The economic recession has been upon us for a while now, and there hasn’t been an industry unaffected by the drop in consumer spending. However, some in the digital signage sector say they are enthusiastic about the coming year because of new windows of opportunity opening up as the economy goes down.
Lyle Bunn, a digital signage consultant, believes that the digital signage industry is better equipped to handle this recession than down periods in the past, and if anything the industry will continue to grow.
“There is a much stronger level of integration of digital signage than there was at that time,” Bunn said. “We have a lot more knowledge now; people are thinking through deployments, there are better relationships with advertisers. There has been strong progress in this industry.”
Four areas of growth
In November 2008, Bill Gerba, CEO of Wirespring, a digital signage solutions provider, identified several places to find digital signage growth in a down economy during a presentation at the Building Your Digital Signage Business Strategy Institute event and wrote them up in his Wirespring Blog.
Small networks
There is a lot of growth in the number of networks with five to 20 screens, particularly those located in corporate communications, education and healthcare sectors. Brad Gleeson, managing partner, TargetPath LLC consultancy, said that many of these networks tend to be regional in nature and generally are earn value based upon something other than advertising, mainly because they are too small to support any kind of ongoing ad-based business model.
“Value-added resellers like small networks because they have a lot of clients that fit that profile,” Bill Gerba said. “Investors like them because they can fully fund them out of pocket. And entrepreneurs like them because they're manageable with a small team, for less money.”
“Eighty percent of the market is the low-hanging fruit, like these small networks in local hospitals, small banks, universities or small businesses,” said Ryan Cahoy, managing director for Rise Vision, a provider of digital signage software. “They’re still funded and they’re still happening.”
New screens on existing properties
With fewer capital dollars flowing down the pipeline, many deployers are looking for ways to re-purpose assets they already have for messaging. This could mean adding digital signage screens any existing hardware such as ATMs or kiosks.
“This makes sense, since ATMs and kiosks require similar infrastructure to digital signs such as power, Internet connectivity, etc.,” Gerba said.
But Gleeson says network operators should be cautious when exploring this point, as they can sometimes be stuck with a financial burden.
“The challenge to these projects is that the network operator is typically expected to cover the capital expense of the screens and hardware, sell the advertising and then pay a revenue share to the ATM or kiosk owner,” Gleeson said. “My advice would be to proceed cautiously and focus on opportunities and locations with clear near-term ROI or where you are able to share the risk with the property owner in some way.”
Non-advertising networks
Only a small percentage of digital signage networks operate on an ad revenue model, and PQ Media indicated last year that non-ad networks are continuing to grow faster than ad-based networks.
“A lot of people who went out last year and put up small ad networks are going to feel the pinch this year from advertisers cutting back,” Cahoy said.
Operating digital signage that doesn’t rely on ad revenue allows operators to spend time on critical messaging rather than worrying about filling ad space each month, Gerba said. This works out well particularly for small networks without access to large national advertisers.
“Right now, big brands aren’t interested in digital signage unless there is critical mass, and that could be 1,000 plus screens,” Cahoy said.
Non-retail networks
The holiday season left just about every retailer (except Wal-Mart) with a bad taste in its mouth, meaning that capital investments on new in-store digital signage in 2009 don’t look as promising as they did in 2008.
“I believe specialized, vertical-market applications are the best chance for the smaller operators and integrators to generate new business in this economy,” Gleeson said.
Corporate communications, healthcare and education are leading the charge in digital signage implementations from vertical markets other than retail.
“In those verticals, it’s not about increasing sales as much as it is increasing efficiency,” Cahoy said. “As companies cut back on personnel, paper and resources, they have to find new ways to communicate. Digital signage is a pretty economical medium.”
*cover image courtesy of advanced.Method.
