In the flat world, there are three types of monitors: LCD, plasma and obsolete.
Digital signs have surpassed the bright-idea status of many marketing gizmos "with potential." They're being utilized and monetized in stores, along highways and at airports. They're installed six at a time in sports bars. In a short time, they've gone from novelty to commodity.
According to a report by iSuppli principal analyst Sanju Khatri, approximately two million digital signs will be deployed for retail applications by 2010. In 2006, Kahtri reported about 450,000 digital signs already deployed. And that's just the retail market.
As the market sizzles, companies are rushing in with new recipes.
The hardware makers
Commercial digital signs usually are enhanced versions of the technology available to consumers. It's a commercial/consumer tech relationship similar to that of PC-based kiosks, or hardened PDAs carried by retail managers. And, as flat screens have paneled American living rooms, so too have they taken over desktops and store walls. To understand why digital signs are taking off, one must understand why all flat panel displays are taking off, because the stories coincide.
Mark Pickard knows the saga well. He's a senior product marketing manager for Samsung Electronics America. In 2006 Samsung sold 62 percent more digital signs than in 2005.
Pickard said sales jumped as prices fell 25 percent. Samsung has pumped out a pile of flat panels, enough that it's number two in market share. And the years of mass production have yielded efficiencies along the way that helped squelch prices. What's more, Pickard said the cost of broadband, necessary for generating a constant flow of content to a digital signage network, has tumbled.
The biggest other guy in the space, NEC, reported sales of 3.2 million LCD monitors in fiscal year 2006.
"One of the most important advances in the segment is reducing the cost," Pickard said. "We can build larger LCDs. We can have higher yields so that fewer panels are thrown away at the production stage. At the same time, we are looking at ways of increasing the long-term durability."
Samsung and NEC have taken on the market in different ways. Samsung, for example, makes plasma screens, but touts LCD to the digital signage space for its durability. NEC, on the other hand, sold its plasma display arm to Pioneer and focused completely on LCD displays. Competing flat-panel manufacturers LG and Philips, needing their own production efficiencies, formed a joint manufacturing company, LG.PHILIPS, which makes the LCD glass for both companies' TVs and digital signs. Put simply, LG.PHILIPS cuts big LCD glass into small LCD glass for use in monitors.
And LG.PHILIPS' sales, both to its parent companies and to external clients, are rising. It reported 2006 fourth-quarter earnings were up three percent over 2005. Ron Wirahadiraksa, LG.PHILIPS's chief financial officer, forecasted bigger production in 2007 and higher shipments for IT uses.
Don Fasick, LG director of new business development, said the economies of scale resulting from LG.PHILIPS' production help both companies compete.
"We have a yield ratio that is almost unbelievable," Fasick said. "In terms of the waste that we have from a panel, one major piece of glass, we have maybe two percent waste. It's a very small waste after we've gone through and manufactured the glass off the main piece."
Aside from production efficiencies, commercial and consumer monitors are linked by crossover sales. Nobody tracks how many businesses hang off-the-shelf flat screens for their digital signs, but a quick trip to a few sports bars indicates that the practice is fairly common.
Wayne Adamczyk, operations manager for a group of Chicago McDonald's restaurants, did exactly what Pickard and Fasick would warn against: He ordered a group of consumer-grade plasma screens for his newly rebuilt location at Archer and Rutherford. The store is open 24 hours, and the signs play continuously. But Adamczyk doesn't worry about wearing them out because, by his reasoning, when the screens go in a couple years, new ones will cost so much less that he'll have netted a savings.
"We know anecdotally there are many consumer pieces going in, particularly in hospitality areas, like bars and restaurants," Pickard said. "Consumer-grade equipment simply isn't designed to be run that many hours per day. We have more cooling fans [in commercial-grade screens]. [Consumer-grade] doesn't build in the cooling pads to be mounted sideways, whereas the commercial grade equipment does."
The solution providers
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| Although businesses may use consumer-grade screens, digital signage is more than a TV on a wall. Commercial-grade equipment is hardened for a longer lifecycle. |
Companies pay other companies like The Digital Signage Group to attack their problems with flat panels. Simon Malls, for example, wanted to leverage digital signs to drive sales. DSG installed 1,400 flat panels in 50 Simon malls, in a variety of ways: from mounting them from the ceiling in three-screen clusters to installing 126-inch video walls.
But retail digital signage, which iSuppli estimates is a $1.4 billion industry, only accounts for 13 percent of the total signage market. Jennifer Fisher, Digital Signage Group digital signage specialist, said despite the company's large retail deployments, much of their work is done inside companies who want to offer information to employees via digital sign.
Brad Gleeson, Planar vice president of business development, observes a similar trend. Gleeson himself has gone at the digital signage market from a variety of angles. He started the original national distributor of plasma screens, ActiveLight Inc., in 1998. He prides himself on his early investments in growing the industry and organizations like Point-of-Purchase Advertising International (POPAI), and has become a familiar face at trade shows and conferences world-wide. Now, working for Planar, Gleeson helps market a variety of hardware and software solutions. He sees digital signage as a good fit for addressing internal communications.
"The use of digital signage inside a business or a company for either communications for those who aren't desk workers, who don't have access to other communications media, or for call-center workers or factory-line workers, for whom a constant line of sight is critical, that is one market I think is promising," Gleeson said. "Other than that, the small- to medium-business market is really ripe for someone to come in with some really interesting approaches."
Nobody's home
Wherever digital signs reach consumers, industry insiders agree they're not reaching them on their sofas. According to Forrester Research, 95 percent of retail sales still happen in the store, which means in the store is the place to influence customers' buying decisions.
But doing that requires powerful messages. Brian Ardinger, Nanonation vice president of business development, points out that digital signage isn't like TV, in that customers don't veg out in front of digital signs like they do in their living rooms.
"How a person sees messages in a store environment is different," Ardinger said. "You can't take your TV ads and put them in a store and expect that to work in a sales environment. They must be much more action-focused."
Experts agree that even a 30-second TV spot is too lengthy for a digital sign. One of those experts is Ron Gross, CEO of DynaTek Media. The digital-sign content his company produces is filled with snap and pop: rotating products, churning scenery, flashing colors. His company's goal is to attract viewers' attentions with snappy graphics and to affect their behavior with quick, powerful messaging.
"Thirty seconds is too long for most applications," Gross said. "For example, the average person is in a convenience store for four minutes."
His company does the filming, animation, production and editing of digital signage content: the same duties that were, until recently, the soul domains of TV studios and high-dollar production companies. As for effectiveness, he claims his stores experience lifts from 70 to 350 percent. With the help of digital technology, Gross claims to have beaten down to $1.72 the cost-per-thousand of a digital sign ad.
"I can put an ad on a billboard and it costs at least $4 (per thousand)," Gross said. "And they can't buy anything while they're there."
The advertising warriors
With the allure of digital signage's more targeted audience so apparent, digital sign advertising networks are springing up around the world.
"Fragmentation of media is more evident now than ever," Khatri wrote. "The effectiveness of mass-media channels such as TV and print, in reaching their intended target audiences, is rapidly declining each year. Due to changes in TV-viewing habits, namely widespread uses of Tivo and DVRs, consumers are zipping past the TV advertisements and infomercials."
One of the most common reasons businesses deploy digital signs is to participate in ad sales partnerships based on their customers' demographics. The ad-based revenue model has been a topic of hot debate as critics warn that companies shouldn't bank on digital signs paying for themselves through advertising.
And that's not the only criticism. Nanonation's Ardinger, who advocates focused branding strategies for in-store marketing, warned that on an ad model network there is no guarantee that ads for competing products won't pop up at inappropriate points in the store, creating conflict in the mind of the customer.
One thing those in the industry do agree on is the importance of reaching customers at the point of decision. Steve Nesbit, president of digital signage network provider Reflect Systems, said 70 percent of customers' buying decisions are still made in the store, meaning digital signs are in the right place to change buying behavior.
The growing trend in digital-sign advertising is similar to that of the established method of online advertising: Advertisers can upload ads through a software interface and pick their placements in networks' many different locations according to who goes there.
Therefore, it's not surprising that the digital-signage industry has attracted former forerunners in the online advertising market, like Doubleclick founder Jeff Dickey, and former Yahoo! director of global strategic partnerships, Cameron Burnham, who both now work as vice presidents at SeeSaw Networks, a startup ad network.
SeeSaw, with its national network of smaller networks mirroring the traditional television network model, bills itself as offering "the world's most extensive network of venues" allowing advertisers to "reach people where they are."
In November 2006, SeeSaw procured $10 million in venture capital to boost SeeSawAds.com, the Web site its clients use to place and manage their ads, as well as to build its network of small affiliates.
"As people become increasingly more mobile, the importance of adding out-of-home digital media to the marketing mix is critical for brands to stay competitive," said Jim Gaither, managing director of SeeSaw. "Out-of-home digital media is an effective advertising media and is becoming a major component of advertisers' media mix, much like the Internet is today."
Given its similarities to online advertising, it's not surprising that the Internet's biggest contextual advertising machine, Google, is eyeballing digital signage. In January 2007, Google filed patent applications for "systems and methods for allocating space for advertisements in a network of electronic display devices."
The Future
The future of digital signage varies depending on who predicts it, as companies big and small fight for the industry's myriad niches.
One common thread, however, is the belief that it all will keep growing. As it does, companies keep building, adding and discovering new ways to approach consumers outside of their homes, and improving the tools with which they do it.
Gleeson, who helped pioneer the industry, sees something that he and a variety of vendors are trying to achieve: A realization that a digital sign is more than a TV in a different place.
"As the industry has grown and matured, the demands on the hardware have gotten more significant. ... We're starting to design products with digital signage in mind, (and) we're trying to get people off the idea that the TV on the wall is a digital sign."
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Hotels welcome digital signage
Guests arriving at the Rembrandt Hotel in Knightsbridge, London, are greeted by a smiling face behind the registration counter — and just above that smiling face, they're greeted by a 32-inch digital sign displaying information on how to travel the London Underground.
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| The Rembrandt Hotel in Knightsbridge, London, boasts three digital screens, two are pictured here. The screen above the registration desk displays information on traveling the London Underground; the screen to the right of the bar's entrance shows menus for the bar and the hotel's restuarant. (Photo courtesy remotemedia.) |
Digital signage is not as prolific in the hotel business as it is becoming in retail, but that's an inherent trait of the industry, according to James Lavelle, chief executive of Watchit Media, a 13-year-old media company that delivers content to hotel screens.
"Innovation using digital signage in the hospitality market has been slow in coming, especially in large hotel chains," he said. "Hotels operate at thin gross and operating margins."
The continuing drops in both hardware and bandwidth prices will undoubtedly make more hoteliers give dynamic signage a serious look in the coming months. And meanwhile, companies are using the technology in creative ways, reshaping long-standing hospitality fixtures.
CTM, a 20-year veteran of the brochure distribution business, operates a network of more than 5,000 brochure stands in hotels in 23 states. Although low-tech by nature, a recent upgrade might change the face of these hotel stalwarts.
The company enlisted Selling Machine Partners to design a stand with a built-in display above the paper brochures. Sponsor videos are looped based on day part. When a visitor picks up a brochure and passes it over a barcode scanner, a video is triggered to give more information on the chosen attraction.
The net result? At test locations in New York City, brochure pick-up tripled.
- James Bickers
