Newspaper advertising is already under siege from sliding circulation, the loss of key department store advertisers and online competitors like Craigslist. But now there's another daunting challenge lurking on the horizon: billboard companies.

Clear Channel Outdoor Holdings (nyse: CCO - news - people ), a subsidiary of radio giant Clear Channel Communications (nyse: CCU - news - people ), says it is expanding its digital billboard business into Chicago and Philadelphia and beefing up its presence in Los Angeles. By the first week of September, the company expects to have eight digital billboards in Philadelphia and a second digital network of 10 signs in Los Angeles. By October, it expects to have six digital billboards in Chicago, expanding its total digital inventory to 117 signs.

It's just the latest sign of the outdoor advertising industry's shift into the digital arena. Lamar Advertising (nasdaq: LAMR - news - people ) and CBS (nyse: CBS - news - people ) Outdoor, the other dominant players in the market, have also begun putting up digital billboards in major markets.

All of this spells bad news for newspapers. Billboard companies and daily papers both vie to sell advertising, often to the same clients. But by and large, they have coexisted peacefully. Billboards snare mostly brand advertising ("Our wireless network is best") and location-specific ads ("You just passed Joe's Diner").

By contrast, newspapers -- thanks to the fact that they publish every day -- usually capture most local ad spending for retail sales and product promotions ("15% off all washers and dryers through Sunday") and other time-sensitive advertising.

Digital billboards threaten to rob newspapers of this key advantage. That's because they can be changed day-to-day or even up to the minute, if needed. In addition, if they are located along major traffic arteries, their regularly updatable ad messages can conceivably reach more eyeballs than the local paper.

"I do think that it has the potential to really transform the medium,'' says Paul Meyer, president and chief operating officer of Clear Channel Outdoor.”Our bread and butter is going to be our traditional outdoor billboards. But to be able to offer clients this alternative opens up a whole category of [advertising] that was very difficult for us to access before."

Clear Channel expects to have 140 to 150 digital billboards by the end of the year in 14 U.S. markets, including Las Vegas, Cleveland, Albuquerque, Minneapolis/St. Paul and the Tampa Bay, Fla., area.

That will still represent only a tiny portion of Clear Channel's overall outdoor display inventory, which includes about 125,000 traditional billboards. But going digital will greatly broaden the company's options. Clear Channel plans to set up more digital networks in major markets, which would enable it to sell ads that can be programmed to appear simultaneously on a large number of digital billboards at the same time, Meyer says.

A key barrier to growth in digital displays is state and local regulation of outdoor advertising. "Existing zoning laws simply didn't contemplate this technology, so there are a lot of regulations that prohibit various types of more distracting signs,'' Meyer says.

Digital billboards are configured to the same dimensions as their traditional counterparts, display full-color images via light-emitting diodes and feature a different ad about every eight seconds.

Despite facing some local regulatory hurdles, digital billboards are similar in concept to so-called "tri-vision" billboards, Meyer argues. Tri-vision signs, which feature shifting panels, have been in use for decades. But they have drawn criticism for being more distracting than wholly static billboards.

To help win over local governments, Clear Channel has made a point of meeting with emergency management officials in each of its new digital markets to establish protocols on how to issue public safety announcements through its billboards.

The company's digital billboards in the Minneapolis/St. Paul metro area alerted local motorists about the Aug. 1 collapse of the Interstate 35 West bridge about 15 minutes after the collapse, Meyer says.

He acknowledges that there has been some disagreement within advertising circles about how to best calculate customer impressions for digital billboards because their rotating selection of ads don't give advertisers the round-the-clock exposure that they have been accustomed to with traditional billboards.

Still, despite the challenges, Meyer remains bullish on the digital business.

"It opens up promotional advertising in a way that we were never able to penetrate before,'' he says.

Source: maxeffect.bg