Whew, what a relief. Here I thought we'd be shutting off the lights and hanging an "out of business" sign in the window, but InfoTrends has run the numbers and concluded that we won't have to! Specifically,
After struggling in the early years of its development, the business of networked digital displays in retail and other public spaces is now on the path to sustainable growth, according to InfoTrends market research. At the end of 2006, the narrowcasting industry was valued at $1.1 billion with an installed base of 630,000 screens at 97,000 sites. This marks a CAGR of 56 percent as compared with the 2004 statistics....I do agree that more retailers and marketers are starting to understand the potential that these systems have to offer, I also think that a big part of the growth right now is that more are finally figuring out exactly how to determine the ROI on their digital signage networks. By knowing just what to measure, they're having an easier time getting some results, and making optimizations when necessary.
InfoTrends expects overall CAGRs of 18.5% for revenues, 8.9% for sites, and 11.9% for screens between 2006 and 2011. By 2011, total revenues are expected to reach $2.59 billion. Key findings of the study include:
- The typical survey respondent is using five different types of media, and printed signage and outdoor signs are still the most common.
- Systems integrators are correct in identifying digital signage for advertising, promotion, and out-of-home applications as a key growth area. They should intensify their efforts to increase their exposure for involvement in applications of this type.
- Compared with the survey conducted in 2004, respondents in this most recent study were much less concerned about issues such as lack of measurement of ad program effectiveness, as the body of data supporting the effectiveness of narrowcasting systems continues to grow.
- Indicative of a high level of satisfaction, of the 51 current users of networked digital displays or in-store TV who responded to our structured survey, not a single one expected their usage over the next three years to decrease, and 80% expected it to increase.
- Retailers and brand managers want their promotional programs of any type to deliver sales lift and increase traffic, and they are becoming more confident that narrowcasting systems can deliver on that goal. Securing repeat customers is their secondary goal, while attaining ad revenues from such systems is considered relatively unimportant.
Tags: digital signage, narrowcasting, retail media
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5 comments:
I've seen a lot of numbers revolving around this from 5 different research houses but this is, interestingly, the lowest of all of them.
To look at this another way, that's $11,340 per venue
I have another report that says that the number of venues expected to have screens installed will be 2.7 million by 2012
If we continue on the existing per venue revenue, you're looking at $30,618,000,000 in revenue. I have a report on my blog from a professor who took 2 years to study the space who concluded that the Digital Signage space will be bigger than internet advertising in 2-3 years...this would make it just about equal in 5 years.
Mind you, that number above is based on today's prices for advertising....I know a ton of networks that are retailing for $3-5 on a CPM basis which are easily worth $10-12...they just can't get the advertisers right now - that will change...and make the numbers go up
...just some food for thought
Rob
I'm always a bit suspicious of these researchers and their reports, personally. As optimistic as I am about the industry, there's simply no way it will be the same size as online advertising in 5 years, and it probably never will be.
Online ad spending for '07 will be nearly $11 Billion, versus just over $6 Billion for ALL OOH advertising, let alone the tiny fraction that accounts for digital signage these days. Granted, our sector is projected to grow at a pretty amazing rate (most predict about 30% for the next few years), but online growth is no slouch.
While I think digital signage will become an increasingly viable medium for advertisers, it just seems highly improbable that it will surpass the money machine that is online advertising.
Hey Bill
I agree - a healthy amount of cynicism is very much needed. Having lived through the dot com research years I'm acutely aware of that! :)
It's interesting though. P&G just shifted $2 Billion into retail media...let's assume 400-500 million of that MIGHT go into digital signage. J&J Has 250 million already in "alternative media" and probably is spending 10-30 million of that to trial this type of media and has a corporate tax on other media to fund more in this area.
Unliever has done the same thing.
The report that came out today from the Coen report decreased the increase in measured media growth this year from 5% to 3% citing massive shifts in traditional dollars being repurposed for in-store, online, etc....for reference, this year's measured media spend is supposed to be $105 Billion...so the total "shift" that was supposed to increase traditional headed to various alternative is an additional 2,100,000,000 (on top of what P&G just shifted). Let's pretend 10% of that heads to our space...that's another 210 million. For reference, for Coen to revise projections down 2% is massive and represents a fundamental shift in purchasing attitudes.
Just adding up what I've put here as potentials increases the spend in our space by $1 Billion. That's a big jump compared to the 25-50% CAGR people are forecasting for this year in Digital OOH.
The last piece that I have to mention is where the money is coming from. Everyone looks to the national brands for where the dollars are going to come from...the reality is that 30% of the spend will come from the local guys. Like Newspapers, which are a 43 Billion dollar ad business, most of their revenue comes from local services, restaurants, etc (Insurance, real estate, local car dealers, etc). Digital Signage is going to have the same appeal at the local level - it's just harder to sell en masse.
The only other comment I had on why this professor thought that our business might be bigger was that his take on online advertising was that most of the people who advertise online have been doing it for years. The increases are just coming from the same old brands shifting dough out of other media. Many people have tried online in little bits over the years and found it doesn't work (for them) so they quit. His take is that our medium is more holistically beneficial to the entire market so it will appeal to more customers (case by case basis of course). I don't know if he's right but it's an interesting take.
Lastly, you and I are obviously pulling from completely different research pools! I have this year's Online Ad Spend projected at 19 Billion! LOL!
All of this is, of course, just conjecture and spitballing numbers at the wall but it makes for good watercooler conversation.
We should try and meet one of these days Bill! I missed introducing myself in Chicago
:)
Rob
Hi Rob,
Believe me -- few people want to see the market expand more than I do :) And I even think that a 100% increase over 2006 (basically taking us from $1B to $2B in 2007) is feasible, based on projects that I've seen this year.
However, an equation that extends this out to the point where digital signage surpasses online ad spending is less than forthcoming...
First, online ad spending has entered the first phase of maturity, but continues to grow in the high double-digits every year, showing no signs of slowing down. Though our CAGR is much larger right now, we're starting from a much smaller base, which is going to make catching up pretty tough.
Next, P&G, Unilever and other big CPGs are putting a lot of money into alternative media, but as you say, there's no guarantee of how much will go into digital signage (versus any of a hundred other "alternative" alternatives with equally peculiar capital costs and ROI prospects.
Finally, and maybe most importantly, for the forseeable future, online advertising will be more accessible and easier to get started with than advertising on digital signs. This is especially true for the small local businesses that (I agree) will make up an increasingly large percentage of the DS ad spend in the coming years.
So is it impossible? No, certainly not. And as I've said, I do expect very strong growth in the market. But I think we'll be lucky to break the low billions in the next 5 years.
News flash, InfoTrend:
Air is good to breath! Scientists discover water is wet! The Sun found to be a big ball of fire! Christopher Columbus says "Earth is round!"
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