Content Rules: Digital Signage Isn't About Signs
The fact that digital signage is a booming market doesn't guarantee fat margins. Companies need to embrace a turnkey business model if they're going to succeed.
Name: Matt Oswalt
Title: President, Vizionefx Location: Baldwinsville, N.Y.
Need to Know: Vizionefx got into digital signage after years of integrating AV for healthcare facilities. Recently, it took its expertise to Le Moyne College in Syracuse, N.Y., where the company designed digital menu boards for the student caf© and a touchscreen program for the athletic department.
Credit: Noah Kalina
First, the good news: digital signage is a boom market worth $3.9 billion in 2009 despite the recession and is growing 20 percent annually through 2013, estimates IMS Research. The bad news? Growth doesn't always guarantee fat margins. Take the market for displays and digital signage players. Here, pricing pressureincluding pressure from consumer-grade products (and not just consumer TVs; there are installs out there driven by Sony's PlayStation 3 game console)–has AV integrators and vendors looking for new ways to turn a decent profit.
Increasingly, those new ways involve creating and managing content for their clients. In a few cases, that content includes advertising.
"It's much easier to do a hang-and-bang and then walk away," says Sam Taylor, executive vice president of Almo Pro A/V, a value-added distributor with experience in digital signage technology. "But in the long run, the integrators that are going to be the most successful in this space are the ones that embrace the whole business model. That includes advertising revenue."
Integrators as Mad Men?
Much of the bullishness around digital signage comes from its role in enabling digital out-of-home (DOOH) advertising. Despite the recession, the U.S. DOOH market grew more than 14 percent in 2010 to $2.07 billion, according to PQ Media, a research firm.
At the very least, that growth benefits AV integrators because someone has to sell and install that signage. But it's anyone's guess whether integrators can reasonably expect to get a sizeable cut of signage advertising revenue, or whether that money will wind up in the pockets of OOH incumbents such as JCDecaux.
There's also the hurdle of fragmentation: As the number of digital signage installations grows, so does the challenge of aggregating them. Through aggregation, brands and agencies can buy ad space conveniently, instead of working individually with hundreds or thousands of bars, malls, hospitals, and other signage owners.
NEC Display Solutions' Vukunet platform aims to capitalize on the fragmentation problem by providing a solution–one that potentially benefits AV integrators. Announced in November 2009, Vukunet is a content-management system that signage network owners can use to provide advertisers with a one-stop shop for identifying locations and then buying space at each location.
Vukunet could benefit AV integrators on two levels. First, if it reduces fragmentation to the point that digital signage becomes attractive to more advertisers, then integrators should benefit as more clients deploy or expand signage networks. Second, and on a more lucrative level, Vukunet could make it easier and more cost-effective for AV integrators to grab a piece of the advertising pie by brokering space on their clients' behalf. But this opportunity has costs and risks that integrators would have to weigh against the revenue potential when deciding whether they should pursue it.
It depends on whether "they are willing to front some of the costs associated with the networks, either in cash or in kind, on the bet that advertisers will come and, when they do, it will more than offset their investment," says Joyce Vogt, a business development manager for AVI-SPL. "I think the industry needs to see more demand for advertising inventory before integrators will be taking this gamble."
NEC isn't the only vendor betting that they will.
"Integrators typically don't want to get too much into the business of advertising," says Mike Marusic, vice president of marketing and service for Sharp. "It's very time-consuming.
"A lot of vendorsSharp includedare looking to aggregate that information and create almost a Chinese food menu of what you want to take. Absolut, Budweiser, Procter & Gamble, they already have content and the agencies. What the [AV] manufacturers can do is provide the integrator with the ability to access that and provide it in the right format locally."
Yet it's probably far-fetched to envision even a large integrator wresting advertising business away from companies like JCDecaux in large venues such as airports and malls. At the same time, signage is increasingly showing up in smaller public venues, such as hospital lobbies. Those locations could be where integrators have a better chance of positioning themselves as providers of advertising-related services.
"The big places are taken," Marusic says. "What you're now seeing is the secondary markets being approached: places like dry cleaners, where you've got people waiting. It's a revenue opportunity."