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.