Looking back on some notes and presentations from 2004 and 2005, I had mixed feelings when I thought about what we termed the “perfect storm” brewing in the digital signage space. The three elements of the storm were fragmentation of TV audiences and the advent of the DVR, falling display prices, and the increased penetration of broadband, especially at retail.
Each of the elements of the storm was quite real, but they were insufficient to create the monster waves that we all expected at the time. To be sure, the waters churned, but it was not historic in nature. The fragmentation of television audiences and the “TiVo-ization” of America created some impetus for advertisers to seek more effective ways to get their messaging to consumers. However, digital signage networks themselves were fragmented, and not the only out-of-home alternative. Prices for flat panel displays fell quite sharply over that period, and prices continue to moderate, albeit not at the same downward rate as before. New capacity for LCD glass, competitive pressure and manufacturing efficiencies certainly contributed to this positive trend, but we can see in retrospect that the cost of displays was not the long pole in the tent in terms of digital signage investments. Lastly, the ever-increasing ubiquity of broadband seemed to bode well for digital signage applications, especially at retail. However, unless the retailer itself is the network owner, unfettered access to that in-store pipe is not an assumption a third party network operator can make. The idea of the perfect storm was not a total illusion. It was a storm, but to make it perfect other conditions had to exist that were not there at the time.
Today, the elements of the original storm persist. However, new factors have come into play that may elevate the storm to its original potential. Specifically, three trends are emerging that will be transformational for the digital signage industry.
Measurement: While advertisers have certainly looked at alternatives to increasingly inefficient television campaigns, digital signage networks haven’t historically made it easy for the ad buyers to shift dollars. Digital signage network owners, from monoliths to small timers, set prices and asked advertisers to take a leap of faith. While ad buyers know instinctively that out-of-home messaging works, they have struggled to place its value in a context and in terms that are familiar to them. Network owners present their rates in the familiar CPM, but because the “M” (thousands of viewer) is elusive at both the gross and net levels, it is hard to assign an appropriate cost (“C”). To move a piece of the zero sum pie from a media buy that includes “Grey’s Anatomy”, ad buyers must feel comfortable that they are getting equal or better value. Their jobs depend on spending effectively. Industry trends are working that will eventually turn the leap of faith into a decisive act.
The measurement trends of note include development of industry-driven standards for measurement, technology-driven audience measurement, and cooperation between network owners and network sponsors in establishing a fact base. We blogged in December about the announcement of the In-Store Marketing Institute’s partnership with VNU to launch P.R.I.S.M., and initial results are being publicized, with more to come. The result will be a lingua franca for in-store media measurement. While the P.R.I.S.M. project relied upon the considerable research capabilities of its primary partners and participating retailers, the project used infrared devices for counting traffic. For some, that raises the question of what is traffic vs. what is an impression that is worth paying for. Not surprisingly, technology has emerged to provide a more definitive answer to that piece of the puzzle. Perhaps the most promising is AMPnet from VideoMining, of State College, PA. Through the use of cameras and sophisticated software and algorithms, AMPnet does far more than measure traffic. It can collect important data that includes actual eyes on screen, dwell time, gender, overall navigation in a location and much more. The correlation of eyes on screen to the actual message being played is valuable in many ways: not just as a net impression, but as a validator of the effectiveness of a piece of content. AMPnet data can also drive display placement and even store design decisions. The folks at VideoMining think that this type of data will aid network owners in the effort to establish and validate higher prices for spots. They may be right. The last trend in measurement that we have seen is the cooperation between a network owner and a potential lead sponsor before the network is fully deployed. The two parties work together to develop custom research in a panel of pilot locations, with advance agreement on metrics defining success. It makes perfect sense, and is a natural evolution from the Field of Dreams mentality of early adopters. We expect to see more of this, perhaps wrapping the findings of P.R.I.S.M. and technology such as AMPnet into the process.
Large Corporations as Network Owners: The biggest early success in the digital signage arena was without doubt the PRN-WalMart partnership inside the WalMart stores. PRN’s 2004 S-1 filing in anticipation of an IPO that never occurred provided some juicy tidbits about the volume of dollars flowing through the mega-retailer network. The success at WalMart was a bit of a dilemma, as it was very difficult to separate WalMart’s notorious power over its vendors from the actual appeal or effectiveness of the network itself. Nevertheless, the ubiquity and success of the network spawned many business plans. Some, such as SignStorey, were ultimately successful in creating significant value. Others, attempting to create networks at retail and other venues without the power to attract ad dollars up front, failed.
Without question, we are now seeing the emergence of large corporate network owners. Clearly, there will always be room for third party network owner/operators such as PRN and SignStorey, but the marked increase of corporate activity indicates a seismic shift. It means that large companies now see digital media networks, whether ad-driven or not, as strategic marketing assets, and on that basis they want to control them. It also means that we will begin to see large scale rollouts become the norm, not the exception. It is also driving the emergence of industry-seasoned and industry-focused consultants who are assisting their corporate clients with feasibility and ROI studies, design services, technology selection, implementation planning, process optimization and much more. The result is a more structured and methodical approach, coupled with a stronger commitment to success from the corporate clients. We have long held that the emergence of a vibrant and busy consulting community would be a harbinger of accelerated adoption.
Capital: The digital signage industry has absorbed its share of venture capital and angel money. There are several instances of big paydays for those risk takers already, notably PRN and SignStorey. However, taken as a whole, the industry, from entrepreneurial network owners to technology companies to service providers, has been largely undercapitalized. The continued validation of the effectiveness of out-of-home messaging and the interest of large corporate network owners is starting to drive change.
Recently, we have seen a resurgence of “me too” opportunistic entries into the technology space, and a continued flow of new network proposals. This is not shocking. At the same time, solution providers, service providers and network operators who have been around for some time are seeing the beginning of some consolidation, some failures, and emerging points of differentiation. In all, it creates an atmosphere where venture capitalists work most effectively. There is enough empirical data to discern the differences between business models; the early adopter risk has been largely borne by others; the basis for valuation is clearer; and the exit strategies are becoming well defined. As such, there is increased interest in all facets of the industry from the VC community, as well as from the corporate world in terms of acquisitions. In either case, the industry is seeing more and larger bets being made with more confidence. This will only accelerate innovation, adoption and consolidation, all of which are signs of health and maturity.
The elements of the first “perfect storm” were necessary but not sufficient to cause radical change and acceleration. However, the emergence of measurements, big corporate interest and big investment will combine with those elements to cause a true sea change. Batten down the hatches, mate.