What has happened to ad-funded digital signage (aka Digital Out Of Home)? Just five years ago industry analysts were forecasting a nearly $2 billion market by 2010. Back in ’05, the future of this sector seemed so bright that tradeshows, press reports, articles, blogs, etc. were brimming with optimism. Today, the reality is much more sobering. Ad-funded digital signage has fallen significantly short of expectations, and according to some estimates, 2010 revenues will likely be less than a quarter of 2005's forecast. This failure to perform to expectations has been creating a sense of concern among many within the industry that DOOH’s money making potential is just not there.

Recent blog traffic has been questioning whether the growing ranks of ad-funded digital provider/operator bankruptcies would suggest that the industry has too many players and whether the industry would be better served by consolidating. While this speculation does suggest that a smaller number of players would benefit from splitting a smaller pie, it does not address the fundamental issue: Why is the revenue pie so much smaller than originally forecast? An examination of a recent report by a leading digital signage network aggregator gives some insight into the problem.

In a report by Adcentricity, the authors painted a rosy picture for the industry by expounding on the unprecedented and continued growth of their digital signage network. While their report provided an impressive set of growth statistics -- none of which were revenue-oriented -- it did however slip in one caveat that could lead one to believe that the core revenue fundamentals may not be so good. The report said: “…digital agencies haven’t yet adopted or fully understood its [digital signage’s] capabilities. There is a digital divide when there should be a natural fit.”

For an industry that depends on ad revenue, it would seem that the failure of digital agencies to embrace the technology would be a serious problem. There are however theories as to why this may be happening:

1) The inability to correlate DOOH metrics with traditional ad metrics,
2) The inability of agencies to afford the cost of DOOH campaigns,
3) The fiscal and operational instability of DOOH networks/operators,
4) The impact of a poor economy on the availability of ad dollars.

Perhaps the real reason is this: The fundamentals (e.g. ROI, value proposition, etc.) of ad-funded signage are simply poor.

While this statement may not sit well with many in the DOOH industry, company devaluations and sector bankruptcies are tending to reinforce the point. So is this statement suggesting that there is no role for ad-funded digital signage? No, but it is suggesting that social and technological change will further reduce agency participation; therefore the industry must learn to adapt or face extinction.

The remainder of this paper will examine the trends that are imposing change and then outline what DOOH providers can do to adapt.

Read the full white paper