Photo courtesy Samsung Canada
By Alan High
The digital signage industry, comprising a wide range of deployments, formats and venues, continues to enjoy unprecedented growth. Across North America, there are currently an estimated 250 networks playing more than one million advertising spots on more than 900,000 displays. The annual revenues generated by digital out-of-home (DOOH) ads were estimated to top $1.4 billion in 2013, having sustained an annual growth rate of 13 to 15 per cent over the past five years.
As the costs involved in installing and operating digital signage networks continue to decline, there has been a dramatic increase in the number and types of networks. Retail outlets, hotels, shopping malls, airports, banks, gas stations, office building elevators, sports stadiums, bars, restaurants, schools and college campuses are just a few of the venues where digital signage is now common. Anywhere there is an opportunity to reach large numbers of consumers, in fact, digital signage is either already present or being planned for deployment.
Additionally, people are spending more time out of their homes—travelling, studying, working, shopping, dining and enjoying leisure activities. It is inevitable marketing dollars will gravitate toward locations where these consumers congregate and spend time.
Digital signage is now common in stores, malls, restaurants, hotels and schools, among other venues. File photos
Avoiding mistakes
While many digital signage deployments are internal, non-revenue-based networks, DOOH networks tend to be more mass-consumer-related and, by definition, depend upon advertisers to underwrite a portion of their costs. Yet, despite the significant success the DOOH sector has achieved to date, strategic planning has taken a secondary position behind deployment issues for many of these networks. There appear to be far too many ‘if you build it, they will come’ assumptions toward revenue generation with DOOH networks.
The ‘glamour’ of digital signage can lead many companies to short-change the process of properly evaluating their real revenue potential. They can make mistakes by overlooking the key elements of success for digital signage, which in turn will hinder their ability to optimize profitability.
DOOH network operators must be thoughtful, focused and diligent if they are to maximize revenues. There are no guarantees their revenue-based deployment model will be successful, but valuable insights can help avoid potential mistakes and oversights during the evaluation process.
The five following key success factors have been identified as essential components in the process of assessing a DOOH opportunity and achieving its maximum revenue potential:
- Define the objectives and communications variables necessary to grow revenue.
- Determine the role of the venue, including such variables as location, traffic and dwell time.
- Assess how content can be used effectively and how important specific types of content will be to the success of the network.
- Review, define and refine the sources of revenue.
- Determine how to successfully market the network and sell DOOH ads.
In an airport, business travellers typically dwell for at least 40 to 45 minutes, so the DOOH loops tend to last 30 to 45 minutes, featuring plenty of commercials and full newscasts.
1. Objectives and key communication issues
As with any new business venture, a DOOH deployment needs to begin with a business plan, reflecting a careful review of goals relating to the network, the audience and the market.
Most digital signage networks involve a combination of objectives. Besides the advertising components, many also serve to inform, train and/or entertain their audiences.
All such goals should be ranked in order of importance, with a ‘weight’ applied to each. This will help clarify how the network should be designed and operated. Research of the audience, based on industry-acceptable metrics, is fundamental to the success of selling ads on a DOOH network. The more dependent the network will be on revenue, the more important this research becomes for the project.
Determining long-term revenue-generating forecasts for a new DOOH network can be very challenging, especially if there is only limited information about the advertising potential of its market segment. One recommendation is to look elsewhere, as other DOOH networks have likely already been deployed in similar venues, perhaps in different regions or countries. By taking time to analyze those networks, it will become easier to replicate their success or avoid their mistakes.
Other helpful resources are the potential advertisers for the DOOH network. They should be asked about their marketing objectives and investments—and what it would take to move their budgeted dollars from other media formats.
Another key indicator of revenue potential is other signage. Static signage is common in many public venues, after all, and it is not difficult to estimate the associated ad revenue. If a DOOH network is being introduced somewhere it will need to compete with an existing, non-digital out-of-home (OOH) ad network, then its inherent value proposition—such as greater flexibility—may not necessarily translate into new revenue. It could instead add to confusion and the ‘cannibalization’ of ad dollars.
Financial considerations should not be allowed to drive the revenue estimates. Rather, all components should be analyzed carefully to help develop a revenue model first, which can then be applied to the targeted financial thresholds.
