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.
Show Me the Money
Name: Jeff Dowell
Title: Vice President for Digital Signage, LG Electronics Location: Chicago
Need to Know: LG came out with turnkey digital signage solutions that include hardware, software, and content so that small and midsized businesses can get up and running quickly, but also so that AV integrators can make money. They can lease the solution to clients for three years.
Credit: Nick Burchell
Until those standards exist and are widely accepted, it's tough for integrators get a sense of how much they can reasonably expect to make from offering advertising services, such as ad management and even creation.
"Integrators typically don't have the sales background in advertising required to make those successful," says Lance Hutchinson, vice president of Alpha Video's CastNet group. "And I haven't seen a third-party network, such as Vukunet, that has offered good returns for resellers."
Vukunet divides ad revenue among at least three parties: The signage network's owner gets 70 percent, while NEC and the integrator share the remaining 30 percent. (NEC won't say exactly how that 30 percent is divvied up, except that it's not necessarily equally.)
But even with Vukunet, an AV integrator still would have to add expertise and relationships–either with staff or by partnering with, say, a marketing agency–in order to line up enough advertisers. The effort and resources required also increase based on the size and number of the metro areas where the integrator operates.
"That's really hard on a local level," says Mike Zmuda, NEC's director of business development. "That's a knocking-on-door type of thing, getting the cleaner down the street."
Advertisers Come Knocking
But in some verticals, it's the advertisers doing the knocking. Healthcare is a prime example.
"Hospitals are getting warmer to advertising," says Matt Oswalt, president of Vizionefx, a Baldwinsville, N.Y., integrator that branched into signage after years of providing bedside TVs and patient phone services. "Five years ago, you couldn't even say the word because the drug companies had given everybody such a bad taste with it. But now you're starting to see the Pampers birthing center at this hospital or the Johnson & Johnson wing at that one."
Vizionefx leverages those relationships as a source of advertising for its clients' signage networks. This makes it easier than if Vizionefx had to go out and round up those advertisers on its own.
"A lot of what we'll do is work with the hospitals and say, 'You have people that you work with. Help us help you," Oswalt says. "They seem to be more comfortable with that. They know who they can go to."
Vizionefx uses growing client receptiveness to advertising as a way to create recurring revenue streams and fatter margins. For example, in some cases, Vizionefx gets a percentage of the client's ad revenue. In others, it might get the lion's share of that revenue.
"We could use that to offset the cost of putting in the network for them," Oswalt says. "We structure our contracts that we have some ownership of the network. I don't want to go all over hell's half acre screwing displays into walls. We're not an integrator on that level."
The more that its clients warm to advertising, and the more companies that want to advertise on those clients' signage networks, the easier it is for Vizionefx to come up with new business models.
"I would love to get to a situation where we say to a hospital, 'We're going to put this wayfinding solution in your lobby and a few 42-inch displays in your common areas, all for free," Oswalt says. "I think that day is coming. They're starting to get more warm to it."
Others agree that the healthcare vertical is fertile ground for advertising-centric solutions and business models. "If you have a doctor's office, and somebody said to you, 'I'm going to put a screen in your office, and studies have shown that they increase customer satisfaction while they're waiting, by a certain percentage, and by the way, you're going to get X dollars per month for having this [screen] there,' it's pretty hard for a doctor to say no to that," says Almo's Taylor.