Behind The Surge In Digital Signage
Although retail installations show the most promise for future growth, content is in the driver's seat of this media.
United Airlines and the Chicago O'Hare International Airport help up to 70,000 daily travelers navigate one of the nation's busiest aiports thanks to more than 150 digital signage displays positioned strategically throughout the Terminal 1 lobby.
Credit: Planar Digital Signage
The secret to understanding the digital signage market today is to realize there is no digital signage market. Rather, digital signage is a tool that's being used to varying degrees in a wide range of applications, all of which have different objectives and standards for measuring its value. Another key trend to note is that many observers expect today's state of affairs — in which dedicated, noncommercial signage networks dwarf those devoted to advertising and sales promotion — to reverse itself in the foreseeable future.
The case for dynamic signage is strong in both settings, but the world's universities, museums, airports, corporate campuses, and other users have, so far, embraced digital signage more enthusiastically and effectively than its retailers. The eventual retail advertising market is, of course, immense. So far, though, no one entity has come forward to “connect the dots.”
“One of the issues we've got right now is that there is no clear structure to who is driving it,” says Mark Webster, president of Rollouts, a company in Chaska, Minn., that specializes in “high site-count, nationwide installations.”
Brad Gleeson, vice president of business development at Planar Digital Signage, Beaverton, Ore., agrees, characterizing the digital signage market as an amorphous cloud that is beginning to crystallize.
“There clearly is a very fragmented group of small markets, some larger and more strategic than others, in sort of overlapping circles,” he says. “But it's not yet an industry, and the real future is still out there a ways.”
Wayfinding is a key application for digital signage at the U.S. Post Office in Potomac Falls, Va.
Credit: Symon Communications
A huge amount of money is being spent on equipment and networks for signage. Market research firm iSuppli, El Segundo, Calif., for instance, notes that in the third quarter of 2006, indoor digital signage alone surpassed conference rooms to become the largest revenue-generating segment of the display industry. Furthermore, it notes that the retail digital signage sector, generating some $416 million in the fourth quarter of 2006, will be worth $2.8 billion by 2011.
Beyond that, exact numbers are hard to come by. “There's a ton of capital flowing into this area right now,” says Webster, based on the promise of “being able to do things that haven't been done before.”
With all that money being spent on infrastructure in the hope of even more amounts being spent on content, who is really going to shape the future of digital signage? Who will decide what networks are installed, what content they convey, and how their effectiveness is measured? Who will design and install them? Answers to these questions are evolving right along with the underlying business environment.
It's easier to say who is not driving the surge in digital signage. Start with the equipment manufacturers. “If we were successful in driving it, installs would have proliferated much more than they have,” says Mark Pickard of Samsung, Ridgefield Park, N.J. “I don't think display manufacturers are driving it in any significant way.”
Next, add in traditional systems integrators. “The most common meetings I have today are with dealers that we did not have as standard AV systems integrators — companies that have formed specifically to address the digital signage market,” says Pickard.
Instead, the fundamental driver of the signage market turns out to be...content. “The key driver is the challenge to improve marketing investment,” says Lyle Bunn, strategy architect at Alchemy International, a Toronto company that specializes in planning, executing, and creating content for multimedia promotional campaigns. “That desire is not just on the part of brands and product categories, but also on the part of retailers who want to improve the shopping experience.”
What the client wants to accomplish, whether it's to sell shoes or encourage employees to contribute to their retirement plans, drives what they buy, who they buy it from, and how they use it. This basic definition also crafts the division of the market into the broad categories of advertising-driven and non-advertising networks.
So far, non-advertising networks have grown and prospered more dramatically than those based on selling ads. But virtually all observers expect that situation to change, as more people figure out just how to use dynamic signage to boost sales and build brands.
Retail Pot of Gold
Always one of the great engines of America's economy, retail advertising promises to be the big payoff on digital signage investments in the future, but that future , says Gleeson, is “still out there a ways.”
Consultant Bill Collins of Decision Point Media Insights, a market research and consulting firm in Cincinnati, compares retail digital signage spending today to “where the Internet was five or six years ago.” Collins estimates that total spending for all out-of-home media, including cinema advertising, is still significantly less than $1 billion annually. Still, huge amounts are being spent on infrastructure on the well-known premise that if you build it, they will come.
In the retail arena, the big players right now are “those who have the installed base of display at this point,” says Bunn. “These are privately funded companies who have invested in the technologies and have a display inventory.”
Credit: Planar Digital Signage
In many cases, these are dynamic signage initiatives recently launched by some very traditional media players. Clear Channel, for example, which runs a nationwide chain of radio stations, has an outdoor division that's actively promoting digital signage. Similarly, the Captivate Network, which has displays in elevators and lobbies of hotels and office buildings nationwide, is a subsidiary of the newspaper publishing giant Gannett Corp. Lamar Advertising, a major national billboard operator, has launched a dynamic signage unit, and other leading media companies have followed suit or plan to do so soon. In any case, these are companies accustomed to selling ad space or time nationwide with well-established contacts among major advertisers and their agencies.
“The people who have been making the most progress on the advertising-supported approach are the people who sell advertising: Clear Channel, CBS Outdoor, and the like,” says Gleeson. “They are seeing the transition from their traditional signage media to dynamic media as absolutely critical. Looking at LED billboards with a cost of $300,000 or so each, they're buying them as fast as they can. They can generate seven times as much cash flow per sign as they generated with the traditional media.”
So far, says Gleeson, retail digital signage has been very much a push market. “It has been people who knew what could be done, promoting it to people who didn't know they needed it,” he says.
Part of the sell is to advertising agencies, the usual gatekeepers between marketers and media. “The brands, the people who are actually driving the advertising, are used to going to a broker,” says Webster.
The ad planning and buying process is very mature and thoroughly understood, he adds. However, “so far, in order to be able to sell the ad space in those networks that do exist, there isn't a brokering system to do that,” says Webster.
Creating this system takes time, says Bunn. “Ad agencies and media planners typically have to work hard to understand a new medium,” he says.
Today's Inroads, Tomorrow's Explosion?
The hottest retail markets for digital signage today, says Steven Keith Platt, director of the Platt Research Institute in Hinsdale, Ill., are banks, financial services companies, insurance agents, and similar companies. Webster points to any place that has a captive audience for a period of time. Medical sites are particularly hot, he says, along with pharmacies and doctors' waiting rooms.
Says Pickard: “Convenience stores and medical waiting rooms: I'm very confident that both of those will happen, because it's easy to understand the business model. That's critical in order for ad agencies to buy in.”
Platt says that “the busiest channel, where we're spending a lot of our time, is banks, financials, and insurance companies. These are companies that deal with a lot of intangibles, with complex sales, not impulse buys.”
Pickard also predicts that certain segments will pay off later this year, although he won't identify them. “Other verticals will start serious deployments in the next 12 to 18 months,” he says. “The first really big deployments will come later this year, leading to thousands of locations.”
Many users who might fuel this explosion in signage may seem to be looking at each other for clues. “One of these [large networks] is going to hit with a nationwide convenience-store chain,” says Pickard. “It will be so obvious that it's successful, everyone will try to copy it.”
The intersection of technology, cost and advertisers “is not there today,” he adds. “Maybe in six months or a year, I don't know.”
Part of the promotion challenge, of course, is figuring out just who makes the buying decision in a target organization. To Bunn, the champion is the chief marketing officer, because “digital signage enables marketing communication.”
For AV integrators and other local or regional businesses, breaking into the big national scene can be difficult. “So many of the decisions to invest in these networks are not made locally,” says Collins. “It's like national advertising, and for AV integrators in and of themselves, it's going to be hard for them to sell.”
Still, experts say the savvy AV integrator does have a role, even in the biggest national systems. The starting point is to realize that however good the national players may be at building networks and distributing effective ad content, there are also things at which they're not so good, such as installing, monitoring, maintaining, and servicing sophisticated audio and video systems.
“There's a huge opportunity in the traditional pro AV segment to be the hardware and hardware maintenance component,” says Pickard. “The companies I'm talking to generally don't have a technical service capability, and it's definitely going to be necessary.”
Platt says an AV integrator that wants to play in this arena “would be well advised to hook up with someone on the front end, perhaps with two or three firms that specialize in marketing at retail.”
Another sound business strategy, say experts , is to realize the biggest and most famous players are far from the whole market.
“Lots of people have focused on the home run,” says Gleeson, “on the broad retail chains, aggregating hotel lobbies or health clubs, or high-rise elevators — chains with broad national footprints. But there are also opportunities for lots of Mom and Pop networks, which take place inside a community and don't have to be huge. The AV integrator can take part in both sides of the business.”
Even plain, old, much-maligned hardware sales, often portrayed as an unprofitable commodity environment, shouldn't be overlooked, says Gleeson.
“People in the business need to buy products that are professional-grade,” he says. “Whether plasma or LCD almost doesn't matter. If you are going to buy professional-grade products, who else do you buy them from?”
Getting a Piece of the Action
Possibly most important, aspiring dynamic signage integrators should remember that much of the excitement of ubiquitous retail promotion is still in the future. Meanwhile, other markets are booming in the here and now.
“You would be surprised how few networks are advertising-driven right now,” says Webster.
Platt agrees, noting that “about 90 percent of the market is on the captive side of the world. This is very much an infant business, young and growing.”
Bunn cites a recent consensus among speakers at a business conference that about $390 million worth of advertising is running on North American digital display networks. “If you consider that number against the billions of dollars of annual expenditure for digital network infrastructure, estimated by InfoTrends, then it's clear there are a lot of networks out there being considered as an alternative to other communications media, for internal employee communications, or within a campus environment,” says Bunn.
Samsung's Pickard says airports are his company's largest market for digital signage. “They are the largest single vertical market for large LCDs, and not an advertising market, but firmly on the informational side,” he says.
Universities, corporate facilities and campuses, churches, local sports facilities, and similar venues may offer untapped growth potential for digital signage networks created, installed, and served by local and regional providers. Says Collins, “It's going to be easier to sell to traditional AV customers in settings like these, because they already have the relationship and can be an added service they offer.”
Bunn warns, however, that the AV integrator should not expect to be the first person calling on a prospect with a digital signage proposal. “Software providers have been fairly aggressive in this marketplace for the last few years, and the display companies have pushed hard to advance this application,” says Bunn.
So when the AV integrator calls on a prospect, “there has probably been a presentation by a display provider [party that runs the outdoor or indoor signage] or a software company before that,” he says. “This is not a brand new prospect with a large learning curve.”
If the prospects are increasingly knowledgeable, the systems are sophisticated, the bandwidth is cheap, and the return on investment is more tangible than ever, it seems likely the long awaited boom in digital signage may finally be at hand.
“The issue now is not the technology, because that now works, and has proven itself,” says Bunn. “The issue now is what communications objectives are sought to be achieved with dynamic signage?”
John McKeon is a freelance journalist in Chevy Chase, Md. He is also the author of a recent novel, “Demented Choirs,” which can be previewed at www.dementedchoirs.com. John can be reached at firstname.lastname@example.org.