One Size Does Not Fit All
Increasingly, parties involved in the digital signage industry -- from network providers to content distributors to retailers installing the systems -- are seeking a more direct impact from these platforms in terms of generating measurable revenue from advertising for the end user. While the opportunity waits for the company that figures out how to capitalize, the approach varies. The one point of agreement is that no single model fits everyone and no single business model "represents a home-run case."
"At the early stage of the digital signage life cycle, some retailers are thinking, 'Put me up some screens and I will sell more,'" says Joe Amor, vice president and general manager of Microspace Communications Corp., a provider of point-to-multipoint satellite services. "Those case studies have been unsuccessful. Right now, there is no one-size-fits all. ... Microspace works with many hardware and software providers to custom design exactly what enterprise clients are seeking from a digital signage platform. Does the method vary depending on type of business and type of system used? Certainly, screen size, placement, content and dwell times directly influence the final product. Each system is different based on clients' expectations."
OOH Vision has made its mark providing systems to restaurants and casual dining environments, which provide the advertisers using the network a captive audience that may no longer exist in front of the home television. OOH Vision, in conjunction with Helius and Microspace, has installed a proprietary digital signage network in more than 100 diners in New York, New Jersey and Connecticut. The network displays a variety of advertisements, video content and text crawlers on strategically placed plasma screen TVs. OOH Vision owns and operates the network and sells the ads.
But there are many other retail industries -- financial institutions, home improvement companies, automotive firms -- that have yet to embrace digital signage to its full extent, says Presser. Educating customers on the benefits that can be derived from digital signage systems will be key to expanding the market and capturing advertising revenue. "There is still a tremendous amount of education that needs to take place," he adds. "That said, it's been a monumental leap from two years ago to now. Traditionally, we are finding the adapters are the local and regional clients, and to be more specific, a lot of the larger contracts are direct to client."
Cook defines three basic business models in the industry. The first, designed to build brand equity, can be found in businesses such as Nike stores that are devoted to reinforcing the Nike products in the store, as well as reinforce customer loyalty to the brand. Another network business model may be devoted to changing the buying behavior of a customer already in a store. This model, which some studies suggest has been successful in driving consumers toward a particular brand of product, is used in retail stores such as Target or Wal-Mart. The third network business model is used to display an in-store channel intended to create revenue by selling the advertising space to third parties who have merchandise in the store. This can also be combined with the second model, Cook says.
Hughes has found success providing a network to Tesco, the largest grocery store in the United Kingdom with nearly 2,500 stores. The company's Tesco TV, which uses Hughes' Direcway satellite broadband platform, provides advertising designed to guide customers to in-store sales and specials. "We have basically implemented the whole of their digital signage infrastructure throughout the grocery chain," Cook says. "We chose the screens, put them in service and operate the whole thing. They manage the content."
The strength of the digital signage business is that companies such as Hughes can tailor the network to the individual requirements of the customer, Cook says. "The jury is out on which one is the most effective," Cook says. "... Of all the ones that are available, the in-store opportunity is the most appealing, because you know that if somebody already is in the store they are looking to buy goods of the class you are trying to sell. They can be more efficient in targeting their particular audience, creating a lot of interest from that point of view.
Tippets also sees three segments driving market growth, though he defines them somewhat differently. Externally controlled/ad revenue supported networks will be "the biggest drivers of digital signage in the near term and will be for companies who have access to capital and have experience selling advertising," he says. "... This model is the one that receives the least resistance to implementation and if the company truly has ad sales experience and capability, it will succeed."
The other two segments -- internally controlled/ad revenue supported networks and internally controlled marketing/branding supported networks -- will develop as well. Their growth may be slower because they require more capital expenditures by customers without providing an easily defined returned on investment. "Once the externally controlled/ad revenue supported model is successful and people can point to ad revenue supporting the network infrastructure and actually turn a profit, then large retail and other chains will be willing to spend the capital to put in the network," Tippets says. "But they will still want to charge someone else to make back the capital expenditure dollars."
As companies seek to tap into these dollars via various systems, there will be winners and losers, says Scott Calder, CEO of Mainstream Data Inc. "As is the case with most nascent businesses, entrepreneurs will try a variety of approaches and only a few will be economically viable," he adds. "I think we are still too early to know exactly which formula will be successful. ... My bet is on the in-store point-of-purchase model" placing the advertising in the store.
"Clearly there needs to be a tight correlation between the venue -- what is the consumer target doing and thinking about when you present the digital signage promotion -- and the advertising message," Calder says. "I think most digital signage experiments in the past have focused on pounding the same message through a new channel, and that doesn't work. The right answer is a message that represents a favorable value proposition to the target, whether that value is in the form of information or entertainment. We have become pretty adept at tuning out blatant advertising messages that don't represent value to us."
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