The Digital Signage Insider

Do you ever get the feeling that market analysts can sight a buoyant industry from far off, kind of like how sharks can follow a faint trickle of blood underwater for miles? Or maybe piranhas would make for a better fish analogy: upon detecting a particularly fat prey, market analysts lunge in for a feeding frenzy. Whichever you prefer (or perhaps you can come up with a better one), over the past two or three weeks I've come across more "research companies" that I've never heard of. These firms are busy publishing more reports on our industry than I would ever have thought existed. The good news, I suppose, is that these new reports generally agree that our market will continue to grow, even through a protracted recession. But I doubt you'd need to drop $1000+ on one of these tomes to figure that out.

Since everybody is keeping a close eye on industry growth during these times of economic uncertainty, I thought it would be nice to put all of the predictions from these recent reports in one place. That way, we can all read about them, agree or disagree with the analysis, and then in a year or so look back at them and laugh about how terribly inaccurate they were. Here are the predictions made by these four analysts, in no particular order:

Goldmedia (source)

• Digital out-of-home (DOOH) advertising revenues in Western Europe will quadruple over the next five years from Euro160m in 2007 to Euro626m by 2012. By 2012 DOOH share is expected to grow to approximately 10 per cent of total OOH ad revenues.
• Driven by the migration to digital and the incremental revenues generated from digital sites, the out-of-home sector will be the only traditional advertising media to post real revenue growth in the next five year.
• Thanks to the increasing affordability of digital displays, digital signage networks not only conquer brand new spaces for advertising (e.g. in-store point-of-sale advertising) but also upgrade static poster format sites in a growing number of locations (airports, stations, roadsides, etc.).
• Sales of displays and other hardware for digital signage generated revenues in the amount of approximately Euro4m in Western Europe in 2007.
• Lower maintenance costs and higher revenues, combined with reduced hardware costs are making a profitable business case out of upgrading many existing to digital, as well as creating new sites intended to reach audiences on the move.
• The added value of digital OOH formats over traditional OOH formats (superior impact of moving image, creative and dynamic copy, booking flexibility and scalability, etc) allows contractor to sell inventory at premium rates.

PQ Media (source)

• The industry will experience a shakeout that will cause its growth this year to decelerate from 2007’s 24.5%
• Expected compound annual growth rate of 12.9% between 2007 and 2012.
• U.S. digital OOH spending has tripled since 2002, growing 23.1% on a compound annual basis from 2002-2007 and exceeding 20% growth each year of the period.
• U.S. spending on video ad networks, the largest segment of digital OOH media, is on track to expand 8.1% in 2008 but will decelerate in 2009 before returning to double-digit growth in 2010.
• Digital billboards remains the fastest-growing segment, though it will be slower in 2008, posting growth of 28.2% and remaining in the 20% range through 2012.
• Ambient ad platforms will grow 6.8% in 2008. This growth compares with expected low single-digit growth or outright declines in most ad-based media in 2008 and 2009, including newspapers, radio, broadcast TV and magazines.
• PQ media forecasts digital OOH spending in Europe, Asia and the Americas to grow 12.8%, to $6.11 billion in 2008. This growth is slower than last year’s 22.6% rate, but digital OOH is still expected to expand 14.5% from 2007 to 2012.

Koncept Analytics (source)

• Out-of-home or outdoor advertising will buck the downward trend in the rest of the advertising industry.
• Advertising dollars [are] being diverted away from traditional media like newspapers, television and radio and into OOH.
• Digital signage, a powerful and promising out-of-home advertising channel, appears to have the chance to resist this downturn in advertising expenditure by offering a dynamic messaging medium with an enhanced message impact.
• One of the major growth drivers of digital signage is the advancement in technology which has helped retailers, marketing and entertainment companies, and many other organizations to 'narrowcast' dynamic video, graphical and editorial content on hundreds, or even thousands, of digital signage displays located virtually anywhere.

ABI Research (source)

• The economic slowdown in the United States and other markets will impact retailer and advertising spending on new initiatives.
• In the United States, the overall market for digital signage software, hardware, installation and management services will reach around $1.4 billion by 2013, up from the $641 million market in 2008.

A few brief thoughts of my own

First of all, not all reports are created equal. While PQ has been following this market for a while, and has indicated that current predictions more or less match ones from previous reports (thus suggesting they might not be completely off-the-wall), some of these other guys don't have that luxury. One of them had several grammar and sentence completion mistakes right in the summary, so I can only imagine what the quality of their "data" is like. Second, while most of the reports talk about market size, that means different things to different analysts. When I've purchased reports in the past, I've found that a given report may or may not include things like consulting, internal costs reported by host venues and retailers, non-advertising marketing-related expenditures, and so on. Often the report doesn't even clarify what is and isn't included.

Consequently, all that I find these reports useful for is figuring out what the rest of the digital signage industry is telling the analysts. For example, if the reports suggested a general downward trend, I'd know that my counterparts at competing companies and networks were probably having a bad year and feeling pessimistic. The generally positive outlook I've been reading about tells me that despite all of the economic messiness, we're still more or less headed down the same path we were on a year ago, which is a pretty good sign in my book.

One last note: Investors, I know there are a lot of you circling around out there looking for a place to park the money you don't want to put into the public markets right now. I suggest you ignore the fine details in these reports. If you want a more accurate feeling for the market, I encourage you to get in touch with somebody from a reputable company that has been serving the digital signage industry for a while. We're relatively few in number, but we have (I believe) a far more reliable gauge of what it's really like out there, and where things are likely to go in the near future. After all, we have skin in the game, and if we're way off base, our businesses suffer.

Do your own experiences match what the analysts are saying? Has 2008 been good, bad or neutral for you? What do you think a protracted recession will mean for your business and the industry at large?