The Digital Signage Insider

Charting the Tipping Point and Hype Cycle for Digital Signage

Published on: 2011-01-28

Boy, if there's one thing I love, it's the reuse of a tired cliche. I mean, where would the Internet be without endless witticisms about hockey-stick growth, business synergy, best-of-breed solutions, and "convergence" -- whatever those are. As I was researching some market statistics recently another old favorite -- the tipping point -- came to mind. It caused me to remember an article that I wrote last year about growth rates in the digital signage industry. In that post, I used measurements from Google Trends to controversially illustrate that the digital signage industry might not be growing in the same way that everyone thinks. Now that we've accumulated another 12 months of data, and in light of recent predictions that millions of new screens will be deployed in the coming years, it's time to revisit our findings. In particular, I'm curious to see if the trend we observed still holds true. And even if it does, should we really care about this set of metrics in the first place?

Just what is a tipping point, anyway?

In sociology, a tipping point happens when a previously rare phenomenon suddenly becomes dramatically more common. In physics, it's the point at which an object changes from an existing stable state to a new state. For climatologists and other big-system researchers, it's the point at which a slow, reversible change becomes irreversible, often with dramatic consequences. And for many in the tech industry, it merely means the point at which some new technology becomes mainstream. Obviously, that last definition is the most relevant to us, though a good definition of "mainstream" eludes me. After all, if you just define mainstream as capturing a certain percentage of the market, that target number might actually decrease as the market size expands or new markets open up. I suppose you could get it over and done with by defining it in terms of the human population or something like that, but that doesn't seem too useful either.

More importantly, there isn't just one tipping point in most industry lifecycles. As Gartner illustrated back in 2005 (and has continued to do every year since then), most tech industries actually follow a "hype cycle," which typically has peaky periods of extremely fast growth in the beginning, and more languid but sustainable growth after maturity:

If I had to guess, I would say that while our "technology trigger" happened somewhere in the 2004-2005 timeframe, our "peak of inflated expectations" occurred in the middle of 2008. The natural course of the hype cycle would thus suggest that we had the unfortunate circumstance of diving into the "trough of disillusionment" just as the global economy took its own dive toward the second half of that year. The Google Trends data seems to lend a bit of support to this idea:

While searches for "digital signage" nearly doubled between the start of 2007 and the start of 2008, that number only barely held on for the rest of the year, and has been in decline ever since. What's more, that decline comes even as the market pumps more and more "news" into the channel in the hopes of stimulating demand. As Digital Signage Universe's Lionel Tepper pointed out last year when I looked at this trend:
"Reports of increased search volume for the keywords "digital signage" are not accurate: There's a direct parallel that can be drawn between the rise in search volume for the keyword "digital signage" and the increase in the number of registered domains for providers and services within the space. As one might expect, a percentage of this increased search volume has been generated by the industry itself, creating an artificial rise in search queries for digital signage; therefore, some, if not all of this increase should be discounted."
Lionel has a good point. However, even discounting the number of research reports issued over the last two years showing slow or flat growth for the industry through 2010, there's another piece of data to throw into the pile: the price of keyword advertising. Where just a few years ago the price of a prime Google AdWords ad for "digital signage" might have been a dollar or two, that number has spiked into the neighborhood of $5 (or more) per click. Other, longer tail search terms have shown similar percentage increases, suggesting that even though the search traffic for these key phrases has leveled off, vendors are willing to spend much more to convert them. Now, that might be because web visitors for these keywords are more likely to convert to actual customers than ever before, making each visitor more valuable. Or, perhaps there are fewer new avenues of growth for vendors to pursue. From what I can tell, the supply-side hasn't seen a dramatic swing up or down in the past year or two. And our research suggests that the cost of implementing a digital signage network has actually decreased during that time as well. So the most plausible explanation is that demand has leveled off to some extent. (Confusingly, you could say that the available "supply" of demand has decreased, driving up its cost as demand for "supply" grows.)

So did we hit a tipping point, and does it matter?

I'm going to optimistically say that we've made it through the "trough of disillusionment" and the "slope of enlightenment," and have started to enter the "plateau of productivity." Just about everyone in IT knows what digital signs are, and marketing departments, corp comm departments, safety departments and many others understand (or at least perceive) the value of these systems. Finding an ROI is still challenging in many of these applications, but that will either get resolved, or costs will at some point decline to the point where it doesn't matter. So rather than say we hit a tipping point, I'd rather dust off my old calculus textbook and say we hit an inflection point, or the point on our growth curve where the slope has changed from negative back to positive.

While I remain bullish on the digital signage market, the data above should serve as a reminder of how important it is to set reasonable expectations for any business endeavor. For instance, I think that a startup looking to enter the market and expecting to immediately hit millions of dollars in sales and triple-digit year-over-year growth should take a closer look at their assumptions. That, or do some major innovating to significantly expand the definition of what digital signage is and means.

Is the market for digital signage growing, staying the same, or shrinking? What's going to drive growth during the next 5 years? Leave a comment below and let me know!

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