There is no shortage of success stories in Internet-driven businesses these days. The media has been very quick to pick up on the latest trends, hoping to be in early on the next trend, technology or wave. Looking at five stories gives us a chance to dig into what creates sustainable success, where hype and reality part ways, and what may be next. The sixth story is digital signage. Where do we fit?  Let’s try to figure that out.

In the Spring of 1998, NetFlix (changed to Netflix in 2002 prior to its IPO) opened its virtual doors and began renting DVDs through the mail. Like most successful businesses, Netflix was solving a problem.  In fact, it was solving three problems: the sparse availability of DVDs in video rental stores at the time; the annoying and often costly late fee experience; and the need to “go out” in order to “stay in”. Response was tremendous and has made Netflix a smashing success. The company has been able to adapt to the advent of ubiquitous broadband, and grabbed the streaming video bull by the horns before others could fill that void. Without doubt they will move steadily toward a 100% streaming service, eliminating the use of hard media, the U.S. Postal Service, and lots of touch labor. When you see that there will be a branded Netflix button on television remotes, you know that a company has disrupted more than one industry. It is becoming part of infrastructure.

The domain was registered in August of 2005, Facebook itself having been born a year earlier at Harvard.  Its rise to a position of dominance as a social force and as a marketing engine is the stuff of legends, and of screenplays. It recently raised a billion dollars in a private equity round that will actually force it to go public in the near future. Prepare for astronomical valuation. Facebook gives users an opportunity to create an online persona and presence, to associate with (“friend”) other users of their choice, and to share thoughts, likes, dislikes, pictures and rants with their own network. Businesses have jumped on the bandwagon to create Facebook pages for brands, products and companies, using them as secondary web sites that allow them to identify their friends. The company, which reportedly crossed the billion dollar revenue threshold in 2010, with net margins greater than 25%, continues to make acquisitions to extend the breadth of its offering and to move toward the web-dominant position enjoyed today by Google. Disruptive, multi-platform, multi-channel, well protected from competition. That is Facebook.

In March of 2006, the first tweet ever was posted by Jack Dorsey, “just setting up my twttr”. Since then, there have been a few billion more tweets. It is more than a way to let the world know that you are bored, motivated or simply finishing a salami sandwich.  Twitter holds an important place in the business and media worlds, and Twitter has played a role in the Egyptian uprising, and before that in Iran. Approaching 200 million worldwide users, it is the backbone of what is now known as social media. Twitter somehow bridged the worlds of text messaging, blogging and instant messaging to create a self-perpetuating, self-filtering community of communicators. That is has spawned dozens of Twitter-related companies trying to capitalize on its power without any serious competition speaks loudly of the disruptive nature of Twitter.

Foursquare burst onto the scene in 2009 with a location based mobile service that is designed to allow users to “check in” to locations, earning points, badges and mayorships for frequent visits. They can even tweet their location, annoying their Twitter followers to no end. Ostensibly, Foursquare proposes to monetize its base by selling ads and becoming the de facto loyalty program for thousands of large and small businesses. Unlike the businesses described above, while Foursquare was first to its space, it was not really disruptive, and attracted competitors like flies. Among them: Gowalla, Booyah!, SCVNGR and most notably, Facebook. Foursquare does not have the traction, barriers to entry and raison d’etre that the big and disruptive winners do. Call me the Mayor of Skeptic Cafe, but I don’t think that Foursquare or its imitators have solved a problem. Businesses of any scale can easily create their own mobile apps to capture users and reward loyalty. LBS is cool, but Foursquare is a hammer looking for nails, proving that being first doesn’t guarantee anything.

Groupon was born in late 2008, providing deeply discounted, localized, daily deals that members can avail themselves of. They employ a major call center to reach out to prospective businesses to pitch their participation in a Groupon deal.  The business partners enjoy a spike in traffic and sales based on the discounted offer, and hope to see a lift in post-promotion business in the aftermath of introducing themselves to new customers. On one level, a win-win. On another level, Google’s $6 billion offer for Groupon, which Groupon turned down, a mammoth home run. But there is already some serious competition in LivingSocial, backed by Amazon. That site recently became widely visible by offering (surprise!) a 50% discount on a credit for It seems clear that these services will become an important factor in the promotion cycle of small and medium businesses. Whether they break through to larger retail businesses remains to be seen, but there is little doubt that they will have the time and resources to morph, branch out and cement consumer relationships. They filled a void, and they got big enough, fast enough to leverage the first mover advantage.

Unlike the five Internet businesses above, digital signage is really an industry powered by an Internet-enabled business application. Within that industry there are hundreds of players: software vendors, hardware vendors, service providers, ad sales businesses, implementors and network operators. There are still some lessons to be learned by the high profile stories above, and some common threads to look for.

Digital signage solves a problem. The problem is the lack of a timely and dynamic alternative to static signs. Most digital signage offerings can provide the solution to that problem fairly gracefully. Unfortunately, where they part ways with the disruptive winners above is that the solution itself is extremely costly for the end user, making the decision to engage or switch an exercise in cost-benefit analysis and ROI calculations. This has been the single largest impediment to truly explosive growth in the industry. Some vendors have tried to solve that puzzle with “free” or “freemium” offerings on the software side, but have learned (or will) that the most attractive customers are a tad more sophisticated than they are given credit for. The price of software is but a small piece of the puzzle, and pales in comparison to hardware and organizational costs in operating a network professionally. What software does is more important than what it costs, within reason of course.

The Internet winners leverage the pseudo-free networking of the Internet itself to connect a consumer or business to a desired outcome.  Digital signage fundamentally uses the Internet as data transport. The most disruptive and successful Internet-based companies were able to build a huge customer base quickly, stemming competitive responses. That has not been the case in any aspect of digital signage to date. One company, RMG, has attempted to buy market share on the network side. The jury is still out as to whether their top heavy model can be sustained or whether they bought the best pieces to stitch together. No such attempt has been made on the software or services side. We are an industry of fragments. That can not be our destiny, because for the most part it is unsustainable. The market will not allow it to continue for long.

The opportunity to disrupt, to build barriers, to acquire customer/network bases of significance is out there, perhaps uniquely in time, right now. Whether anyone is inclined to or able to act upon that opportunity is not clear. The digital signage space may not create a Netflix or a Facebook any time soon, but in the next year or two, market forces may produce a dozen really impressive companies focused upon the space where none exist today. It seems inevitable.