metro card ads are viewed before, during and after transit
Metropolitan transit authorities often use advertising to generate operating revenue. However, in many cases, most of this revenue is derived from billboards, vehicle advertisements and within transit stations.

The extension of advertising to mass transit fare cards aims to provide an additional source of income for financially strained transit authorities, and also seeks to channel increased business to advertisers. Yet, studies and data pertaining to the effectiveness of such marketing is questionable.

Several factors negatively impact the usefulness of mass transit fare cards. Research conducted by the Transportation Research Board led it to findings that state transit advertising, “lacks credibility, relevance and distinctiveness in today's advertising market.” This is partly because transit advertising is broad and mostly un-targeted. However, ineffective design and delivery of ads is also a reported problem per the TRB.

Ridership engagement is also a pertinent factor in the effectiveness of ads on mass transit fare cards. More specifically, a research study released by the Kellogg School of Management, and  designed to gauge the effectiveness of transportation advertising, found the level of passenger involvement with an activity to affect the usefulness of advertising. Moreover, individuals who were less engaged in an alternate activity such as in-depth reading and intermittent access to smartphone signals were found to have a more favorable perception of advertising presented to them. The broad use of metro cards and the brevity with which they are viewed are an additional obstacle for targeted marketing campaigns.

Despite a relatively low appeal to advertisers, transit authorities have earned increased revenue from fare card ads. For example, by 1998, just one year after the New York City metro card advertising debut, the Metropolitan Transit Authority had earned $400,000 in fare card advertising fees per Advertising Age. By 2011, this amount declined to between $16,000 - $165,000 per year according to AM New York.

Advertising revenue is also typically a small fraction of metropolitan transit revenue. Furthermore, the Washington Metropolitan Area Transit Authority reported just 2.2 percent of its 2011 revenue from all its advertising sources including fare cards. Similarly, no more than four percent of operating revenue is attributable to advertising via the Metropolitan Transit Authority of New York per the National Transit Database.
Pros and cons of metro card advertising
Public transit ridership is correlated to employment levels

Innovative use of ads on mass transit fare cards is one way to improve the benefits of advertising for sponsors. For instance, according to the Hillsborough Area Regional Transit Authority, exclusive fare card advertising combined with coupon incentives via the ads “solidifies a stronghold within the tourism market.” Additionally, the findings from the TRB suggest improved media planning services and advertising sales representation would help steer advertisers away from a perception of low-quality service.

Image: Eyone; "MTA MetroCard"; CC BY-SA 2.5; 2. US-PDGov