As the summer comes to a close, Labor Day approaches and the football season begins, it feels like as good a time as any to break out the crystal ball and do some prognosticating. No sense in waiting until January… that is too conventional! With that in mind, I offer you a touchdown (and an extra point) worth of predictions.
1. Big hardware players make big moves: Look for HP, Cisco and potentially Dell to make moves to expand their presence in digital signage. Intel may also be ready to leverage its position in embedded systems beyond chips and boards. Cisco has not gotten what it hoped for out of its Tivella acquisition, and no one should be surprised if they don’t take a second shot, perhaps with more of a hardware (media player) slant this time. Some of this was signaled at the recent DisplaySearch Conference in San Jose, as reported by Dylan Jones. I don’t expect the big players in displays to make acquisitions outside of their sandbox. Most of them are simply not culturally able to manage the less forecastable software businesses, and the Planar/CoolSign experiment was a fine example of vertical deals not always making sense.
2. Big software may move in as well: While some players in the digital signage software field fancy themselves as being big, none actually are. Enterprise players in retail, healthcare and hospitality will likely look to digital signage as a new market for line extensions and integration points. IBM has learned a lot in its DS dabbling for several years, and you can bet that Oracle is keeping an eye on how newcomer Starmount, an Oracle Partner Network member, fares. Big players in analytics may also be tempted, given the huge volume of data that flows through a busy digital signage network. And then there are a couple of software companies named Microsoft and Google. They have lots of reasons to want in, and Google already has patent applications in digital signage. Of the two, my take is that Google may be less comfortable outside of web-based businesses, and may tread carefully, while Microsoft has more hands-on experience in digital signage. Both bear watching.
3. Capital for network deals will get smarter: Venture capital, private equity and even angel money will flow to larger scale, well-conceived network deals, and it will get tougher for under-capitalized, independent networks to scale and survive. With all the lessons learned in the past several years, investors have a keener sense of what they are looking for: mature management, realistic ramp rates, and strong evidence of advertiser interest for ad-supported deals. It is clear that there is money on the sidelines, but the hurdles for prying it loose are higher than ever.
4. Smaller, ad-supported networks dwindle in number: Many of the smaller networks will become attractive to larger entities and be receptive to takeover deals due to weak cash positions. Those less fortunate will simply disappear. Others will band together in smaller-scale mergers in an effort to achieve scale and efficient operations. Declining costs are not enough to float the boat on small networks, as it is and always has been about generating revenue. Scale and reach matter a lot to advertisers. As such, combinations that provide penetration in attractive DMAs may make more sense than ever, and we will see them happen.
5. The recession and the natural software cycle produce two interesting effects: First, as we have noted before, savvy retailers have a penchant for investing during downturns, so that implementation occurs ahead of recovery. We are already seeing the signs, and expect to see more retail activity than has been the case over the past 18 months. Second, while the retail activity picks up, so will software replacement as a source of new deals for solution providers. Many early players have fully depreciated the capital expenditures from their first foray into digital signage, and are now ready for second generation solutions. WalMart TV 2.0 was perhaps the first and most well known example of this. Look for early adopters to set up very competitive processes as they re-invest.
6. New consulting practices will cater to big players: With bigger entities and the attendant bigger money entering the space, the need to build a business case and clear strategy will become greater, whether it is in support of a start-up network, an acquisition, or a new product. Big retailers, huge high tech companies and venture capitalists are not shy about using third party experts to provide perspective, validation and process. To-date, consulting in digital signage has tended to be niche-oriented (content, technology), and we expect to see more generalized, business-oriented practices emerge and win some large deals, while perhaps engaging some niche experts as subcontractors.
7. Solution winners will emerge by marketplace: Without doubt, there is a global market for digital signage. But by their nature, digital signage networks tend to be country or region-specific. For the most part, each major region/continent also tends to have its own set of solution leaders. In the coming months, in parallel with the emergence of the previous six predictions, technology winners and losers will be more clearly defined by major marketplaces: North America, Europe, Asia, Australia, South America and Africa. The seeming imperative to be “global”, which some use as the yardstick for measuring “leaders”, may come at the expense of consolidating a home market first. True globalization will likely be fueled by entry of truly global entities.
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[…] week, I took a stab at seven predictions for the digital signage industry. Well, it seems that the prediction of new consulting practices […]