Organic Inorganic

Posted by on Jul 2, 2011 in DOOH

Two industry growth reports were released this week, one by DisplaySearch out of Texas and the other by Goldmedia out of Germany. DisplaySearch boasted digital signage would have a 20% CAGR through 2016, while Goldmedia claimed digital out-of-home in Europe will quadruple in the next five years. Generally speaking these are reassuring for future growth and are great for incentivizing venture firms, but are we relying too heavily on venture-funded growth?

Based on the reports, most of the growth is in hardware/software investment. Displays, media players, and peripherals will aide the industry in it’s growth forward. While the media planning segment of digital signage waits for the industry’s onset of puberty, hardware and software vendors seem–at least currently– to be having all the fun.

Our good pals at the Digital Signage Universe posted a piece outlining some of the take-aways from Strategy Institute’s Digital Signage Investor Conference. My take away: venture capitalists are seeing the “potential,” while not yet seeing the self-sustaining revenue of a mature industry. Certainly investing in potential will help spur growth, but what about organic growth? Where are we on the organic growth spectrum?

Think for a moment about all the consolidation that is currently taking place as well. Networks are being snatched-up, mostly with venture funds. Bill Gerba did a great piece on recent mergers earlier this week. Consolidation is not unique to the digital sign industry. We are certainly seeing widespread mergers in many industries. However, now is the time when those who can show they’re “in the black” can make a killing from inpensive aquisitions using venture funding. A steal of a deal!

My only concern is that we are still relying on Daddy Warbucks and not weaning ourselves off the paps of venture capitalists. How long will this last before venture firms can say, “enough is enough.” Gerba speaks of organic growth from within and inorganic growth from our venture friends without. If we were to throw out a percentage of venture vs. internal growth within the industry, what would our numbers be? 70/30? 80/20? I tend to side heavily with the venture folks, at least for now.

It’s easy to see what is happening. But when will the self-sustaining maturation train roll in? How many more absorbtions will it take before critical mass can turn a critical profit?

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