The Digital Signage Insider

4 Places to Find Digital Signage Growth in a Down Economy

Published on: 2008-11-25

I spent part of last week in Chicago speaking at the Strategy Institute's "Building Your Digital Signage Business" conference. Attendance was definitely lower than last year's event, no doubt because of the "belt tightening" (or whatever euphemism you prefer) that has affected so many industries. But while the group was smaller than in the past, it was also far better educated about the digital signage market than any I've come across before. As one might expect during a recession, many of the presentations and ensuing conversations revolved around getting businesses to spend money during hard times. Overall, the presenters (myself included) were optimistic about 2009's prospects. But the audience of network owners, equipment vendors and system integrators was somewhat skeptical. To help bridge the gap, let me tell you why I'm optimistic -- and where I see the bulk of business coming from in the next 12 months and beyond.

Making the case for optimism

Yes, it's in my best interest to be optimistic. I want people to buy my digital signage software and media players, so I have to encourage them to go out and start networks, right? Well, there's at least a smidgen of data behind my conclusion that 2009 will be at least OK, hopefully good, and possibly even great. Putting aside all of those analyst reports that say we're on track for double-digit growth, the most important thing to remember is that out-of-home and Internet are the only slices of the ad spending pie to make consistent gains over the last three years. Of the two, Internet advertising is of course much larger, but OOH is growing at the fastest rate. Even long-time stalwarts of above-the-line marketing like Advertising Age have come around on the prospects of OOH, and particularly digital and interactive signage. In fact, they just published the results of some OgilvyAction research indicating that in-store signage (of the non-digital variety) is actually more effective than price reductions when it comes to stimulating impulse purchases.

If that kind of data is too macro-level for you, let's try an anecdote from the conference. Most people felt like third quarter sales practically came to a halt at the end of August. By October, they were panicking about dismal prospects for the end of this year and the beginning of next. But many agreed with my own observation that instead of falling flat, fourth quarter sales were actually picking up, and if anything, January and February of 2009 were looking pretty good. Is that rigorous data that you can set your own sales forecasts to? No. But I heard this story from people who are living and breathing the industry. They sell their products, services and ad spaces every day to make a living. Since they had no reason to sugar-coat things for me, nor I for them, I'm taking that as a pretty good sign of recovery.

Where to look for opportunities

During my presentation (the last spot on the last day, yuck), I outlined four areas where WireSpring is finding good growth right now. These include small networks, new screens attached to existing "properties", non-advertising networks, and non-retail networks. Here's why each category is a good target:
  1. Small networks - We've seen strong and accelerating growth for networks with less than 25 unique channels of content (typically spanning less than 25 venues), and we expect this trend to continue well into the future. VARs like them because they have a lot of clients that fit that profile. Angel investors like them because they can fully fund them out of pocket. And entrepreneurs like them because they're manageable with a small team, for less money. And heck, there are just a lot of places where you can put 25 or fewer screens, period.

  2. New screens on existing properties - I'm seeing a lot of opportunities to attach digital signs to existing real-world properties like ATMs, kiosks and even heart defibrillators. This makes sense, since all of those things require similar infrastructure to digital signs (i.e. power, Internet connectivity, etc.), and their owners are now looking for more ways to generate revenue from their existing investment.

  3. Non-advertising networks - PQ Media indicated last year that non-advertising networks are being installed faster than advertising networks. New objectives and innovative business models are allowing these networks to skirt tough questions about ad sales and efficacy in order to focus on goals that aren't directly tied to filling advertising space.

  4. Non-retail networks - Retailers may lose their taste for spending money after the holidays if sales aren't good (and they're not looking too great right now). But growth in other sectors -- particularly health care and corporate communications -- remains strong.
There's plenty of overlap between these high-level trends (small non-retail networks, for example, or non-advertising, non-retail networks), making it easier to zero in on the good opportunities. Also, since the retail sector is pretty slow this year, there isn't as much of a mad dash to harass them about their 2009 budgets, which typically close before Christmas. Likewise, many non-retail companies finish out their fiscal years in February or March, so there's still plenty of time to work with them on digital signage budgets for 2009.

Slow growth is better than no growth

I can't say that 2009 is going to be the super-duper banner year that everyone was hoping for. But like PQ Media and others, I do expect the industry as a whole to grow. It'll be less growth than in recent years, but still a positive number (I'm guessing 7-9% right now, but it's really just that -- a guess). What I am sure about, though, is that if we're all on the sidelines waiting for conditions to improve before putting new plans into action and helping to get new business off the ground, nothing's going to happen. So in a way, it really does pay to be an optimist, doesn't it?

Are you brave enough to post your predictions for 2009? Leave a comment below and we'll see how well you did by this time next year! :)


Comments   

0 Franois Reeves 2008-11-26 14:05
I believe hardware will come down dramatically in 2009 so that might trigger projects that were contemplated but not enacted. I forecast a consolidation of sort of smaller players into larger networks. Finally, I believe digital signage will see more money in a time of restraint because it is a niched media, highly targeted and is able to provide the single most benefit any advertizer is wishing for: a call to action, often close to a point of purchase. Hey media buyers, cut TV, Radio and Print in favor of Internet and DS. Easier to track, cheaper CPM with a far better reach. Cross media campaigns have proven to be more effective. According to a recent Veronis Suhler Stevenson Forecast, Internet advertising--- including pure-play websites and digital extensions of traditional media--- will replace newspapers as the largest ad medium in 2011. Positive, as always. FR
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0 Gary Halpin 2008-11-26 17:25
Nice article Bill (sorry I missed the conference but I'm scheduled to speak at the Vegas conference in February). One point that I see as very clear is the advertiser-supported networks could be in trouble in the near future. I'm actually much more concerned about the overall economy than our Digital Signage Industry. I am a strong proponent of the Austrian School of Economic thought, where monetary inflation has been shown as a very destructive force. While the market tries to correct itself (thru deflationary pricing), the powers to be are pumping more and more money into the system with the goal of combating that. This can only lead to more misallocation of resources and a bigger bust later. One thing is certain, it will definitely lead to higher prices, a deteriorated dollar and a less wealthy economy as a whole. It is extremely difficult to forecast the economic conditions in our market (or any market for that matter) because of the political decisions that are being arbitrarily made. With that disclaimer, I think deflationary pricing is actually a good thing for our industry for two primary reasons. First, it is the market (buyers and sellers) correctly valuing the services and products we all provide. And second, as prices drop, clients or potential clients recognize a buying opportunity. But I fear prices will stop falling sometime in 2009, which could impact our industry negatively. However, there are some groups who could benefit. Who are the immediate beneficiaries of the priming-of-the-pump (i.e. monetary inflation)? Think of a counterfeiter, who benefits the most because prices havenTMt adjusted yet to the new infusion of money. But the 5th or 10th person who sees that money wonTMt benefit because by that time, prices will have risen to combat (and many times overly compensate) their new ~falseTM wealth. The same holds for where the bailouts are directed today. Figure out which industries are getting that cash first and target them.
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0 Bill Gerba 2008-11-26 22:06
Franois: I also think we'll see some hardware price decreases this year, but I don't think that in itself will be sufficient to drive a lot of new deals (I mean, unless they dropped 80 or 90%, but I don't think that's terribly likely :) It'd be nice if media buyers suddenly realized the benefits of [[http://www.wirespring.com/dynamic_digital_signag e_and_interactive_kiosks_journal/articles/Want_to_ Hedge_Your_Media_Buys__Try_Digital_Signage_Adverti sing-637.html|shifting money into digital out of home]], but again I think we're looking at a much longer horizon than just 1 year. Gary: Good to hear from you. I agree with what you're saying, and believe me, I could write tomes on why bailing out whole industries right and left is a **terrible, terrible** idea that we, our children and our grandchildren will pay dearly for. But it sounds like you'd put your hat into the "slow or no growth" category for the industry, right? :)
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0 Anonymous 2008-12-01 12:07
Hello Bill
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0 Gary Halpin 2008-12-02 13:53
Yeah Bill, I'm leaning heavily towards the slow or no growth category as I fear it could get much worse, despite most people not having a clue. However, with that said, when money is infused into certain sectors, those areas could (or should) experience some growth. I guess I'm more of a macro-guy when it comes to forecasting.
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0 Aaron Hargrove 2008-12-02 17:32
BIll, I would love to hear what your thoughts are on using the fact that buissinesses can use co-op money to help pay for digital signage or even to generate revenue by paying for it completely and not spending any more money on in store static media. Thanks
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0 Mark 2008-12-03 15:57
Great post - altogether I'm bullish for digital signage in 2009. The economic shock therapy might be just enough to prompt venues advertisers into a new line of thinking. Thanks
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0 Bill Gerba 2008-12-03 16:16
Hi Aaron, We talked a little about getting retail networks funded with co-op dollars in [[http://www.wirespring.com/dynamic_digital_signag e_and_interactive_kiosks_journal/articles/Digital_ signage_networks__Advertising_supported_networks-3 11.html|this article]], though generally digital signs are used to merely supplement existing POP and merchandising programs. While DS has a lot of potential to grow into, I think it's very premature to even think about getting rid of static POP and posters in favor of all digital signs. For one, digital signs are still somewhat complex to manage, not to mention expensive. For another, there are times when a poster or well-placed display is going to be faster and easier to put into production, and will generate the same (or even better) results than a screen would. The real issue with using co-op money, though, is that it's already all allotted for other in-store programs. So to get your retailer to use some for digital signs, you first must convince them to either a) raise their co-op fees (which **ALL** of their vendors will complain about), or b) take some money they're already using for a program, and move it to the digital signage program. That's not exactly trivial either, but we have seen a number of retailers do it successfully.
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0 Ediz Burla 2008-12-21 22:40
Hi Bill, I read the article and the comments. I'd like to point out the importance of new channels on existing properties (dual channel) in such an uncertain economic condition. I believe companies/softwares that have dual channel technology, (1cpu-2 diff. channels) would have an opportunity to increase the existing channel no's/income without a need of additional hardware. Several Banks and Retailers may take advantage of other available/existing screens in branches and use new value adding applications at the POS that would result an increase on awareness of new campaigns and of course on sales. I'd love to hear your point of views. All the best, Ediz Burla TVeez Turkey
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0 Bill Gerba 2008-12-26 16:43
Hi Ediz, That's certainly something worth noting. However, I think it's wrong to assume that every venue would benefit from additional channels, so site and network owners would certainly need to do their homework before deciding whether to go this route or not. And while up-front costs might be significantly reduced, that new channel will need new content - so keep those (ongoing!) costs in mind too :)
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0 Clinton Gallagher 2009-02-12 22:36
1.) 2009: The Year of Interactive TV The control of the $87 billion spent every year in the TV markets no longer exclusively belongs to the licensed fascists and their oligopoly of over-the-air broadcast networks. Every TV manufacturer is beating the drum to manufacture TV sets that function interactively in support of the open and agnostic Internet Protocols. 2.) 2009: the "big names" of digital signage will be seen and recognized as phoney and no longer relevant as business owners and operators become increasingly educated about RSS and AtomPub coming to learn that the current providers that relegate the use of RSS and AtomPub to "news and weather feeds" have been selling crippleware. 3.) 2009: will begin "our time in the sun" as my partner and I deploy our RSS and AtomPub software services via METROmilwaukee.com proving our assertions regarding Items 1 and 2 above.
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