The new age of advertising

Dynamic digital signage has become known as the next killer application for the new generation of sign technology in the advertising industry. A digital signage system, usually composed of a server or PC, a monitor or TV and software, is capable of delivering full-screen, full-color content to multiple locations.

Costs have gone down significantly over the past two years, making it possible for digital signage to grow in the mainstream marketplace. This is evidenced by the extensive usage of digital signage at airports, museums and shopping centers. The growth rate is projected to increase significantly in the next few years as the technology matures.

Furthermore, digital signage is no longer the exclusive domain of national retailers. Independent storeowners can access new opportunities because available today are advanced platforms that overcome price and implementation barriers.

So, digital signage is here. What's in it for you?

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One advantage of dynamic digital signage over printed materials and static signs is the ability to change messages in real time and enable just-in-time marketing. Another advantage is the unlimited content that can be rotated to display locations, which is particularly valuable when space is at a premium.

While national retailers such as Macy's, The Gap and Foot Locker see the potential of leveraging digital signage technology to increase sales, a twist on the model has been to use the screens to broadcast ads from other companies. As an example, McDonald's is placing ads on Foot Locker's in-store video network.

Wal-Mart is upgrading its vast in-store television network at its 2,600 locations to promote products sold within its stores. According to Wal-Mart, its TVs capture some 130 million viewers every four weeks, making it the fifth largest television network in the U.S. after NBC, CBS, ABC and Fox. Advertisers are willing to pay $137,000 to $292,000 to show a single commercial for a four-week period, depending on the length of the ad and the number of stores where it is shown. That level of support says that when it comes to delivering the right message at the right time, digital display at the point of purchase is a winner.

Getting into the swim

Many business owners associate digital signage with a big investment in hardware, software and time. But there are ways around those impediments.

Value added resellers (VARs), such as sign shops and hardware providers, can offer services to such businesses. Hardware installation, content creation and content management are ways VARs can help.

Also, with the latest software technology, any PC and monitor can be turned into an electronic display system. Application service providers (ASPs) deliver software over the Internet as a subscription service, and the model offers many distinct advantages:

• Small- to medium-sized business can access sophisticated full-featured software with low initial costs, no installation, no maintenance and no manual upgrades.
• The system uses simple hardware and can be accessed from any PC connected to the Internet, making ad posting and content management for multiple stores feasible.
• System reliability is much higher.
• Businesses use the software by paying a low monthly fee rather than spending thousands of dollars in building their own systems. Depending on usage, the fee could be as low as $100 a month.
• The entire subscription fee can be written off from taxes, whereas the typical software investment entails extended depreciation. The cost of technology ownership and related resources can then be reverted to growing the core business.

Content generation and management

For digital signage to become a mainstream product, the software must be tailored to non-technical people and should not have to rely on outside specialists to create and maintain the content. A few key issues associated with using signage software include: content creation, content management and content distribution. The ASP model, along with innovative applications, can sufficiently reduce these barriers to open digital signage to virtually any business.

ASPs allow customers to start using the software by signing up for an account through a Web site, much like signing up for an e-mail account. Once the account is created, customers can start posting their own messages within minutes from their own PC or any remote PC. Simple and intuitive interfaces are available to let first time users grasp the concept and start using the software with minimal training.

Without the appropriate ASP, content creation generally requires someone who has knowledge in graphic design -- and those services could otherwise add significantly to a digital signage project. This can be addressed by using advanced applications for composing dynamic content automatically with the input of raw images and type-in text. It becomes easy to edit content, and changes can be updated to various display locations in seconds.

The feature is especially useful for store managers who have to monitor the selling rate of discounted items and vary the percentage discount accordingly. In addition, most ASP platforms accept graphics, movie and flash files in common formats. Users set the display schedules and locations ahead of time, and tending the content has become suddenly a simple task.

Market opportunity

So how big is the digital signage market and how does it change the landscape of the advertising industry? According to the data from CAP Ventures, total ad spending in 2003 was $149 billion. Traditional advertising channels such as TV, newspaper, radio and magazine claimed 80 percent of it, while digital signage claimed less than 1 percent. But things are changing rapidly.

Advertisers like those investing in Wal-Mart's network realize that the effectiveness of traditional media is on the wane. Consumers have become more sophisticated and are attracted to products tailored to personal needs or tastes. Broadcasting delivers an ever smaller percentage of the audience that may relate to the advertised product. Also, since ad space is limited, placement is expensive and benefits more products that are very commoditized or nationally branded. Finally, ad-zapping products such as TiVo allow viewers to skip commercials, and channel-surfing has long been a favorite pastime during breaks.

As a result, ad buyers are turning to avenues that bring them better results with lower costs. They realize that decisions can be influenced more effectively at the point of purchase than at any other place in the consumer process. Advertisers can profile their audience ahead of time and push the right message at the right place.

The digital signage market will experience double-digit growth in the next few years and will become a major channel with size comparable to traditional media. With Wal-Mart getting into the full digital signage swing, non-believers should take a second look now at this potential market and prepare to engage.

The writers are with ADurance Inc., a software company addressing the digital signage market. The company works with local businesses to provide attractive total digital signage solutions to their customers at low cost.

This article appeared in theC-store Self-Service Executive Summary, Winter 2005.