Guest Post: Digital Signage – Why Sitting on the Cutting-Edge May Cause Hemorrhaging

Most internal industry prognosticators are always bullish. The digital signage market is no exception. In fact, since 2005, we’ve not seen the proverbial market marching drums slow one iota. Simply put, we’re very good at touting our own horns and talking about the future, but the realist in me (and perhaps annoying pessimist) makes me take a different look at where the industry has been, where it is going and what 2013 means for the maturation of the industry at large.

In my own mind, we’re still on the cutting edge—that high-centered median where product demand meets stark reality. Here are a few reasons digital signage has disappointed investors over the past decade.

1. Systemic Risk. This issue is number one. “If the market hadn’t ___.”  Fill in the blank. Soft markets, tepid investors and corporate cash-hoarding have kept companies from shelling out money for products whose ROI is subjective at best and negative for most.
2. 4 million screens. The 2012 numbers are out. The industry now sits at somewhere around the 4 million display mark. Sure, 2013 promises another million added which works out to some great marginal growth, but it’s nowhere near previous predictions and nowhere near the requisite volume to sustain every industry software, hardware and integration vendor.
3. Unclear Vision. Sure digital signage is morphing. In five years, it will be represented by a complete integration of tablet, mobile, signage and PC, but a lack of clarity on returns of particular modes and methods has proven a turn-off for would-be investors. I’ve found that talking about it too much brings in questions from fringe lunatics, but they’re time-consuming black holes with shallow pockets.
4. Unproven Bleeding Edge. Stepping further out onto the ice, industry gear heads like to talk about retail signage with gesture control and large format touch screens. It’s not viable except perhaps for those wishing to make a statement. Unfortunately, viable returns trump statement setting.
5. Advertising Has Been Stymied. Ad-funded and ad-based models have fizzled. See #1.

Return Free Risk

There is no longer such a phrase as risk-free return. We’re at the inversion point where investors everywhere chase returns with the hope that systemic risk does rear its ugly head before capital starts coming back. This is especially true of cutting-edge products.  Negative ROI? What negative ROI?

Tell me how one can justify pegging a positive ROI with a two year turn-around on a display, player software and content that racks up a bill of a few G’s? There is inherently more risk associated with installing flashy digital displays (e.g. hardware depreciation, potential significant price drops etc.) than even investing in corporate bonds (even if the bubble there decides to burst very soon).

No, sadly digital signage is simply another return free risk—yet another byproduct of the fringe lunatics (see #4) above.

Industry Blinders and Self-Deportation

If you’ve been in the industry long enough, you’ve seen sales reps, players, products come and go. I’m personally seen a great deal of self-filtration of career signage evangelists who felt compelled to leave an industry they adored (see #2 above). The supply/demand economics simply don’t add up.

Some need to follow Kenny Rodgers’ advice by”[knowing] when to walk away and when to run.” Such self-deportation often requires harsh realities like layoffs or stock floundering, but having eyes wide open is helpful. I’m not a pessimist, but it’s easy to be a bit more bearish when you invest alone and personally remain the single throat to choke.

The sad truth: most of the online content created about this industry comes from within the industry or from some paid study performed about the industry. If you want to get back into the thick of it, the competition is fierce, the margins are less-than-lean and the bleeding edge is hard to sell. In short, the hemorrhaging occurs on the cutting edge. Sadly, as a still adolescent industry, the wounds are still fresh.

About the author:

Nate Nead is the owner of Deploid.com, a digital signage marketing agency based in Seattle, WA USA.

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