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Google, APEX and Others Discover the Fast-Growing Digital Signage Market

Digital Signage is the fastest-growing marketing and communications medium in the world

Digital Signage is the fastest-growing marketing and communications medium in the world second only to the Internet and branded entertainment.  It replaces conventional paper signs and posters with electronic signs using liquid crystal displays (LCDs) and plasma screens.  Google has pursued a patent on digital signage and has recently launched a Google TV ads platform, which will likely revolutionize out-of-home and TV advertising in the coming years.  APEX Digital Imaging is providing a total suite of digital signage services through a collaboration with the largest companies in the space.  And there are countless ways in which organizations are using digital signage today:

Dental clinics and medical centers.  Reduce patient perception of waiting time; Lower marketing and communications costs; Generate third party advertising revenue

Mid size businesses and large corporations.  Improve quality and impact of corporate communications; Boost employee morale and productivity; Lower operational costs

Colleges and universities.  Enhance campus image and experience; Generate advertising revenue; Alert campus during emergencies; Lower cost of bulletin board, posters and other media

Health clubs and fitness centers.  Educate and inform members; Increase sales of memberships; Promote, cross-sell and up-sell fitness accessories

So why is digital signage "all the rage" even in today's tough economic climate?  With the rapid advances in technology what truly constitutes digital signage today?  And finally, what are some emerging trends in this market that will provide you with new media marketing and sales opportunities at a lower cost and in a more effective manner than ever before?

High-Impact Messages to Target Audience at Right Time & Place
Digital signage has proven itself to deliver high-impact messages to very specific, target audiences at just the right time and place when the receiver is most receptive to the message and can act upon it.  As we will see, digital signage has already established itself in the retail and out-of-home channels, and is now poised to explode as a means for improving the effectiveness and retention of corporate communication messages, lowering operational costs and boosting employee training, productivity and motivation - especially in today's tough economy. 

A Growing Market
The digital signage market has experienced double-digit growth over the past several years.  In 2008, revenues grew 24.5 percent to $1.69 billion, on track to a projected $2.6 billion by 2009.  Frost & Sullivan, a digital signage research firm, also forecasts that the North American systems market revenue will climb to nearly $900 million by 2011; this from its $149 million figure in 2004 (the systems market includes hardware, software, installation and management services).  Perhaps, the greatest gains in future digital signage (DS) will be in non-advertising related verticals such as higher education, healthcare and internal-facing corporate communications, which are used within the four walls of the workplace in locations such as break rooms, call centers, warehouses, transportation control centers, and on the factory floor.  But before we get too far ahead of ourselves, let's first define digital signage.

Because the digital signage market is so new and rapidly evolving, a universal definition of the industry remains elusive.  Indeed there have been many terms used to describe digital signage itself:  dynamic signage, narrowcasting, electronic digital signage (EDS), digital out of home (DOOH), dynamic displays, and others.  So it should not be surprising that an industry that has not yet defined itself might have some trouble clearly defining what it does.  Today, most industry players are converging on the term "digital signage" -- with the exception of some hold-outs who prefer (the poorly chosen acronym) "DOOH." 

Over the years we have seen many definitions of digital signage come and go.  And of all the current definitions, we believe the one proposed by Advertise Me is one of the best:

"Digital Signage is the use of digital technology such as a digital screen, digital signage players and software to deliver content such as information, advertisements and entertainment to a captive audience."[1] 

In our opinion, many of the other definitions are too restrictive and do not allow for the changes in technology, social trends and other market forces that are impacting the industry.  For example, many definitions limit digital signage to "displays in public spaces," but we see an increasing number of businesses using digital signage internally to communicate with and educate their employees.  Other definitions put too much emphasis on advertising, yet we see some of the greatest growth and value-add in industries in which ads and audience counts are irrelevant such as health care, manufacturing, education, transportation and logistics, call center operations, corporate communications, military and government.  Cost avoidance and savings, employee productivity, staff morale, process efficiency, training and development effectiveness and catastrophe avoidance (via real-time emergency alerts) are some of the benefits of these non-advertising applications of digital signage.  So with this working definition, let's turn our attention to the basics of how digital signage works and why so many are deploying it.

Overview of Key Components
A typical digital signage system consists of a Display Screen (usually LCD or plasma); a Media Player or Set-top Box, Software and a Network for coordination and control.  The price of every component in this digital signage eco-system is falling due to a highly competitive market and technology advances.

A Perfect Storm for Digital Signage
The convergence of several market forces and social trends is positioning digital signage as a very attractive alternative to traditional print media and marketing-communications.  The mobility of consumers and employees combined with the influence of the digital-savvy millennial generation (who have 25 percent of US purchasing power) are among the primary social trends influencing the growth of digital signage.  Also spurring its growth are the interactive forces of improved manufacturing methods, which lower production costs and increased market demand as the price of display screens continue to fall.  Additionally, the power and simplicity of next generation software and Internet technology is increasing the digital signage adoption rate and lowering the cost and effort of its deployment and management.  And finally, new generally accepted measurement methods and today's tough economic climate are sustaining market growth.

Knock-Knock, Nobody Home
In today's fast-paced, mobile society no one stays home any more.  And even when consumers are at home they seek privacy and make every effort possible to keep marketers, advertisers and sales people from invading their space in myriad ways such as: 

Placing their name on "do not call" (DNC) lists

Screening their phone calls

Replacing land telephone lines with mobile phones, Skype, Vonage, etc.

Using Tivo, video on demand (VOD) and digital video recorders (DVRs)  to avoid TV advertisers

Throwing out "junk mail" received through the postal service

Filtering email or mass-deleting messages altogether

"Skipping" or fully ignoring online ads and filtering pop-ups

Digital signage provides an alternative means for reaching consumers, students, patients and employees when they are out of their homes and at a time when they are most receptive to receiving information and acting upon it.  Unlike traditional internal communications, telemarketing, direct mail and TV advertising, digital signage can:

Offer a 30% in-store promo to slow-moving toothbrushes to toothpaste shoppers near point of purchase

Blend text, images, audio, video, and real-time weather, news and stock market feeds to create visually impactful communications

Communicate employee benefits, corporate information, company events, training videos and much more to company staff who do not have access to desktop computers

Provide class scheduling, book store promos, concert ticket information, emergency alerts and sports and campus events information to college students, staff and faculty

Organizations Seek Alternatives During Economic Downturn

During the current economic slowdown, companies, health care providers, educational institutions, and governments are under tremendous pressure to cut costs without sacrificing communication quality and frequency with their primary customers and stakeholders.  As a result, organizations are assessing lower-cost alternatives to traditional marketing and communications rather than blindly signing off on last year's budget.  As they discover the power of this engaging, low-cost and versatile new communication medium, they are dedicating portions of their marketing dollars to digital signage.

Millennial Generation:  All Digital, All the Time
The millennial generation grew up on MTV, HDTV, PDAs and flat-screen computer displays, so they have high expectations of media and messaging.  This generation of employees and consumers are growing up "digital" and are plugged into it 24/7.  They represent about 25 percent of the buying power in the US economy.[1]  These 75 million millennials, born between 1980 and 2000, are nearly as large as the Baby Boomer generation (and influence their Baby Boomer parents) and are multicultural, talented, self-absorbed, influential and optimistic.  Like it or not, employers will have to accommodate them and advertisers will have to cajole them.  Digital signage can offer organizations a way to engage, communicate and influence this new generation of workers and buyers in order to tap their talent and gain or sustain a competitive advantage.

Lower Screen Prices Capture Long Tail 
About ten years ago a plasma screen would cost you $8,000 to $10,000 (USD).  Today, both plasma and LCD displays can be purchased for $1,000 to $3,000.  Pacific Media Associates, a Menlo Park, Calif.-based research firm that tracks display prices, found that the price of liquid crystal display (LCD) screens tumbled 22 percent between 2005 and 2006.[2]  Since then the price of both LCD and plasma flat screens have continued to fall, making them affordable to nearly every type of business or consumer and fueling further demand. 

Indeed, over the past several years LCD and plasma unit sales rates have been on a tear, growing at double digit rates often in the 20-40% range depending on the country and market.   Even in today's slow economic climate, DisplaySearch, a leading retail research firm forecasts that the LCD TV market will reach 119.9 million units, for a 17% year-over-year growth in 2009.[3]  Furthermore, DisplaySearch predicts 2010 production costs for a 32-inch HD LCD TV will drop below $400; a 42-inch full HD panel will fall to below $600; and a 52-inch full HD panel could be as low as $1,000, setting the stage for yet lower prices for businesses and consumers.   In fact, over 430,000 digital displays were sold in 2005 alone and Display Search estimates that the digital signage market will have a need for more than 900,000 displays by 2009, trending in line with a Gartner report.[1]

On Demand Software Further Lowers Costs
Depending on which analyst report you chose, there are now about 150 to 300 software vendors providing digital signage software.  With such fierce competition, signage software continues to get easier to use and more affordable each year.  One of the dominant trends in this space is the integration of Web 2.0 and On Demand / SaaS with digital signage.  Software as a service reduces the upfront technology infrastructure costs and risks associated with your digital signage deployment by allowing you to pay as you grow through relatively inexpensive monthly subscriptions.  This makes it much easier for organizations to run pilot projects and proofs of concept to better understand benefits and prove potential ROI, ROO and ROOM.  Additionally, with such an On Demand solution, an organization need not incur the expensive capital expenses associated with purchasing hardware, software and other IT infrastructure. 

Another technology development is the ability to pull in news updates, stock tickers and weather reports directly from the Internet using RSS feeds.  Advances in technology also make it possible for many organizations to re-purpose or completely re-use existing media content vs. re-creating it from scratch.  This further accelerates the learning curve for staff and reduces the time and cost of deployment.  As On Demand platforms become increasingly open, different networks will be able to "talk" with each other, further unleashing network effects which will spur faster growth and innovation.  For example, signage software companies that open their systems may be able to connect with Google's highly-anticipated release of their signage advertising software platform.  This may provide such companies the ability to generate ad revenue from small businesses and niche markets that were previously not economically feasible.

Metrics Draw in Broadcasters & Advertisers
The biggest announcement in digital signage for the year 2008 occurred on October 30, 2008 when the Out-of-Home Video Advertising Bureau (OVAB) released its Audience Metrics guidelines.  OVAB President, Suzanne Alecia, made the announcement as the keynote speaker at the sold-out Digital Media Summit in New York.  She went on to explain the need for the 82-page report, which includes guidelines and a key metric (Average Unit Audience).

 "The problem has been that media companies have been speaking in different languages to agencies," Alecia said. "These guidelines represent the first iteration of establishing the necessary data for the out-of-home video advertising industry to achieve ROI that effectively competes with more traditional media."[1] - Suzanne Alecia

The establishment of this Average Unit Audience metric marks a major milestone in digital signage for retailers, broadcasters and ad agencies as it places the industry on equal footing with established media channels and provides a common means for all to calculate ROI.  Detailing this seminal report on audience metrics is beyond the scope of this document but you may access the full report here.[2]  Also, in late February 2009 at the Digital Signage Expo 2009 in Las Vegas, MediaTile announced its ROM Methodology.  Rather than focusing on advertising ROI, this ROM metric will cater to non-ad models, allowing organizations to "plan and measure digital signage effectiveness, value and impact."[3]  As a result of these improved measurement methods, 2009 is expected to be the year in which we see many of the traditional players, which have been cautious about entering this space, become more engaged. 

Determining Digital Signage ROI and ROO
The world's most popular statistician, Dr. W. Edwards Deming (the American who taught the Japanese quality) admonished, "The most important figures are unknown and unknowable."   This is a powerful statement coming from a numbers guy who dedicated more than 70 years of his 93-year life to measuring quality and productivity.

We provide the same caution.  There are essentially four basic business models for digital signage: sales lift supported, third party advertising supported, non-advertising and hybrids.  We will examine all four shortly, but keep in mind that no two deployments are alike and some benefits are easier to quantify than others.  For example, if your digital signage alert system prevents a serious injury or saves a life of a single person, how do you put a cost or price on that?  The value resulting from gains in employee morale and worker satisfaction achieved through more effective corporate communications using digital signage is also elusive.  How do we measure the benefit of the overall campus experience for university students, faculty and staff that have access to digital signage for news, information, community and campus events, emergency alerts, and much more?  It is also difficult to put a price tag on the lowered perception of wait times in waiting rooms at medical facilities, banks and pharmacies where digital signs appear.  So with those caveats, let's see how different organizations are determining ROI, ROO and ROM and which might be most appropriate for you.

Return on Digital Signage:  ROI or ROO?
While the most often quoted examples of return on digital signage come from retail examples, we are seeing an increasing mix of ad and non-ad related digital signage business models:

UK-based Lloyd's Pharmacy found a 13% uplift on sales of targeted items displayed on digital signs

As small southern California dental office quickly achieves 100% ROI

The break-even point for the deployment of a small digital signage system was three teeth-cleaning appointments

The sign "shows dental hygiene tips, describes special treatments and services available in his office and reminds patients to schedule regular cleanings."[1]An Info Trends study which polled consumers found that digital signage displays:

Have a 47.7% effectiveness on brand awareness

Increase the average purchase amount by 29.5%

Create a 31.8% upswing in overall sales volumes

Provide a 32.8% growth in repeat buyers and

Generate 32.8% more in-store traffic

The University of Central Arkansas projects $100,000 in advertising revenue to offset campus wide $240,000 investment in digital signage.[2]

Media research firm Arbitron conducted a study at a shopping mall which found:

 When asked about recent changes made at the mall, about half of the shoppers spontaneously mentioned the video screens

 Nearly 40 percent preferred visiting a mall with video screens.

 Product recall was high with nearly half of all shoppers able to name at least one brand they saw advertised on a digital screen that day, without being prompted.

Consumers were better able to remember product from the digital signage ads than from television commercials.

Hearing aid sales quadrupled at medical facility Central Carolina ENT following installation of digital screens (medical facilities: enhance image, educate patients, improve bottom line)

Digital signage is a disruptive technology that will continue to reshape the out-of-home advertising and communications markets as well as offer insights into the next generation of TV broadcasting.  Individuals and organizations that understand these market forces can position themselves for competitive advantage.

Please provide us your feedback and thoughts on the topic of digital signage and the impact it will have on out of home advertising and the future of television.

References:

1.   [1] http://ageconsearch.umn.edu/bitstream/27646/1/33010182.pdf

2.   [2] http://www.consumerreports.org/cro/electronics-computers/news-electronic...

3.   [3] http://www.marketingcharts.com/television/lcd-tv-revenue-to-fall-yoy-for...

4.   [1] http://www.la.viewsonic.com/solutions/cs_signage.htm

5.   [2] http://www.hbcommunications.com/expertise/digital-signage.php

6.   [1] http://www.digitalsignagetoday.com/article.php?id=20951

7.   [2] http://www.ovab.org/OVAB%20FINAL%20102408%20no%20watermark.pdf

8.   [3] http://www.digitalsignageuniverse.com/news_mediatile_022009.html

9.   [1] http://www.digitalsignageresource.com/digital-signage-articles/digital-s...

10.  [1] http://www.advertiseme.com.au/content/DigitalSignage.Home.asp

More Stories By Frank Shines

A former Air Force officer, IBM executive and Ernst & Young consultant, Frank Shines has flown Air Force jets, trained and competed with Olympic athletes and traveled the world as an award-winning business adviser to Fortune 500 executives. He has been published by John Wiley & Sons (The Controller's Function: "Performance Measurement" Chapter, 1999) and is the author of a book examining the impact of the next generation of the Internet on individuals and organizations (The New Science of Success: How to Outsource Proof Your Job in a Web 2.0 Economy, 2007). He is the founder of Skill of Success, a Services 2.0 consulting firm.

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