Breaking the Network Size Threshold

Posted by on Jul 21, 2014 in Advertising, DOOH

In business, the bigger you are, the easier it is to get what you want. It’s true for just about everything, including this market. The more revenue, connected players and overall market penetration you have, the more likely you are to get what you want when you call up other potentially interested clients. You may have a single, good feather in your cap. In short, size matters. That makes it difficult for many-a-client working to break into some of the big advertising dollars: most of them lack the scaled size needed for any substantial buyer to take notice. In the past, there have been a couple of options to this rough conundrum.

  1. A network could either grow organically by selling and adding more screens.
  2. Signage operators could acquire other smaller networks (something we don’t recommend as differing technologies and obsolescence can make shifting a bear).
  3. Partner with other networks to provide greater reach for potential ad dollars.

#3 has also been attempted by outside firms looking to “aggregate” others’ digital real estate. Some have even created aggregation software to better streamline the process. None have really done a good enough job to have staying power. I’m not going to be the one to claim whether past failures were a result of the idea vs. the implementation, but my guess is that companies engaging in any type of aggregation–which ultimately fails–are probably guilty of a little of both.

What’s Your Model? 

In assessing your digital signage business model, it’s important to keep things in perspective. Some have, in an effort to reach more rapid profitability on their digital signage investment, chased several different models to see which one sticks the best. Focus creates wealth. Lack of focus dilutes limited resources. If your model is advertising, then reaching scale should be part of your intended plan. If not, that’s okay too. There’s room for everyone.

Luckily, our diverse client base includes just about any type of project in digital signage you could possibly imagine and–believe it or not–most of our clients don’t use digital signage for advertising. As surprising as it may sound, many are used for internal, ambiance and streamlining information display purposes and not advertising for third parties.

Growth on the Mind

While many don’t want to publish for advertisers, those advocating for digital signage understand this important principle: the proliferation of digital signage further fuels its legitimacy, impact and growth as an alternative out-of-home communications medium. Regardless of whether you’re looking to grow your network to reach some arbitrary threshold set by an advertiser. If you don’t have growth on the mind and you’re happy with your network, great. If you’re not and keen on breaking the size threshold, we’d love to hear some of your strategies either in the comments or by email (if you’d like to not give away your secrets :)

  • Pedro

    We could play with these variables in order to achieve the threshold, starting from what a snowballing effect should occur:

    -installed base,

    -network effects and

    -price at which diffusion becomes self-sustaining

    When the latter has been set already low by strategic reasons, if the product/service is really attractive, and taking into account that higher installed base and higher network effects make it easier to reach critical mass, in order to assess one’s business model it remains to find out where the critical mass point is in practice as well as how to identify it prospectively.

    • Nate Nead

      Thank you for the input Pedro. Critical mass may be different depending on the business and the model, which is why each individual network or company needs to pick a number as a good, determine the resources needed to obtain said goal and then determine whether or not it’s worth pursuit given a simple ROI calculation. Unfortunately, most lack the discipline to perform this analysis.

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