A prevailing myth continues to be that digital signage are costly applications, which only large, display-needy environments such as airports, casinos, college campuses, entertainment parks and sports stadiums can afford. But the spread of broadband Internet access among small to medium businesses (SMBs) and the availability of subscription-based digital signage software mean companies of all budgets have he ability to run a screen network.
SaaS means opportunities for SMBs
Current digital signage service offerings in the marketplace are mostly targeted at the large enterprise with a significant number of locations or target sites, typically over 100. Also, the typical large enterprise opts for an end-to-end managed digital signage service, where it selects the digital signage hardware/software components that it needs.
There are a few SMB customers, who also choose an à la carte option for convenience and just drop-in required digital signage components into their existing network infrastructure. Some SMBs opt to save on overall digital signage service implementation costs by buying the relevant digital signage components, but choosing to manage the digital signage service in-house.
However, by using a Software-as-a-Service (SaaS) model, digital signage service can be positioned to appeal to a larger untapped SMB market segment. Typical SMBs have fewer than 50 digital signage sites or screens. These SMBs would much rather prefer the cost-efficiencies afforded by a hosted digital signage service, wherein the minimum requirement is for them to have an existing broadband connection to the Internet.
In this increasingly popular SaaS model, a low-end SMB does not even have to commit to buying any computer hardware or software upfront. With a simple broadband Internet connection, an SMB can access digital signage applications as a Web service for a small monthly fee. Also, using some sort of a barter plan, the SMB can independently negotiate for advertising and/or programming space on third party LCD screens within its community. For a more tech-savvy SMB that already owns LCD screens, a more sophisticated Application Service Provider (ASP) version of the hosted digital signage service can provide additional content management and distribution options.
By making these increasingly popular digital signage solutions more affordable, the SaaS business model can provide a unique competitive advantage to the 4.8 million broadband-enabled SMBs.
The question then becomes what is an affordable monthly fee to a typical SMB? A cost-benefit analysis targeted at specific verticals within the SMB segment has shown that there are certain verticals which are more amenable to the value provided by a hosted digital signage service. These broader categories that are favorably inclined to a hosted digital signage service include automotive franchises, beauty salons, convenience stores, healthcare establishments, hospitality services and legal offices.
Broadband means digital signage for everyone
Per government estimates, there are more than six million small-to-medium businesses (SMBs) in the United States. AMI-Partners' research has shown that U.S. SMBs possessed a strong Internet and high-speed network infrastructure, making this group a huge untapped market opportunity for digital signage.
Among medium businesses (those with 100 to 999 employees), the penetration rate of broadband Internet access is nearly 95 percent. Even among small businesses, 62 percent of companies who owned at least one PC are using broadband Internet, with an 84 percent adoption rate predicted for 2009. It is estimated that there is a total addressable market of approximately 4.8 million broadband-enabled SMBs.
A more affordable medium for SMBs
Fortunately for the SMB market, the costs involved with operating digital signage are dropping, particularly those paid up-front. The cost of flat panel displays – a major cost component in any overall digital service offering – continues to tumble. The SaaS model means software is paid for over time rather than a one-time fee for a license.
Large corporations that own or lease their private networks to run mission-critical applications have a harder time cost-justifying upfront capital expenditures related to digital signage. Given the overall size of the market, which Cap Ventures estimates at 2.7 million digital signage sites, the urgent need is to reduce or eliminate the initial capital investment costs that make it a non-starter. With a falling capital investment involved, the SMB segment is more likely to take interest in digital signage.
In these tough economic times, SMBs that take these incremental steps can help catapult the digital signage business into a period of rapid growth over the next several years.
Jack Nargundkar is director of marketing for TeleCommunication Systems Inc.'s Government Solutions Group, based in Annapolis, Md.
