eMarketer says digital signage advertising growth looks strong

I know Haynes already beat me to it, but this data from eMarketer and PQ Media bears repeating: new projections show the US outdoor video advertising market growing from about $1.3B in 2007 to over $2.3B by 2011, indicating a compound annual growth rate (CAGR) of well under the 20% that has been thrown around so frequently. For reference, they calculate that in 2006 the market grew about 28%, and in 2007 it was about 25%. All the way out in 2011, apparently the market starts to stabilize and enter its "mature" phase, with single-digit projected growth of 8.4%.

While such growth is certainly nothing to sneeze at, I have to wonder if we're really that close to leaving the growth phase and entering the maturation phase, or if we might be on track to squeeze out a few more years of double-digit growth before that happens. My money is actually on the latter, which I know comes as a surprise to everyone who just automatically assumes that I'm a big pessimist (I swear it's not true - I'm a realist). The article makes all of the usual arguments for our current aggressive growth:

"While other traditional advertising sectors are struggling to adapt to increasingly fragmented audiences and changing media consumption patterns, the out-of-home advertising sector is actually reaping the benefits of the evolving media landscape."

Unlike TV or radio, out-of-home advertising is immune to channel or Web surfing and digital and video technologies are making the medium more compelling and effective.

As an example of the opportunities that new technologies are opening up, out-of-home video advertising networks will comprise the largest component of what is described as the "alternative" out-of-home advertising sector.

...

The falling costs of flat panel LCDs, combined with the emergence of IP and wireless Internet technology are driving the out-of-home video advertising market.

"Another significant driver of the out-of-home advertising sector is that US consumers are spending more time outside their homes, shopping, dining, walking, traveling and waiting," says Mr. Macklin.

According to Veronis Suhler Stevenson, US consumers spend twice as much time away from home than they did 30 years ago and the average daily commute has doubled to about an hour.

"New delivery and measurement tools are also giving advertisers the confidence to embrace the emerging new creative possibilities that out-of-home offers," says Mr. Macklin.

So there's not much new to learn there. But if you take a closer look at the numbers, the company estimates that the outdoor advertising market will grow about $3B from $7.4B today to about $10.2B in 2011. While that means the digital market will grow to capture about 20% of the total out-of-home market (which seems reasonable), overall growth in the sector is expected to lag far behind online spending, which doesn't seem too realistic. Actually, I'll qualify that -- it would only seem realistic if online spending starts cannibalizing TV spending in a major way, since that seems like the most likely source of new ad dollars in the near future.

If I had to speculate, I'd say the US digital out of home advertising market has probably four or five years of 20%+ growth left, after which the rate of change will slow, but not in the dramatic 5 or 6 point drops that this study indicates. Given how long it can take for new large digital networks to gain traction (and how much longer it can take for them to achieve a reasonable fill rate of maybe 30 or 35%), networks that are already being deployed will contribute to the growth rate for several years to come.

Tags: digital signage, out-of-home advertising, OOH