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Digital signage sector still looking for Daddy Warbucks
The digital signage industry is suffering from a "chicken and egg" problem that has kept it from cementing a leading position in the mind of venture capitalists.
Websites and companies like Twitter, Foursquare, Groupon, Gowalla, Demand Media, and Chatroulette are getting the lion's share of attention these days from media and technology investors. Terms like location-based services, augmented reality, image recognition, group buying, social shopping and automated content creation fill the headlines of startup-focused blogs around the world.
The frenzy around the mobile sector is growing louder by the day, enhanced by the launch of the fourth generation iPhone and a bevy of new Android devices coming down the pipeline.
But in the world of startups and venture capital — as captured in blogs like Techcrunch, ReadWriteWeb, VentureBeat and the Business Insider — digital signage and digital out-of-home (DOOH) media are getting little attention. From time to time, maybe, a startup-focused journalist might pick up a press release about new display technology or the expansion of a digital place-based media network.
Application developers are enamored with check-ins and giving consumers badges based upon specific behavior within a geo-targeted landscape. Foursquare is forming major media partnerships, including relationships with the Wall Street Journal and CSPAN. News surrounding the company's next funding round has catapulted Foursquare into mainstream media territory. Many are calling the location-based mobile network the next Twitter. Groupon has brought new life to the world of group buying. Leveraging exclusive local deals and the social sharing of time-sensitive discounts, Groupon has experienced explosive growth over the last year.
And still the digital signage industry has yet to cement a leading position in the mind of venture capitalists. Digital signage suffers from the "chicken and egg" problem that has befallen many other industries with so much promise. Without a sizeable footprint, a digital signage network cannot scale. It can't garner the attention of serious advertisers or investors. Networks that grow from the minds of entrepreneurs who act more like 19th century speculators than true businessmen impact the entire industry's ability to garner funding. While the industry's growth projections are very promising, the ad-funded digital signage model has yet to be proven.
Despite countless digital out-of-home media network failures, there are still many things to be optimistic about. For those inside and outside of the digital signage industry, it's hard to deny the bright future that lies ahead. The digital writing is so clearly on the wall. Advancements in digital display technology make for an ideal foundation to push digital signage forward. The relationship between location-based mobile services and digital out-of-home media represents a perfect marriage of complementary technologies.
As companies are just beginning to prove, via the delivery of real-time content and social streams that leverage location-based data, digital displays can act as megaphones that spread mobile interactions to a larger audience. Digital signage is positioned to benefit from the mobile industry's movement to 4G networks which promise significant increases in connectivity speeds and bandwidth. With the enhancement in mobile network infrastructure, not only will more consumers adopt smart phones, but faster mobile broadband connection speeds bring visions of untethered digital signage networks to the forefront of people's minds. Screens are getting thinner. Content is getting smarter. Mobile interactions are being tagged with greater meta-data, which provides a treasure trove of information that DS networks can mine to enhance the viewer experience.
While DOOH may not yet have the buzz or cache of some of the newer technology applications, venture capital and private equity firms are looking at digital signage. While it may not be to the same degree as their interest in markets like social media and location-based mobile, I contend that digital signage and digital out-of-home media will soon rise to such a position.
In a recent conversation with Gadi Tirosh, a General Partner at venture capital firm JVP, he captured the barriers and opportunities facing digital signage companies seeking outside investment. As embodied in his organization's recent investment in Minicom, he sees enormous potential in partnering with market-leading technology companies that occupy niches in the industry.
Though he is optimistic about the long-term growth prospects of advertising-funded digital signage networks, he argues that the model still needs to be proven. Tirosh says that significant capital will not flow to DOOH media companies until they can show that advertising revenue will outweigh the extensive capital required to support their networks. It's in continued technology innovation that Tirosh believes the ad-funded digital signage model will elevate beyond its operational barriers.
"Advancements in technology will play a major role in proving the value of ad-based networks," said Gadi Tirosh.
He articulated that future technology will reduce the capital required to launch and operate DOOH media networks. In reducing the capital requirements that stifle the growth possibilities of many ad-funded networks, companies will grow large enough to attain interest from national advertisers.
Tirosh will be speaking at the Strategy Institute's upcoming Digital Signage Investor Conference in October, which aims to help illuminate the many business opportunities that exist across the sector. He'll be joined by a long list of representatives from the investor, media and DOOH sectors.
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