The holiday season is a perfect time for reflection, whether driven spiritually or simply by the calendar. This is the time of year when stories featuring analysis of the past year’s trends and predictions of next year’s glory begin their annual appearance in online and offline media. They serve a good purpose in reviewing what has been and preparing for what might be. They are easily scanned, often interesting, and certainly more worthy of one’s limited time on Earth than anything Kardashian. Like many, I view 2012 as a year that the digital signage industry will build upon the spiky, cautiously optimistic year that was 2011. But upon reflection, one concept kept bothering me even as I shared my optimism with others. The marketplace is woefully underserved in terms of operations services, while remaining alarmingly over-served by solution providers. The two phenomena are intertwined.
As the concept of digital signage and the technologies to support it grew in tandem over the past eight to ten years, the predictable emergence of entrepreneurial network owners and technology providers grew at the same pace. In the early stages, start-ups were the norm on the network side, with many evolving into significant companies of real scale. Others have remained in the small to mid-size range, or disappeared altogether. Few came in to the space as big, going concerns. Most of the start-ups had to take on every task in the process of creating, acquiring and distributing content; selling, trafficking and reporting on advertising; selecting, mastering and operating software; as well as acquiring, deploying and managing sites and equipment. There was not much choice in those matters, and many of those companies still do it all. Now, as larger companies contemplate DOOH networks and represent a potential quantum leap in investment and growth, they will have a different slant on who-does-what.
To larger companies entering a new space requiring skills and tools that are outside of their current core competencies, the idea of hiring staff and creating new internal capabilities is often anathema. They generally prefer to outsource as much of the work as possible, often as a way to avoid an increase in headcount, and sometimes as a way to mitigate project risk. As such, they work with third parties to acquire and manage content; to sell and manage advertising; to select and acquire technology; and to deploy equipment in the field. Then comes the tough part: operations. The operation of a network requires (among other skills) deep expertise in the software platform that manages content and sites. For a third party to build a business around that, they need to invest in the training and maintenance of a particular platform, and bank upon the success of that platform in order to realize economies of scale. Because of this phenomenon, there are only a few folks that provide network operations center (NOC) services, but usually limited to one or two software platforms. The dilemma of how many platforms to support (and which ones) is complex, and often decided opportunistically rather than strategically. There is risk in the model. Do they invest in cross training people or dedicated resources for additional platforms? If so, how many? What happens if customers from a supported platform are acquired or go away for any reason? As a result, there remain pockets of operations providers that are essentially specialists.
The existence of so many software platforms in the space makes the development of a healthy NOC subsystem within the DOOH ecosystem a difficult matter. Looking at an example outside of our industry, many large companies have looked to outsource financial operations, usually based upon one of the big platforms in place. Back in the day, that included Oracle, Peoplesoft and JD Edwards. It isn’t shocking to learn that Oracle now owns all three brands, but what that has done is consolidate the skills and infrastructure required to offer consulting and operations services to large corporations. We are certainly not at that point in digital signage, and it is a concern. As very large companies decide to take the plunge on digital signage, and they will, the demand for these services will increase. It is not clear how that demand will be met or by whom, although there are people thinking about it. To a certain extent, the answer may dictate winners and losers on the platform side. It remains to be seen whether the limited choices for outsourcing a key function will be a barrier to entry for large companies, or a driving factor in the development of a NOC giant or two. Choices made by a new echelon of network owners and an evolving subsytem of service providers may play an important role in shaping the industry going forward. Where there is concern, there is also opportunity.
Best wishes to all for a season of joy, peace and family from everyone at Real Digital Media.