Article
The maturing of digital signage
Is digital signage finally "crossing the chasm" of early adopters and pioneers into the mainstream?
August 17, 2009 by Ajay Chowdhury
Ajay Chowdhury is the CEO of EnQii.
There has been a great deal of talk over recent years that the digital signage industry is finally "crossing the chasm" of early adopters and pioneers into the mainstream. We believe that this process is now underway and that the growth in the industry that has often been predicted is materializing.
We believe that this is based around five key factors:
a) Clearer understanding of the benefits of digital signage by sector.
When any new medium arises, it tends to use paradigms from old media to launch the new medium. For example, television borrowed from theatre and the Internet borrowed from magazines. This continues for a while until the new medium begins to create its own vocabulary and changes things in line with the way consumers use the new medium.
Similarly the DOOH space initially used the paradigms of billboards and television when it first launched. While these paradigms may be appropriate in certain situations, it is only now beginning to re-invent itself as its own medium meeting the specific needs of consumers in a place-based way.
There is now a much clearer focus on understanding the role and objectives of the network it is an advertising, merchandising and information network with clearer metrics on measuring the ROI.
This also spills through into understanding how the signage network will work in different environments and how the customer should be addressed. Advertising has classically gone through four phases: interruption, entertainment, engagement and dialogue. In the first phase, the ad interrupts what the consumer is doing and often forces them to watch the ad. This was the classical television advertising model of the seventies where consumers had no choice but to view the ad.
The eighties marked the start of entertaining advertising where the consumer wanted to see the ad and received a payoff from it. The Internet moved things along in the nineties towards an engagement model where the consumer focused on ads that interested them and they became more engaged with the products. Finally in the last few years brands have realized that advertising is about a dialogue with the consumer. Mobile and social networking technologies facilitate this ongoing dialogue.
Digital signage can also use these models effectively in different environments. For instance, in environments with a fast moving audience (outdoor, transport hubs, malls), the interrupt model still dominates the out of home space. In areas with a higher dwell time (cinemas, beauty salons), you start seeing more of an entertainment and engagement model while in other specific areas of healthcare, some retail environments and food services you can now move towards an engagement and dialogue model.
The dialogue model is being used effectively by some digital signage providers. For example, EnQii partner with Ping Mobile, who link the digital signage software to their mobile marketing infrastructure. This allows viewers of digital signage ads to respond and interact using their cellular or mobile handheld technology.
This type of strategic analysis of the networks allows the operator to ensure the best content is delivered in the most appropriate fashion to get the desired result.
b) Maturing of the technology and content
Another area that is driving the industry forward is the maturing technology. Historically, the industry has moved from unconnected DVD based networks to simple connected networks to more complex networks with sophisticated advertising scheduling.
Going forward, it will be important that the network owner has technology that utilizes the basics – it needs to be scalable, reliable and secure. But it also needs to be an open platform that allows third party and internally developed applications to link to it to provide cost and revenue benefits. EnQii, for example, has always been a believer in open API's (Application Program Interfaces), which allows customers to create front ends that link to the software so that they can link into their own workflows. This also allows linkages to "best of breed" systems such as ordering systems for digital menu boards, wayfinding, ePOS and queuing systems on an as needed basis.
Finally, the technology needs to be easy to use, but complex enough to perform all the key tasks needed. This is no mean feat, as the software has to be used by marketing professionals as well as systems administrators. The wrong design fill frustrates both types of users, whereas the right design will ensure neither of them notice the complexity.
The content has also matured. Initially networks often put up TV or stills that they had available. However, current networks such as Footlocker, Care Media, Harley Davidson, and the WHEN network are realizing that ultimately what matters is that what is seen on the screen and a deep understanding of customer behavior will allow the networks to get the best results.
c) ‘Serious' companies beginning to invest in signage networks
As is typical for companies "crossing the chasm", network operators have gone from an entrepreneur with a dream and some family funding to large multinational companies beginning to invest as well as financial companies putting serious investment behind networks.
This is important because a lot of early failures in the industry's experimental years have been from entrepreneurs who secured a good estate and some financing, but they made the mistake of assuming that they could build advertising revenues as they rolled their network out. Typically ad revenues come in on a stepped basis over time. Ideally, networks need a certain critical mass which is dependent on the advertising strategy (national, regional, local) and the desirability of the demographic before receiving any revenues. Hence, there is a need for adequate funding to bridge the gap to that critical mass as opposed to assuming ad revenues will flow as soon as just a few locations are installed.
In the last six months we have seen companies like McDonald's and well-financed companies like Care Media and Zoom all invest in the space. These rollouts bode well for the industry, especially in recessionary times. The food services sector, healthcare, hair salons and a few others continue to do well in a soft economy as the network operators realize the importance of staying close to the consumer and influencing their purchases when dollars are tight.
Finally, the ad agencies have also started to set up dedicated divisions for digital out of home with Kinetic and Posterscope taking the lead in this area.
d) ‘Serious' suppliers providing a full service
The flip side of serious network owners is that of serious suppliers. Historically the digital signage industry was a bit of a cottage industry. Over recent years this has changed and EnQii was set up specifically to create a leadership position in the space. The focus moved from hardware to communications – having a deep understanding of what signage works and what does not and how to get the best return. Operating as a global player and being well funded became the focus in order to be able to invest in the best technology for the customers. It became about creating the best partnerships and offering a full service solution to large networks. The idea is to let the networks do what they do best – monetizing their customer by offering the best service and content while allowing the service provider to do the rest and minimize the risk of the venture.
e) The view from China
Finally, the growth of DOOH in the Chinese market has proved that there is a real business there. Focus Media is generating close to $400m a year in revenues and has bypassed many of the agencies to go directly to advertisers for a large portion of this money. AirMedia had revenues of $119m and Vision had revenues of over $100m. While some dynamics in China are different – for instance, there is a higher propensity for out of home consumption – it proves that there is real money to be made in these businesses.
In summary, optimism remains about the growth of the DOOH sector and the belief that it will continue to accelerate as all involved learn more about the medium and how the consumer interacts with it.
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