Digital Signage Market Poised to Skyrocket

Well it appears that the 800-pound gorilla Google has set its sights set on the digital signage market.

The New Scientist Web site broke the story earlier this month that the search-engine company has filed for a patent on a way to divvy up ads on a network of electronic signs. The ideas seems to be to give retailers and others a simple way to organize an advertising campaign to promote inventory on, for example, a digital signage network display or displays near their stores in a mall.

Just as Google allows advertisers on the search engine to specify characteristics of their online ad campaigns, such as what keywords to use, how much money to spend, and what to say in ads, the new Google system is likely to give retailers a way to get very specific about what product is advertised, how and where it's advertised and how much will be spent to advertise it.

Granted, Google is only at the patent filing stage, and it's much too soon to discuss this approach in detail. However, that's not what's important. The point is that Google's approach is another sign that digital signage networks are organizing into a market that can be meaningful to advertisers. Google's patent filing is further evidence digital signage is quickly transforming from an amorphous marketing concept into a concrete, definable reality.

Like the November '06 Screen Association announcement of the first directory of UK-based digital signage networks that accept third-party advertising and the news a month later of the formation of Nielsen In-Store to help marketers quantify in-store audiences, the Google patent move is a further indicator that digital signage networks are coming of age as a legitimate, quantifiable ad medium.

Another is the financial health of the out-of-home advertising market, which in 2007 is expected to be the second fastest growing advertising medium behind the Internet. A New Year's Day article in MediaWeek quotes a forecast from private equity and mezzanine capital investment firm Veronis Suhler Stevenson as saying the out-of-home ad market will grow 6.7 percent to $7.25 billion, following a 7.9 percent growth rate in 2006. It goes on to say PricewaterhouseCoopers projects even stronger growth of 7.9 percent for 2007.

To be sure, out-of-home advertising encompasses many things, like digital and conventional billboards, cinema and mobile (i.e. bus, taxi, etc.) However, it also includes digital signage networks, which surely will stake out a growing piece of the out-of-home ad pie as they organize further into a media buy individual companies and ad agencies can measure and understand.

That could not come at a better time as ad agencies and ad buyers increasingly question how effective their traditional television and print ads are. Digital video recorders (DVRs) and video on demand are giving television viewers more control over what they watch and when. Zapping commercials -fast forwarding past them- continues to grow along with consumer uptake of digital video recorders.

Newspapers aren't delivering the audience they once did. Circulation is down nationwide and that's taking its toll on the commercial value of the medium. One need look no further than McClatchy Co.'s sale of the Minneapolis Star Tribune for about half of the $1.2 billion purchase price the publishing company paid in 1998 to see the impact of falling circulation.

All of these factors -including the congealing of digital signage networks into a quantifiable market, new convenient ways for retailers to ties their inventories to ads on digital signs near their stores, TV commercial zapping and the decline in newspaper circulation- point out that digital signage advertising is poised to skyrocket to new heights in 2007.

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