Digital Signage Industry Forecast: Post-Recession

Truth be told, I’ve not actually sat down to write a “real” blog in about four years. This is one of the first posts I’ve written since 2009. I spent about two months writing several thousand words a day and scheduling the posts out every week or two out for several years. It was not until recently that the pre-scheduled articles finally ran out. The content I wrote was intended to be evergreen. That is, it will hopefully be cogent regardless of time or place, but that could also be wrong. Because when it comes to technology, flux is really the only state of things. Which is my topic today.

Since my major writing push back in 2009, a great deal has happened at the company and in my personal life that might be worth noting. I got married, went back to school, had my first child, sold the original domain name I acquired in 2008, reverted the biz back to the original company name of Deploid and acquired signage.biz in online auction. Through it all, we’ve kept the site’s content whole without altering too many things apart from some of the page design elements and site template. Part of my distance from things was due, at least in part, to the myriad of other demands that were more important at the time. Through it all, I was also not as “in touch” with industry news as I ought to have been. I checked in less frequently than was customary–usually weekly instead of daily.

I’ve been playing catch-up of late. In my reading I’ve been looking into industry reports to see some data and predictions from research firms regarding the industry. I also looking at industry-specific reports as well to pull some of the growth numbers. What I found was wholly conflicting and differed widely in its assumptions about future industry growth. Here are a couple of examples.

• According to an IMS Research 2011 press release, the global market for digital signage in 2011 was $7 billion.
• IMS Research also expects the cumulative CAGR of the industry to be 40% in the near term.
• Intel predicts that by 2015 there will be 10 million digital signage media players powering 22 million digital screens worldwide.
• NSR expects a global digital signage CAGR of 8.4% from 2010 to 2019.
• NSR expects branded digital signage networks to hold an 18.4% CAGR through the same time period.
• NSR expects the $1.68 billion in advertising revenue earned by digital signage network operators earned in 2009 to reach well over $7 billion by 2019, representing a CAGR of 14%.
• According to PQ Media’s Global Digital Out-of-home Media Forecast, digital signage advertising revenues were over $2 billion in 2011.

Every example above that touted industry growth in the upper two digits was gleaned from some report published on DigitalSignageToday.com or some other industry website where they have everything to gain by taking the bandwagon approach. In fact, the largest numbers listed came Intel’s internal research about the industry–which may be one of the motivating factors in their decision to jump head-first into an industry that seems outside of their wheelhouse.

Let’s rewind a bit. Some of these numbers remind me of those we were seeing pre-recession. 2007 was the year of the hype for this industry. Here we are nearly 6 years later and some of the numbers seem just as, or even greater, hyped than before.

Here are some things that have changed since the recession in digital out-of-home that are worth noting. First, hardware prices have dropped precipitously. For those used to huge margins with the benefit of inelastic customers, those days in the industry are long-gone. Similarly, prices for hosting as well as other solutions have helped to become a barrier to other industry-entrants thinking they can make massive profits. Second, shake-out has left a small few industry leaders still standing. I can duly note this by simply viewing some of the industry blogs and the writers who–whether they love to or not–still make an effort to publish content. The numbers seemed to have diminished. Thankfully, this has further solidified those who–in my mind–were the thought leaders to begin with (our useless dribble of a blog has been spewing nonsense for sometime…).

The industry has grown up a bit. This also means, that despite the drop in demand for things like digital signage based on advertising and other faulty business models, the industry has penetrated a greater swath of the total potential market. That means the next 10% of growth will be more difficult than the last and that much of the growth going forward may continue to be driven by what we could call “replacement revenue.” It will come from those users who need to recycle old hardware and want to move on to something more affordable with more features.

We need to grow up even more. Adolescence still means mistakes. Those who’ve been around longer will make less of them (as we’re seeing with some entrants who should have acquired rather than built). The right advertising network business model still remains to emerge from the industry’s cesspool. Perhaps it’s a fax machine scenario where it will only work when complete scale occurs and is coupled with standardization in content access and publishing across thousands of displays. As always, hardware and software eventually become the industry’s necessary evil–something reverting to “commodity” status while advertising will become the eventual “horse to the bank.” Moving the Titanic is slow and difficult, especially after it’s already suffered some casualties in its growing up process.

My plan: expect more casualties and take the hype with a large grain of salt.