One of the most remarkable figures of the 19th century, Mark Twain (nee Samuel Langhorne Clemens) was a man of creativity, humor and scientific curiosity. He is of course best remembered as the writer of the classic novels The Adventures of Tom Sawyer and Adventures of Huckleberry Finn. He hobnobbed with the likes of Nikola Tesla and Thomas Edison, not to mention various statesmen, business leaders, academics and river pilots. It is the case with most great men and women (and in our shallow electronic society, some not-so-great celebrities), that the public seems to have a voyeuristic need to know as much as they can about them. So it was with Twain, who twice was thought to be dead, the second time actually resulting in a premature obituary.
Now, in a well-written and thoughtful white paper entitled Ad-Funded Digital Signage: Is There A Future In It?, Steve Gurley, SVP at Symon, concludes that advertising dollars earmarked for ad-funded digital signage networks “will either be significantly reduced or abandoned altogether”. While Gurley’s paper is an excellent review of the rise of mobile technology and marketing, and he correctly suggests that ad-funded networks embrace it, it may be a tad early to pull the plug on any segment of the digital signage industry. Let’s look at why.
Gurley starts out by grabbing a partial quote out of Adcentricity’s widely-read Q1 DOOH market review in order to build his thesis that ad-funded DOOH networks are dead meat. The full quote reads (The part omitted in the white paper is in bold):
While mainstream agencies have Digital OOH on their radar, and are allocating dollars, digital agencies haven’t yet adopted or fully understood this medium’s capabilities. Ironically, there’s a digital divide where there should be a natural fit.
Adcentricity’s report goes into detail on the difference between a digital agency and their mainstream brethren. The digital agencies were created to attack the web space, period. As such, their mentality is one of measured clicks, small buys and easily controlled tests. By their nature most DOOH networks do not lend themselves to that type of thinking. Their adaptation to other digital media has been slow. The general agencies more easily understand national sales, large scale campaigns and the concepts of gross and net impressions, and that is why they are paying attention to DOOH and ad-funded networks. Perhaps it would be more instructive to have a look at Arbitron’s recent Digital Place-Based Video Study, which despite its awkward hyphenated title in deference to certain benefactors, provides many reasons why the large agencies are paying attention to DOOH, not the least of which include reach, engagement and effect on purchases. It seems that not all the folks in bars and coffee shops exclusively stare at their smartphones, as Gurley implies. Arbitron estimates 20 million unique monthly viewers in bars and 21 million in coffeehouses. Perhaps they were only looking at the screens while their smartphones were loading Facebook pages or sending tweets, but I doubt it.
Before laying out five trends that underlie the rise of mobile marketing, Gurley suggests that “the fundamentals (e.g. ROI, value proposition, etc.) of ad-funded signage are simply poor”. Given the definitions he provides for ad-funded, traditional and ad-supported networks, it is worthwhile to look at ROI and value proposition. An ad-funded network, as Gurley defines it, is a network where a third party makes an investment and deploys digital signage in someone else’s venue. ROI on such an arrangement will be highly dependent upon three factors: the level of capital expenditure required to deploy; the advertising revenue generated; and the revenue sharing or “rent” agreement with the venue owners. Many such networks have failed due to various toxic combinations of high cap ex, low ad revenue and crazy revenue share deals. Such is the life of a pioneer. More recent entrants have learned from the dearly departed, and also benefited from reduced cap ex costs. That being said, while the viability of a network is critical to advertisers, the cost of the infrastructure and the revenue share deals are not known to them. ROI on the network does not matter to them. They are about reach, rate and demographics: that is where the ROI on advertising lies. The value proposition to an advertiser of an ad-funded network is identical to that of an ad-supported network, so long as the key factors are the same. So it hard to understand why the bus is being run over one model, but not the other.
The examination of the change in the consumption of media, particularly video, and the rise of the smartphone and mobile marketing is appropriate and detailed. However it is hard to draw the conclusion that agencies will abandon DOOH for mobile just because it is hot. While the delivery of ads to handsets is certainly measurable, the absorption of their messages are a bit more elusive. At one time, banner ads on web sites were the next big thing. It is fair to say that money is actually leaving that vehicle for greener pastures at this point. One of those green pastures is certainly DOOH networks. Another is mobile. Is measuring mobile click-throughs more valuable than measuring increased product sales at retail or in hospitality venues, increased prescription rates in health care, or increased brand awareness in public venues? I am not so sure. In the end, it really is about engagement, and it may actually turn out that Apple’s iPad is a better vehicle for customer engagement than their iPhone.
Gurley prescribes a good dose of mobile integration as the cure-all for the impending doom facing ad-funded networks. While I find his thesis regarding that impending doom to be flawed, I can’t argue with his prescription. Advertising dollars from brands are finite, they represent a zero sum game. Increases in one sector have to come from decreases in another. Good networks are acutely aware of the opportunity to increase their relevance and engagement through the wise use and integration of mobile technologies. Unlike advertising dollars, the use of technology does not have to be a zero sum game. While tension between media channels such as mobile and digital signage is both normal and productive, their coexistence makes both more valuable. That is where we have to go.
With thanks and tribute to Mr. Twain, I feel comfortable saying that the report of the death of ad-funded networks is greatly exaggerated.
Having just read Gurley’s white paper, I’m not sure it can EVEN be called a white paper as opposed to a self serving op-ed. Direct, correlating Research and Data for his claim….that mobile is capturing the hearts and minds of consumers and media buyers at the expense of DOOH…. is nowhere to be found, rather only, circumstantial data and singular observations.
A few points worth focusing on –
Who’s selling DOOH to digital agencies?? – Anyone who’s spent anytime in either the ooh or digital agency business, or selling to it, which the author doesn’t appear to, knows that ooh buyers in the media buying agencies are still the main target of dooh networks…ooh is the operative acronym, not the d. The technology is certainly digital, but the delivery, metrics, objectives of dooh for brands are more closely aligned with traditional OOH and broadcast buys.
Re contentions that DOOH has not fulfilled its forecasts, the same could be said of mobile…it has been the “Year of Mobile” since 2000!! Certainly the advent of smart phones has increased the prospects for mobile marketing in a short amount of time, but, most mobile functions are primarily promotional,such as e-couponing and local deal delivery, and are just one component of the marketing mix.
I could go on, but I’ll go a step farther than you Ken and say that this was such an arbitrary puff piece for mobile, that I’m not sure it even has any merits for further debate.
There is a lot of good, thoughtful material in Steve’s paper, but I find the whole thing odd.
The premise is that DOOH is soon going to be irrelevant because everyone is going to be going online and/or staring at their smartphones, and not much else.
You could pretty much do a Find/Replace and stick any medium other than smartphones in there and the paper would rattle off all the same impending doom things.
This is not a white paper examining ad-driven digital signage, it is a paper about how mobile is freakin’ awesome and everything else, well, sucks unless it gets integrated with mobile.
Gurley spent from 2000 to 2008 running his own mobile-centric biz dev firm, so that is clearly where his head and heart are really at. But for all the hype, mobile is not cranking a lot of revenue yet either.
I agree with the premise that mobile and data integration is a substantial part of the future, but I also think this notion that medium consumption in the future is all about a screen the size of a cheese slice is a little off-kilter.
Guys, I had a nice response prepared but the web page crashed when I submitted it. Perhaps it went through, in which case we’ll let the moderator just delete this one.
Just suffice it to say: Your thoughts are much appreciated.
Let me ask you a question though: If you had to bet where the “big” money will be flowing over the course of the next couple of years, where would you bet? On mobile or on DOOH?
If you answered mobile, you’d be correct. If you answered DOOH, you’d be….
I do believe however that the effective combination of DS and mobile will create a unique proposition that will provide more value and generate more money than either individually. Believe it our not, DS is a catalyst for mobile usage.
Feel free to call on me to be a sounding board for ideas. After all guys, it’s all about the money!!!
Steve:
Thanks for the comment. I think it is fair to say that I have already placed my bet on digital signage, but that doesn’t make it a bet against mobile. When I placed my bet, I didn’t think billboards were going to disappear because of digital signage… because people can SEE them, and that is what advertisers pay for. Mobile devices can and will become ancillary devices to digital signage networks. That will increase the value of those networks and add a certain degree of measurability.
If I were placing my bet on mobile ad dollars, where would I play it? By buying Apple or Google stock? By starting a cellular company? By writing an ad-supported iPhone app? Creating the next mobile ad network (Oops, too late there)?
Where to bet the big money is going?
I am not sure I would bet on either over the next couple of years. Both are growing sectors, but both are also evolving rapidly and in need of structure, standards, stability and more evidence of excellence.
As much as I’d like to say otherwise, most DOOH networks are flawed in some aspect of their approach, like programming, audience dynamics, screen positioning or reliability. As media sales aggregators have suggested, most of the networks out there need to raise their game.
And on mobile, I don’t know how media planners charged with considering mobile buys keep their heads from exploding.
It’s not even a case of “That idea is so 2009.” From the endless gush of information I see, what’s cool technology on Monday is outdated by Wednesday. How does an agency working the ad dollars for a brand plan nine months out when that’s going on?
Hi Ken,
I think the problem is not whether DS or mobile will compete better against the TV ad budgets. Each time there’s a new technology proposition for content distribution out of home, audience behavior is not included as a study before deploying it. DS is an example of this error. Only after a crisis, then we become more careful about it. Human behavior is behind our successes and failures when the subject is communication. The more we understand it the more we can profit from it.
One thing I’m sure about is that the DS will always be a great tool to sell. It’s up to us to make it work.
Mobile on one side can be measured by click-through, but it’s still a mystery to sell something by it because it have to depend on user’s willingness to participate. And each one’s time out of home is much more managed today than before.
Understanding better the audience behavior before deploying any system is the best bet for anybody in this business. And it can be DS or mobil or both together. The ad money will flow in easily if there are real results to be reported.
This whole thing is about how are we using our “time”. Old business models have to be replaced by newer ones because our perception of our time have changed.
A very well written white paper but I am afraid it is wrong on so many
levels. OOH spending is increasing and gaining more share of voice
exactly for some of the reasons that Steve points out at the beginning of the paper.
So many people in the industry fail to understand how the media
planners and the ad agencies work.
Bottom line it is an interesting piece if you want to be in the mobile advertising industry but it doesn’t have much more than a LOOSE connection to DOOH.
When you get to the very end you have the aha moment of seeing that the author spent eight years trying to make a mobile company work before taking a job with Symon. Perhaps he is in this game only as long as he has to, or until he moves Symon into mobile?
He skips over the root cause of why most networks fail – which is because
they were under-funded and/or poorly executed !
Outstanding comments and observations. I had hoped that my paper would spark discussion, which I’m glad to see that it has. The more dialog on the subject, the better off we will all be. I fully believe that DS will be a great launching pad for mobile and vise versa.
I will do what I can to keep the DS industry abreast on the happenings in mobile and the impact to DS. Any and all feedback would be appreciated.
Two additional points that may be implied, but need to be considered by those seeking advertising revenue for DOOH in the sales process:
1. As former VP Marketing, Carnival Cruise Lines responsible for $60MM annually, I agree that while “advertising” budgets are a zero-sum game, but “marketing” budgets are not. Very often, inside corporate marketing budgets are opportunistic dollars in “promotional” or other line-item budgets that can be tapped, IF the marketing effort is tied to actionable (sales oriented) activity.
2. As a former partner of a major southeast US “traditional” advertising agency responsible for the planning and purchase of general market media (for twenty years) and an adjunct professor of this topic at the university level, it is my feeling that part of the problem is that we are consistently comparing DOOH to the wrong medium. While DOOH networks look like TV an offer the flexibility to convey messages with “sight, sound and motion,” they should not necessarily be thought of as an out-of-home corollary to television.
Instead, we should more often position DOOH along the lines of radio – a very successful out-of-home medium in its own right – where the opportunities to explore promotional participation with one or more advertisers in combination with mobile creates a much more powerful media tool.
While it takes a little more imagination and effort, finite promotional campaigns are easier to get agencies to agree to fund (less risk), can combine more than one advertiser within a promotional effort (hence a larger one-time spend) and if well thought out, will immediately substantiate the purchase decision, which will grow agency converts to the DOOH cause.
Great discussion. One thing everyone is missing is one of the biggest reasons digital sign networks are not making roi. Does anyone out there know a dsn operator with an extensive, successful background in advertising sales? If not, let me introduce myself. I come from the radio industry where I started in sales in 1983. Five years ago I started my first digital sign network and have four networks today. All of my networks paid back in less than a year and my income continues to grow even in this economy.
I’ve heard a lot of excuses why dsn’s are not getting the revenue. But I work around the agencies that won’t by just like we did in radio. I make the cold calls, follow ups and proposals in terms advertisers understand. I suggest all of the dsn’s that are failing are run by people who do not know how to sell advertising and how to sell against traditional media.