22 million digital signs by 2015
Getting a handle on the real size of the digital signage (DS) industry is a challenge. Most analysts focus on specific geographic areas or niche sectors, making it hard to get comparable data on a global basis. Another complication: in most markets, 80 percent of the digital signage integrators are local companies and often span the audio/visual and IT worlds.
The sizing challenge: When Intel first tried to construct a worldwide market model for digital signage in 2009, we utilized our best estimate of 2008 actuals and assumed a 26 percent compounded annual growth rate (CAGR): this led us to estimate 8 million media players and correspondingly 16 million digital signs by 2015. I first discussed this market model at the Digital Signage Expo (DSE) in early 2010 and over the following months many analysts converged on these numbers. However, in mid-2009, we felt (and most analysts agreed) that the digital signage market would actually grow at a 38-42 percent CAGR over the next few years. But, because digital signage was a new focus at Intel and our market model is used for factory loading and revenue commits, we decided to stay with the 26 percent CAGR. The take away that was widely reported was 8 million media players and 16 million digital signs by 2015.
Fast forward to 2011: We just updated our worldwide market model for digital signage again, taking a local approach and building up to a global model. This time we made a significant effort to estimate the numbers by country and vertical sector. It wasn't surprising that 2010 actuals exceeded our previous model by some 60 percent because, indeed, the industry had been growing at about a 40 percent CAGR. Now most analysts are predicting a 35 percent CAGR going forward for the next few years.
So what is the latest prediction?
Utilizing 2010 actuals and a still conservative CAGR of 26 percent, Intel's revised model now predicts 10 million media players and a corresponding 22 million digital signs by 2015. It is clear that the digital signage market is expanding at a significant pace.
Worldwide, the top three sectors will continue to be retail, corporate and transportation, but other sectors such as healthcare and hospitality are seeing significant growth as well. The development of transportation networks, public infrastructure and new commercial buildings, particularly in developing countries such as India, China and Singapore, are all creating more opportunity to target the core audiences of corporate workers, commuters and retail shoppers.
Retail is king in most regions, with the exception of the People's Republic of China, where transportation tops the market. Corporate is big in EMEA but still follows retail. Healthcare and hospitality have seen tremendous growth in North America. All of these verticals boast a targeted audience base and high dwell times and, although we don't collect this data specifically, stable advertising CPMs. In a nutshell: digital signage continues to grow because its leading sectors are demonstrating a proven ability to deliver audiences. I don't think that's going to change.
While the audiences are clearly there for digital signage, that alone doesn't explain such strong growth rates. Here are two observations as to why the growth is so strong. These are by no means the only factors, but they are among the most important:
1.) Digital signage is proving itself in a fragmented media market. The strengths of digital signage are becoming more evident as the inherent weaknesses in more traditional media forms become more pronounced. Digital signage has demonstrated a continuing ability to reach large audiences in a targeted way at a point where it really matters: at the point of sale or, at a very minimum, when consumers can easily alter their travel plans to go to a point of sale (e.g., a pet owner watching digital signage at a vet's office). Other media — newspapers, magazines, TV — do not have the strength of place or the flexibility to deliver such targeted messages to specific audiences. Add to this, a growing sophistication in how brands want to manage the consumer experience. Brands want to deliver interactive, personalized and enjoyable experiences to end-customers wherever they are located, on whatever device they are using or seeing or interacting with. DS is a critical medium for making this happen. Additionally, a proven, experienced ecosystem of digital signage system integrators is emerging. This is critical to any technology market and digital signage is no exception. Digital signage system integrators have emerged as an engine of growth, particularly in meeting the need for turnkey solutions for the SMB market. In fact, many system integrators have doubled their revenues year over year for the last couple of years.
2.) The increased performance and cost-effectiveness of digital signage. As digital signage systems have evolved, they have inevitably become more cost effective, lowering total cost of ownership. The initial costs of planning and setting up a digital signage infrastructure have dropped, removing or at least lessening a significant barrier to growth. Today's solutions support remote manageability, energy efficiency and enough performance for advanced capabilities such as anonymous video analytics (for audience metrics and enhanced ROIs), and the ability to process and blend rich media content. Advertisers are recognizing the flexibility and cost-effectiveness digital signage can provide compared to traditional media, i.e., content can be changed remotely; customers can be targeted more accurately.
Arguably, no other marketing media can match the value proposition that digital signage delivers: the ability to reach a mass audience with such a high level of flexibility in creative, placement, cost and (with the addition of audience metrics) proven performance. As the market data are already showing, that value proposition is a winning one.
Jose Avalos Avalos is retail sector general manager for Intel Corp. in the Intelligent Systems Group, leading Intel's worldwide retail & digital signage businesses. His group is responsible for delivering Intel's Intelligent Retail & Digital Signage platforms, software and services, and initiatives fueling industry growth.