I haven’t written for a while now. For those of you that have actually noticed the absence, thanks for caring. I generally get antsy when it has been 7 to 10 days since the last post, so that feeling of obligation and anxiety has been pretty strong for weeks now. Truth be told, it has been a very busy month, and in a good way. I have also burned hours stewing over having finally identified the lowest life forms in the digital signage industry, quite an achievement considering the numerous candidates. (And you know who you are, dahlings. May you each receive the properly painful karmic comeuppance that certainly awaits you.) I won’t waste further keystrokes or your time on such negativity, as cathartic as that might be. During the blog hiatus, I’ve also been lucky enough to connect with some of the brightest, most uplifting people in and around our space. That has been an overwhelmingly positive experience for me, and reinforces the notion that life is too short to waste time with people who bring you down. None of which has anything to do with today’s writer’s block-busting post, but it felt right to share.
An Industry of Niches
Digital signage has its roots as a non-Internet phenomenon, when early networks burned DVDs and distributed them to locations, usually on a monthly basis. It did not take long to understand that there was an opportunity to create a viable business by leveraging captive audiences, predictable dwell times and advertising sales. As broadband began to proliferate and networked solutions were born, it looked like the salad days for digital signage were on. While there have been many success stories, the gold rush did not turn out quite the way typical network and solution provider business plans projected. Perhaps the highest and best use of digital signage is not necessarily as an advertising vehicle. If that is true, then events, behaviors and strategies of the past and present need to be re-examined in a different light.
The lure of advertising dollars “certain” to be diverted from television and traditional out-of-home budgets attracted digital signage startups like moths to lightbulbs. On the network side, every conceivable venue type where one could make a case for dwell time seemed to have entrepreneurs aggregating locations. Capital costs, which were far more onerous in the early days, did not faze the startups or their investors, as they bought into the ad revenue model en masse. Two special situations only increased the hysteria in mid-decade. The 2005 sale of PRN to Thomson for $285 million was generally perceived as validation of the ad-based model. Never mind that selling ads to WalMart’s browbeaten vendors is hardly a typical scenario, or that PRN’s model could not be replicated without a benefactor like WalMart. The FocusMedia IPO was the other one-off that received undue hype. People seemed willing to ignore the fact that the FocusMedia networks were not in fact networked, and that China’s media environment is a tad different than that of North America or Europe. Beyond these anomalies, the ad-based networks that succeeded combined focus and scale in various ratios, and it was not a walk in the park for any of them. The number of large scale winners was small enough to spawn its own
cabal association (DPAA, nee OVAB), with astronomical dues sufficient to support paid research reinforcing the CPM rates of members, while keeping out the annoying riffraff. The DPAA does some good work, and has recently changed its membership policies and dues structure, but it remains a mouthpiece only for an important segment of an industry, not the industry as a whole.
On the solution side, entrepreneurs sniffed opportunity as well. Software distribution, content creation, media player and kiosk makers suddenly morphed in to digital signage solutions. It is fair to say that most if not all of them were blinded by the light reflecting off the pot of advertising gold. It is interesting to look at how time, market pressure and customer demands changed strategies along the way. Some have invested huge amounts of time and money trying to optimize their solutions for ad-based networks. (Ironically, the majority of the DPAA powerhouses use home grown solutions and have been reticent to make a shift to commercial packages.) Others have seen their solutions take on the look of software built by committee, as different pieces built to mollify key customer requirements have a bolt-on feel to them. Others have tried the shell game of promoting bells and whistles to distract attention from a fundamentally flawed core. All of this was occurring as garages across the world gave rise to a new generation of me-too products. Some were undoubtedly worthy, but encountered a vendor-saturated marketplace in which key targets were either taken or moving at a snail’s pace. The recent demise of DG Screens is a good example of a what may have been a promising solution unable to gain enough traction to survive. We may never know the actual motivation for Harris’ impending divestiture of its Broadcast Communications unit, which includes its digital signage business, but their big bet on an ad sales play may make for fun deal discussions. That pot of advertising gold will almost certainly expand, but it will never be large enough to sustain the hordes of software solutions competing to power the networks. For quick affirmation of this, read the ever-growing list of vendors being compiled by DailyDOOH. If you have heard of 25% of the names, you are doing well. Finally, the demise of SeeSaw Networks, the sale of Adcentricity, the focus of DOMedia on outdoor, and the retrenchment of rVue are all indicators that the advertising angle is not what most people thought it would be.
Here, I’ll just say it: advertising-based networks are a NICHE within an industry, they are NOT the industry itself.
Digital signage may have more usefulness as an activator and marketing tool than as an ad platform. The days of venue aggregators are giving way to the era of corporate deployment. This brings with it a shift to branding and marketing as primary goals, with advertising revenue often discounted in ROI discussions. And it necessarily makes content and engagement, scalability and interoperability, flexibility and cost efficiency the focal points of decision makers. New solution entrants will be hard pressed to get through a proper corporate selection process, and older ones will have to decide what they really are. The market has a way of dealing with those that don’t choose and invest wisely.
The emerging battle will be for niches within the next wave of adoption. And while advertising will be one of those niches, it may no longer be the one with the highest growth rate. Sustainable market strategies and resilient business models will have to win the day.