The Regulatory Inefficiency Theorem, Continued

by Mr Juggles

One corollary to the Regulatory Inefficiency Theorem (RIT) is that as regulations increase, attempts to circumvent the rules increase. In fact, if you are the first or the only company to find a loophole, the regulations can form a competitive barrier.

For instance, this old WSJ highlights the restrictions on outdoor advertising and companies attempting to get around them.

Local laws here generally ban billboards in areas deemed residential. But that hasn’t stopped an outdoor advertising company called Van Wagner from plastering hip neighborhoods like Chelsea, Soho and the Meatpacking District with bare-chested pitchmen for Abercrombie & Fitch, dancing iPod users and other immense ads.
The catch: a loophole in the law that allows billboards in areas once zoned for manufacturing — even though the factories are long gone.

Outdoor advertising companies frequently play cat and mouse games with city officials. In California, for example, a state law allows illegally erected billboards that manage to avoid citation for five years or more to be considered legal….One Los Angeles-based company, Regency, repeatedly lands in hot water. On New Year’s Eve 2004, a deputy manager for the city of West Hollywood caught company officials, led by co-owner Brian Kennedy, installing a large unpermitted billboard on the Sunset Strip.

In response to this game, companies like Truck Ads have created new real estate for advertising by looking at non-traditional sources, mobile ubiquitous ones.

We see a new opportunity for advertising real estate: People. Think about it, people are everywhere. Moreover, they move and they enter areas previously closed off to advertising. This has started in some form with sponsorships; you can’t advertise at the Masters but Tiger can wear a Nike sweater. But we suggest taking it to the next level the way GoldenPalace has., the online casino famous for turning eBay into the ultimate advertising vehicle by acquiring several outrageous items is at it again. They have paid $18,000 to shave a woman’s head and permanently tattoo “,” the website of the popular online poker room, on her bare cranium.

Recommendation: We did some preliminary due diligence several years ago involving paying homeless people to do our advertising bidding and also on unions and causes outsourcing protesting to the homeless. We now recommend management buyouts of individual people. After permanently tattooing them with corporate advertisements, these people can be spun back out for their original value (minus a bald cranium discount). As long as corporate advertisements are trading higher than bald cranium discounts like they are right now, this is arbitrage heaven.

Related Reseach:

Ad Sense Ad Sense


  1. Asiren
    February 29th, 2008 | 3:48 am

    Yeah, but is she pretty?

  2. WTF Jr.
    February 29th, 2008 | 2:34 pm

    Market research shows a diminutive affect of such advertising from hair growth and even poor ad placement. The head-to-toe clothing typically worn by residents in the northern regions also is an inhibiting factor that must be seriously considered. But let me regress and suggest for a moment. If the advertisements were mated with see-through clothing coupled with hot boobs, the harnessed jiggly power of “oo” would produce advertising synergies that were previously unexplored by the post. Further evaluation is necessary.