The Digital Signage Insider

Can digital signage be profitable for an AV reseller or VAR?

Published on: 2007-12-18

It's been a while since I've written anything about digital signage and kiosks for the VAR or systems integrator, but in the course of my morning jaunt through the blogosphere I came across an interesting article at CE Pro, a site that bills itself as "the leading information source for the custom electronics installer." Noting that digital signage has become a "growing integration option" (in fact that's the article's title), author Erik Sherman does a nice job of wrangling opinions out of VARs who actually have a few deployments under their belts. Taking his readers through an array of possible business options, Sherman ultimately concludes that digital signage is "a lot of work, but by learning the ropes and carefully approaching the market, you can have your own display -- of increased profits." But is it true? The answer is either yes, no or maybe, depending on how you decide to approach the market.

If you're keeping score at home, the last time I blogged about AV and IT integrators getting involved in digital signage was way back in March 2006. At that time, we tried to expose the four biggest myths that POS and AV integrators seem to encounter with these projects. Nearly two years have passed -- an eternity in the digital signage industry (unless you're in sales, in which case it's about the amount of time it takes for a deal to close), and I wonder... Has anything changed? Are VARs getting better at driving deals in the digital signage marketplace, or has it merely become one more thing that they figure out how to integrate upon a customer's request? From the CE Pro article, I'd say it's a mixed bag. For example, several VAR's cited the ability to put together complex solutions that integrate with a customer's legacy systems using off-the-shelf hardware and software components. That's a good thing, and certainly one of the main areas where we've seen visible improvements in the past year or so. Likewise, the author discusses the common mistake of using consumer-grade displays in public environments, and the kinds of trouble that can lead to.

But hardware and software are the areas we'd expect IT solutions integrators to be the most savvy about. How have they fared when it comes to business models? Have they figured out that jumping into ad sales is darned near impossible? Well, on the heels of those glowing paragraphs about the recent improvements to digital signage technology come more paragraphs about selling ad-driven digital signage networks. The author's take on things: "There are firms doing this successfully, but it's harder than it sounds. [Mary Meeker, president of MEM Systems] tried it four or five years ago and found the going tough. 'The advertisers wanted proof of installation and proof of people watching [the ads],' she says. 'The people at the malls or stores said the opposite -- you show us the advertisers and we'll let you put it in.'" Thankfully, it sounds like the message is starting to get through to some people: jumping from one area of expertise to another is really hard. And doing it while trying to manage a logistically complex and capital-intensive project is insane.

While I wish I could say that my day-to-day experiences at WireSpring completely mirror the opinions and observations expressed in this article, we're actually seeing an even greater number of misinformed organizations trying to dive head first into a project or installation. I recently looked through thousands of inquiries to help identify the five trends in digital signage deployments that separate the winners (i.e. those with stable/successful networks) from the losers (those who have either folded or never got off the ground in the first place). According to the data, trying to sell ads without any ad sales experience was far and away the biggest project killer. I counted over 470 companies that had tried and failed before I lost interest. The result is a rather scary stat: about 94% of the firms that tried to create an ad-based network, but had no prior ad sales experience, ended up failing. Those few who managed to figure it out ran into other unforeseen problems along the way. For example, one client that was modestly successful at selling their screen time (enough to make ends meet, at least) found that they actually needed to build out their own in-house production team to create content optimized for in-store viewing. The reason? Their clients either came in with creative assets that weren't appropriate for the store environment, or had no creative assets at all.

Maybe things will change in 2008, but I'd be surprised if they did. The analysts keep talking about our double-digit compound growth. Agencies and media visionaries talk about the demise of traditional advertising. Real-world spaces increasingly find themselves competing with virtual ones, and keep looking for ways to bridge the gap. And for every piece of real news, five times as much hype gets generated. So it's no surprise that people keep pouring money and resources into digital signs. Likewise, you can't blame the hordes of optimistic companies who are looking for ways to participate in an industry with few hard rules and even fewer bona fide experts. Nor do we want to dampen their enthusiasm or discount the fresh opinions and observations that they bring. So what's the solution? How do you educate a diverse and rapidly-expanding group of companies and individuals that don't fit well into any single governing body or industry association?

Encouraging membership in one of the premier industry bodies is certainly one possibility. Getting newcomers involved in a group like POPAI Digital would certainly give them access to lots of experts and information very quickly. Trade shows and conferences tend to highlight the positives and not so much the negatives. (Except when I'm speaking -- in fact, you can tell it's me when the audience leaves with downtrodden expressions on their faces.) So generally, I don't think trade shows lend a balanced view to those new to the industry. Books, newsletters, websites and blogs? There are a lot of them, but who has time to wade through them all to separate the wheat from the chaff? Next year, I want to see the aforementioned 94% failure rate drop like a rock, and that doesn't have to mean fewer companies involved in the space. It simply means figuring out a way to help companies match the right kinds of digital signage projects with their core competencies. How can we get an eager VAR or system integrator on the right track? If you've got a plan in mind, I'd love to hear your thoughts (you can leave them in a comment below).


+1 # Matthew Olivieri 2007-12-18 19:32
The two biggest things that struck me in this article were this: 1) "clients either came in with creative assets that weren't appropriate for the store environment, or had no creative assets at all." 2) "It simply means figuring out a way to help companies match the right kinds of digital signage projects with their core competencies." From my perspective as someone who seeks to be a VAR, these two points are critical to my business. I think companies like mine must effectively find ways of educating the world on not only the potentials, but also the requirements of different digital signage systems-thus lowering the amount of perceived time, effort and money it will cost to get involved and create positive network effects. The further opportunity to have a ~creativeTM department which assists companies that donTMt have the budget to go through an Ad Agency is simply icing on the cake in my opinion. I am curious as to your thoughts on our latest blog post as well, if you wouldn't mind: Thanks Bill, Matthew
-1 # Bill Gerba 2007-12-19 13:23
I applaud your efforts to try and help educate the world on the potentials and requirements of digital signage projects, but after nearly five years of blogging, traveling and working the trade show and conference circuit, I can tell you that we haven't yet created the ecosystem necessary to quickly bring newcomers up to speed, share knowledge, etc. I do know that there are a number of groups **working** on that very problem right now, but as of right now there are too many people jumping in head-first without first arming themselves with the necessary information.
0 # Matthew Olivieri 2007-12-19 19:35
My response is that perhaps the world wasn't quite ready to fully embrace digital signage in the past- at least not in the ways I envision they will be in the near future...I seem to vaguely remember large record sized laser disc movies that came out 3-4 years before people were ready to start tossing out their VHS cassettes of course later came the first DVD and now that is the industry standard. Why weren't people embracing D.S. in the past? I don't know if any one reason reigns supreme, perhaps of number of reasons...hardware limitations, government regulations? New technologies always have a high $$$ cost associated with them as well until enough players enter into the industry which makes things more scalable and brings costs down overall, which is what I foresee happening in the next 2-3 years BIG TIME. Case in point, I asked a random 25 people what the term digital signage meant to them and only 5 were in the ballpark. Within the D.S. industry I think you will have one company that steps up and who makes D.S. the cool, hip, fresh and exciting medium to advertise on and this group will not only help shape the industry but also society's willingness to absorb the switching costs necessary in learning how to capitalize on this medium.
0 # Bill Gerba 2008-01-03 16:44
Hi Matthew, Thanks as always for your perspective. While I think your comment is mostly correct, I continue to believe that the issue is not so much the cost, but the determination of benefits. After all, ROI is basically just $Benefits - $Costs While the latter is pretty easy to calculate nowadays (and yes, it can be a big number), people continue to struggle with the former, even after nearly a decade of "serious" digital signage deployments. The way out of this, of course, is to be able to effectively and accurately value the benefit portion of the equation, and as we've seen, that has a lot to do with the specific model that the signage is being used for (check out our articles on digital signage business models for more info on that).
+1 # Greg Askew 2008-01-04 12:29
I think there is huge progress in this field. Every mall you go in now has digital signage everywhere. Our company has built a very successful and unique model not in malls but in other high traffic areas. I could care less if a var ever figures out how to pull off a successful way to do this. I do see someone showing up and buying the thousands of digital signage locations and tying them all together. There is a lot to be said about struggling to find advertisers. There is lot's of hard work going into learning how to sell that space but the bottom line is if you have eyeballs seeing your displays then you will have advertisers. Add to all of this an interactive component that actually tracks usage and prints out information for the buyer - GENIUS!! What I recommend is just staying focused and do not try to be all things to all potential clients.
0 # Bill Gerba 2008-01-04 15:29
Hi Greg, You hit on an excellent point -- too many VARs try to be all things to all people, instead of focusing on the deals and areas where they have a competitive advantage. In doing so, they participate (or try to, anyway) in ways that don't best showcase their strengths, which is why I think there are so many mediocre-looking vendors out there today. It's a big enough problem that I probably should have written about it in this article, but we did touch upon it a few weeks ago in an article about the trends that separate the winners from the losers in our industry: [[ ital_signage_and_interactive_kiosks_journal/articl es/5_crucial_steps_that_can_make_or_break_your_dig ital_signage_project-345.html|5 crucial steps that can make or break your digital signage project]] Specifically, VARs (and everyone, really) need to be able to completely articulate their business model and competitive advantages so that they can pick areas where their time/effort/money is most likely to yield a positive return on investment. Likewise, they need to set challenging but achievable goals so that they have a clear path and hopefully some way to measure their progress. While I wouldn't necessarily say that those who don't do these things are doomed to fail, those who **do** do them have a better chance for success.

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