Welcome back
I haven’t written for a while now. For those of you that have actually noticed the absence, thanks for caring. I generally get antsy when it has been 7 to 10 days since the last post, so that feeling of obligation and anxiety has been pretty strong for weeks now. Truth be told, it has been a very busy month, and in a good way. I have also burned hours stewing over having finally identified the lowest life forms in the digital signage industry, quite an achievement considering the numerous candidates. (And you know who you are, dahlings. May you each receive the properly painful karmic comeuppance that certainly awaits you.) I won’t waste further keystrokes or your time on such negativity, as cathartic as that might be. During the blog hiatus, I’ve also been lucky enough to connect with some of the brightest, most uplifting people in and around our space. That has been an overwhelmingly positive experience for me, and reinforces the notion that life is too short to waste time with people who bring you down. None of which has anything to do with today’s writer’s block-busting post, but it felt right to share.
An Industry of Niches
Digital signage has its roots as a non-Internet phenomenon, when early networks burned DVDs and distributed them to locations, usually on a monthly basis. It did not take long to understand that there was an opportunity to create a viable business by leveraging captive audiences, predictable dwell times and advertising sales. As broadband began to proliferate and networked solutions were born, it looked like the salad days for digital signage were on. While there have been many success stories, the gold rush did not turn out quite the way typical network and solution provider business plans projected. Perhaps the highest and best use of digital signage is not necessarily as an advertising vehicle. If that is true, then events, behaviors and strategies of the past and present need to be re-examined in a different light.
The lure of advertising dollars “certain” to be diverted from television and traditional out-of-home budgets attracted digital signage startups like moths to lightbulbs. On the network side, every conceivable venue type where one could make a case for dwell time seemed to have entrepreneurs aggregating locations. Capital costs, which were far more onerous in the early days, did not faze the startups or their investors, as they bought into the ad revenue model en masse. Two special situations only increased the hysteria in mid-decade. The 2005 sale of PRN to Thomson for $285 million was generally perceived as validation of the ad-based model. Never mind that selling ads to WalMart’s browbeaten vendors is hardly a typical scenario, or that PRN’s model could not be replicated without a benefactor like WalMart. The FocusMedia IPO was the other one-off that received undue hype. People seemed willing to ignore the fact that the FocusMedia networks were not in fact networked, and that China’s media environment is a tad different than that of North America or Europe. Beyond these anomalies, the ad-based networks that succeeded combined focus and scale in various ratios, and it was not a walk in the park for any of them. The number of large scale winners was small enough to spawn its own cabal association (DPAA, nee OVAB), with astronomical dues sufficient to support paid research reinforcing the CPM rates of members, while keeping out the annoying riffraff. The DPAA does some good work, and has recently changed its membership policies and dues structure, but it remains a mouthpiece only for an important segment of an industry, not the industry as a whole.
On the solution side, entrepreneurs sniffed opportunity as well. Software distribution, content creation, media player and kiosk makers suddenly morphed in to digital signage solutions. It is fair to say that most if not all of them were blinded by the light reflecting off the pot of advertising gold. It is interesting to look at how time, market pressure and customer demands changed strategies along the way. Some have invested huge amounts of time and money trying to optimize their solutions for ad-based networks. (Ironically, the majority of the DPAA powerhouses use home grown solutions and have been reticent to make a shift to commercial packages.) Others have seen their solutions take on the look of software built by committee, as different pieces built to mollify key customer requirements have a bolt-on feel to them. Others have tried the shell game of promoting bells and whistles to distract attention from a fundamentally flawed core. All of this was occurring as garages across the world gave rise to a new generation of me-too products. Some were undoubtedly worthy, but encountered a vendor-saturated marketplace in which key targets were either taken or moving at a snail’s pace. The recent demise of DG Screens is a good example of a what may have been a promising solution unable to gain enough traction to survive. We may never know the actual motivation for Harris’ impending divestiture of its Broadcast Communications unit, which includes its digital signage business, but their big bet on an ad sales play may make for fun deal discussions. That pot of advertising gold will almost certainly expand, but it will never be large enough to sustain the hordes of software solutions competing to power the networks. For quick affirmation of this, read the ever-growing list of vendors being compiled by DailyDOOH. If you have heard of 25% of the names, you are doing well. Finally, the demise of SeeSaw Networks, the sale of Adcentricity, the focus of DOMedia on outdoor, and the retrenchment of rVue are all indicators that the advertising angle is not what most people thought it would be.
Here, I’ll just say it: advertising-based networks are a NICHE within an industry, they are NOT the industry itself.
Digital signage may have more usefulness as an activator and marketing tool than as an ad platform. The days of venue aggregators are giving way to the era of corporate deployment. This brings with it a shift to branding and marketing as primary goals, with advertising revenue often discounted in ROI discussions. And it necessarily makes content and engagement, scalability and interoperability, flexibility and cost efficiency the focal points of decision makers. New solution entrants will be hard pressed to get through a proper corporate selection process, and older ones will have to decide what they really are. The market has a way of dealing with those that don’t choose and invest wisely.
The emerging battle will be for niches within the next wave of adoption. And while advertising will be one of those niches, it may no longer be the one with the highest growth rate. Sustainable market strategies and resilient business models will have to win the day.
Hear hear…
Inspired Signage started as an ad based platform for Tesco in the 90’s. By the early 2000’s we were targetting own brand rollouts, and mainly in the corporate arena rather than retail. Any time an ad based network rolled up asking for software we thought hard about asking for cash up front!
I’ve worked with numerous ad-based signage rollouts which were going to make billions. AV Broadband, Buzzboard, Tesco TV, some crazy QuiMedia project on 8 (count em, 8!) UK railway stations, which spent £750k on broadcast quality Sony disk stores for the stations… and more I could bore you with… and not a single one took my advice about rethinking their valuations and getting a very large (5000+ screens) rollout, and how many are here today? I’ll let you imagine the number of fingers on a blind butcher’s hand…
The ad-funded networks that will survive are the ones big enough to compete with TV. As an advertiser do I phone one TV station and buy one ad in one break in a big soap and get 20% of the UK audience, or do I phone 20-50 ad networks and get a similar share for a similar price? While making my content in 20-50 different formats, encodings, shapes and sizes…
In the mean time, the rest of the world has realised that digital signage = poster replacement. We’re integrating signage as an integral part of PoS, employee signage, reception areas, meeting room doors, and directional signs. Ad funded networks are where all the talk is, and own brand networks are where the ROI is.
Just my 2p-worth…
Bryan:
Thanks for the comment and the hard-earned insights! I am not sure that the ad game is a dead end, but I think, as apparently you do, that the strongest growth in the coming years will come from branding & marketing efforts, driven by corporate networks. At least ROI discussions will be more well-grounded.
Ken
Ad based dead-end? Maybe, but is it ever pleasant to bang your head against a wall with yet another mad scheme and get it implemented because it will be the next big thing?
The growth with corporate and own brand in retail is where the interesting things are happening because it’s more about the experience and not about the bullshit!
Corporate, this will just keep on improving day by day, but in retail, the danger is that everybody has a screen, and then they get bigger and then they get brighter and you end up with such a garbled message in a mall with every brand competing for your attention and then you end up with Westfield Stratford, London where there is just too much (how can that be!!??) digital signage!
Signage that provides the experience enhancement in the most subtle way is what will grow, the stuff that doesn’t even make you think you are looking at a screen.
However, I wish I had 2p but I’d need to borrow it from Bryan!
Hi Tom:
Thanks for joining the conversation. Your thoughts on the proliferation of screens in retail reminds of an old saying about sports referees… you don’t even notice the best ones, but you are glad they are there.
KG
All agreed.
Pat Hellberg and I were having dinner with a guy at DSE last year and he wondered aloud if digital signage was going anywhere. I said pretty much the same things as outlined here.
The ad network thing was going to be a huge struggle and only a handful of companies would do well. But I said the same pattern that was already well-established with big-assed highway billboards going digital was going to happen with smaller and smaller versions, and spread out to lots of other printed material, because the costs of digital were going to increasingly make more business sense than all the elements associated with print versions.
You don’t need an MBA to figure out in a spreadsheet when the numbers start to work for digital instead of analog.
Look at the digital menu board business. There may be some goofy exceptions, but for the most part, menu boards are going digital because the numbers work and the benefits are readily evident. They are NOT going in because they look cool.
I almost cringe when I run into guys with big dreams about ad networks. There are guys making real money at it, but the path they have traveled is carpeted with roadkill.
Hi Dave:
Thanks for the comment… One thought that occurs to me is that the ad-based business will start to look a lot more like the corporate business if it doesn’t already. The big will get bigger, focused and more branded. Fun times coming, there won’t be any shortage of blog fuel!
KG
All;
There is a hybrid advertizing model in play when it comes to digital signage. Walmart forces its major brands to place ads on it’s network and many cinema operators (assume QSR and others also) get subsidies for their DS systems to promote brands that they are selling in-store. (ie Coke, Pepsi, Mars)
Bryan,
We find ourselves in a similar situation, as we advise clients of the most cost effective method to deploy a solution and they completely ignore your suggestions, spending thousands on solutions that do not have all the features as the solution we offered and in time the deployments are halted.
When will they listen?
G