DSE: Digital Signage Expo

End User/Network Operator 

End users and network operators comprised about one-fourth of the respondents to the DSE Q4 2009 Business Barometer, with a broad cross-section included (Figure 11). As in previous surveys, the major sectors represented were Retail, Restaurant, Arts,/Entertainment/Recreation and Education (Figure 12).





Overall, the percentage of end users/network operators indicating that they feel “very positive” about the future of the industry rose 6 percent, from 59 percent in Q3 2009 to 65 percent in Q4 (Figure 13). By comparison, those feeling “better” about general business conditions six months from now remained unchanged at 54 percent, while those feeling the economy will be “about the same” during this period declined 8 percentage points to 36 percent (Figure 14). Another 7 percent thought conditions would worsen, up 5 percent from Q3.





The optimism reflected in the Q4 2009 responses came from all quarters and reflected numerous viewpoints, including comments that the cost of hardware is going down, the opportunity for advertising is going up and the industry is consolidating.

“DOOH is maturing in the eyes of media buyers and advertisers, and that is what will drive the growth of the industry,” says Alexander Bonnet, COO, ZipCast, Houston. “Maturity is coming in part from the presence of serious and more mature players offering more robust and more widely distributed DOOH networks, making it easier to buy and leverage its expanded presence.”

While most respondents during 2009 blamed the economy for impeding digital signage industry growth, Matthew Stoudt, CEO, Outcast Media International Inc., Santa Monica, Calif., credits the recession with accelerating the industry’s maturation. “The 2009 recession was the best thing that could have happened to DOOH,” he says. “It accelerated long-forming media trends and hastened the switch from traditional to alternative media. At the same time, the recession caused weak/poor DOOH companies to shutter or get acquired, and it eliminated the hyper competition that stemmed from cheap capital in the marketplace.”

“2010 and beyond are going to be very good days for DOOH,” Stoudt adds.

Healthcare has been one of the bright spots in an otherwise bleak economy and has been cited by content and technology providers as a top growth sector throughout 2009 (Figure 39). Whether the business is pet care or people care, network operators in this field not only express a positive outlook but also point out the effectiveness of the medium.

“I think we've ridden out the storm as far as the economics go,” says Dan Hong, VP technology and content, emebaVet LLC, Sonora, Calif. “Q4 of ’09 was a serious rebound for us. The first half of ’09 made me think the industry might be on its downturn, but I think people are settling in, and advertisers are not as gun shy to try our new toy. The fact is people who view our information make buying choices with it.”

“Since we're in the healthcare industry, there is no decline in the level of interest held by our subscribers,” adds Shannon Kitson, marketing coordinator, CARE Media Holdings Corp, Tampa, Fla. “We provide a win-win for advertisers — a captive audience with an emotional connection to their brand. Since many advertisers are looking at OOH versus traditional media, we've partnered with the best in the industry to meet the highest standards of this medium.”

Compared to the Q3 2009 respondents, the Q4 respondents represented organizations having significantly larger digital signage deployments, with 19 percent indicating that they operated more than 1,000 screens, compared to only 9 percent in Q3 (Figure 15). The average number of screens per venue was 279, the second highest average reported during 2009. As noted in the DSE Q3 Business Barometer poll, where the average number of screens per reporting venue was 224, the difference in company size needs to be taken into consideration when comparing the results from one quarter to the next.



The percentages of Q4 respondents planning digital signage deployments for the next 12 months were down 5 percent, respectively, for both those planning first-time installations and those planning add-ons, replacements and upgrades (Figure 16). Though fewer respondents indicated they planned deployments, those who did planned to purchase an average of 298 displays, up 5 percent from the previous quarter, though still down from Q1 and Q2 (Figure 17).





The average planned dollar investment in digital signage products and services also declined from quarter to quarter, down 4 percent (Figure 18) to about $900,000 per company, the lowest average recorded during the year. This decline could reflect economic uncertainty, as reflected in this group’s general business outlook and in the high percentage of respondents (19 percent) who chose to answer this question by checking the category marked “uncertain.”



As the planned investment figures comprise a range of products and services (Figure 19), they also may reflect the decreasing cost of deployment noted in the Q3 report. According to the WireSpring “2009 Digital Signage Pricing Study,” the cost of implementing a 100-screen network has dropped nearly 23 percent since 2008 and nearly 50 percent since 2004. That translates into a cost per sign of $4,355 in 2009 versus $8,500 in 2004, according to the study.



While the percentages of respondents planning to invest in hardware and installation remains relatively unchanged from Q3 to Q4, significantly higher percentages of respondents plan to invest in software (72 percent vs. 61 percent), content (66 percent vs. 61 percent), maintenance (59 percent vs. 53 percent) and research (40 percent vs. 33 percent).

The increase in research investment is notable in that the Out-of-Home Video Advertising Bureau’s (OVAB) audience metrics guidelines, published less than a year and a half ago, appear to have taken root as the industry standard, with an increasing number of companies conducting studies based on the recommended viewership measurements.

Only 63 percent of Q4 2009 respondents reported that their digital signage network carried advertising (Figure 20), but 78 percent indicated that their Q4 ad revenues were either “higher” or “about the same” as Q3 (Figure 21), a difference of 5 percentage points over the Q2-Q3 figure. For both Q3 and Q4, the percentage of respondents reporting that their ad revenues were “higher” remained steady at 46 and 47 percent, respectively.





Looking ahead to Q1 2010, a noteworthy 10 percent more respondents forecast “higher” ad revenues than did in Q3 2009, while only 3 percent fewer respondents forecast their ad revenues would remain “about the same” (Figure 22a). Only 7 percent expected their revenue would be lower. We’ll learn next quarter how well the trend line continues to hold (Figure 22b).





Speaking of the improving advertising picture in retail, which has been hard hit during the recession as consumers have tightened their purse strings, David Marmour, president & CEO, InStore Vision, Newark, N.J., says, “We understand the market landscape better. The economy is improving and brands are spending more money with digital OOH.”

In addition to retail, other sectors also report a positive outlook. “Our network of screens is along the Las Vegas Strip in bus shelters,” says Gary Young, president & CEO, Outdoor Promotions LLC, Las Vegas. “Because of the digital network of screens, we are seeing interest from agencies and clients that have not used the bus shelters before. So as a result, we see our business up in 2010 directly because of digital.”
Like other respondents, Jerry Hall, president & CEO, TargetCast Networks Inc., San Ramon , Calif., notes the maturation of the industry and its willingness to partner with advertising agencies, but he also expresses the concern that many agencies are slow to embrace change.

“The category has developed a collective presence, initial footprint, and shown a willingness to partner with the advertising industry to provide custom creative and ROI research,” he says. “It is time for the clients and their agencies to release real funds for the top tier networks and get serious about the category in 2010 or they will be sadly out-of-step with the emerging on-the-go media business.”

While many digital signage network owners and operators are focused on a return on investment based on advertising revenues, there’s a countervailing viewpoint in retail in particular that sales lift rather than ad revenue is the business model that holds more promise.

“I've always been (and continue to be) less than fully-excited by the advertising revenue model,” says an anonymous retailer in the DSE 2009 Q4 Business Barometer comment section. “As a retailer, we've made this available to our suppliers (and certain non-endemic advertisers). And it's been profitable for us. And I hope a good investment for our advertisers.

“But I anticipate a coming shift toward advertisers demanding ROI measures based on incremental sales lift (rather than traditional reach, frequency & recall measures). It will be interesting to watch Walmart's supplier community to observe this [shift]. As a retailer, generating measurable sales lift across a large number of stores will always be more exciting (and profitable) than generating advertising revenue.”