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Digital signage: Win the competition or die!

January 20, 2014 by Steven Gurley

The one thing that must be remembered about digital signage is that it is a consumer engagement technology. It is, therefore, in competition with other consumer engagement technologies, which means that in order to thrive it must win the competition. The failure of digital signage to prevail in capturing consumer eyeballs, buyer budget dollars and/or marketer mind-share means that it has lost the competition. If digital signage industry loses the competition, many digital signage providers will go out of business.

Last November, I wrote an article entitled "Ad-Funded Digital Signage: Is There A Future In It? Circa 2013" and companion blog post entitled "Can ad-funded digital signage survive the mobile onslaught?" In both writings, I illustrated how mobile's rapid growth as a consumer engagement technology has been attracting marketers/brands/agencies/ad-buyers, and their money, at rates that have, in less than three years, grown to nearly 10 times that of digital signage.

For several years now I've been sounding the call that the digital signage industry must recognize that mobile is a competing consumer engagement technology, and that it is growing stronger and stronger with each passing year. Rarely, however, do I hear anyone in the industry express an urgent concern that mobile is a competitive technology or threat. Perhaps they are just not giving enough thought to it, but they should — and the following paragraphs describe why:

Thinking about mobile

As we think about mobile as a competitor to digital signage, it is important to understand that last year marked a significant milestone for the mobile industry, a tipping point of sorts. U.S. smartphone utilization, as a percent of all cellphone users, surpassed 50 percent. In fact, 2013 ended with U.S. smartphone penetration approaching nearly 65 percent. With the smartphone now being used by a solid majority of consumers, the pace and scale of mobile innovation will escalate from its already meteoric pace to that of being an unstoppable force.

In terms of the pace and scale of mobile growth, in the five years since the launch of the third era of mobile in 2008, which was spawned by Apple's release of a new mobile ecosystem, mobile innovation has skyrocketed. Nearly 1 million mobile applications have been developed, over 100 billion applications have been downloaded, the wireless purchase of digital goods via mobile has increased more than 3,000 percent, the revenues from mobile advertising have grown from $280 million to $9.6 billion and thousands of companies have been formed or repositioned to create new and often extremely revolutionary mobile-enabled solutions.

It is interesting to note that the market size of the wireless and mobile industry now exceeds $1.2 trillion. It is also interesting to note that the pace of mobile change is so rapid that the U.S. mobile advertising forecast that I included my November "Ad-funded Digital Signage ... Circa 2013" paper has already been increased by more than 30 percent.

The provider of the statistics that I used in my "Ad-funded" paper, eMarketer, is now predicting that mobile advertising will reach $9.6 billion in 2013, versus the $7.3 billion that they had forecast mid-2013. They are also predicting that mobile advertising will exceed $36 billion by 2017, versus the $27 billion that they had forecast earlier.

For those within the digital signage industry that do not recognize the preceding as a competitive threat ... well ... it is. Have you ever wondered how many digital signage deals may have been lost or not even brought to the table because the budget dollars were redirected to higher-visibility, higher-impact, more quantifiable mobile projects? If you haven't, you should, because more and more money will be directed toward mobile as groundbreaking mobile innovations come to market.

Who will be affected?

As you consider mobile's competitive impact on digital signage, it is important to note that mobile will not affect all sectors of the digital signage industry equally. In fact, some sectors will completely escape the competitive threat represented by the mobile juggernaut. The graphic at the bottom of this article illustrates those digital signage sectors (or types) that will be affected by mobile and those that will not.

In order to better understand the graphic, the following describes the key sections:

• Digital Signage Types: This section illustrates the five major digital signage sectors/types. Most readers are probably familiar with the first three. The fourth is a sector/type that most do not often consider since it focuses exclusively on the back-office use of digital signage. The fifth is a sector/type that is generally tied to large multichannel implementations that are usually anchored by high-impact video walls that are accompanied by one or more complementary components such as smartphones, tablets, kiosks, touchscreens, motion detectors, etc.
• Mobile Relevance: This section defines the likelihood that the use of mobile is relevant to the success of a given sector/type. A "LOW" designation means that it is likely that the use or integration of mobile will have little to no impact on the success of the corresponding digital signage sector/type. For example, an employee communication implementation (Informational Networks) is very likely to succeed whether mobile is used or not. A "HIGH" designation such as in the Operational Performance implementation (Reporting Networks) indicates that it is highly dependent on the integration of mobile for its competitive success. A "HIGH" designation means that a digital signage sector/type cannot effectively compete unless mobile is included as a part of the signage solution.
• Competitive Threat: This section defines the likelihood that the innovations occurring within the mobile sector are likely to displace a given digital signage sector/type. A "LOW" designation means that the corresponding signage sector/type stands little to no threat of being displaced by mobile. A "HIGH" classification means that the corresponding signage sector/type stands to be greatly diminished or replaced by emerging mobile innovations.
• Comments: This section represents the key points regarding mobile's relevance or threat to a given classification.

What's next?

In the coming weeks, I will be publishing a series of papers about key mobile innovations that will threaten the merchandising and ad-funded sectors of digital signage. These papers will be going into detail about the trends as well as discussing strategies for negating the competitive threat that each trend represents.

The first paper will be published later this month. It will address mobile marketing's impact on digital signage as embodied by mobile wallets. Shoot me an email at slgurley@pyrim.com, and I'll immediately send you a pre-release copy of the paper.

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