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Digital signage as a service: The next big services contract?

Rivka Gewirtz Little

When IT integrator Coast to Coast Technology went into business five years ago, its founders never expected to get into advertising development. But eight months ago, the company invested in a digital signage practice, creating advertising content

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and selling basic hardware and hosting services.

Now that digital signage practice makes up 5% to 8% of the company's business, and it's likely to grow into its own division, according to Majdi Khatib, vice president of marketing at Coast to Coast.

Coast to Coast is one of many networking and technology VARs that see a clear fit for digital signage technology in their portfolio. And now that digital signage content can be hosted and remotely managed, these VARs also see a chance to grab the holy grail of technology sales: the long-term service contract.

Digital signage -- or electronic display ads that carry moving images, sound and live feeds -- is a growing market, predicted to be worth more than $3.5 billion by 2011. Analyst firm MultiMedia Intelligence predicts that by 2012 the market will consume nearly 2.3 million displays.

While the best known digital signs are flashy, large ads in airports or big chain stores, small and medium-sized businesses (SMBs) are beginning to run their own digital signs to promote products or communicate internally with employees. And now that the technology can be offered as a hosted service, which requires less expenditure for equipment, uptake among midsized businesses is expected to grow even more quickly.

Banking on this predicted growth, distributor Ingram Micro last week unveiled a partnership with Software as a Service (SaaS) company BroadSign International that enables VARs to sell hardware, software, content creation and hosting, as well as site surveying and layout design, in one package.

This isn't Ingram's first foray into hosted digital signage (it also has a deal with digital signage provider Rise Vision), but it is the first soup-to-nuts package.

"There is an easy play there for a VAR that understands the networking business because networking is a good-sized component in a digital signage solution," said Kevin Prewett, vice president of Ingram Micro's digital signage division. "For a networking VAR to come backwards a little and learn about the other components, like content creation or hanging a screen, is not that difficult."

AV resellers, which have been selling digital signage thus far, will have further to go in learning the networking side of things, Prewett added.

The technology

On a larger scale, department store chains or large banks will ultimately build out distributed networks that will feed their digital signage in stores nationwide, said Rick Sizemore, chief strategy officer of MultiMedia Intelligence.

For now, though, there is big business in simply building out systems and hosting content for smaller companies. And the necessary technology is simple.

There are liquid crystal display screens, a central hub for the displays and a multimedia player that can be as simple as a PC with Windows XP or as complex as a server, depending on the amount of content. Then there is a management application that enables users to program the content down to the minute. Some signs are wireless and require access points for network connection, while others are wired to broadband.

For Coast to Coast, selling and deploying the technology was a smooth transition.

"We started five years ago as a VAR and the core of the business was to provide technology products to small and medium-sized businesses. Then we started looking at opportunities to sell further into the existing customer base," Khatib said. "We could sell LCDs, we sold software and we understood how to put the pieces together, so it was just a matter of figuring out the market."

And that was where digital signage as a service (DSaaS) came in. Coast to Coast first decided to get into the content development business. That meant launching a graphics department of artists that worked with software programs like Adobe Flash and Illustrator to create ads according to customer needs.

Then Coast to Coast began hosting that content from servers at Rise Vision. Finally, customers could choose to manage their own content scheduling through a Web-interface application from Samsung called MagicNet Pro or to have Coast to Coast manage it for them.

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"The best-case scenario for us is to sell the product and software, let us teach you how to use it, and then let us develop the content for you," Khatib said, adding that managing content scheduling can involve the kind of minutiae VARs may want to avoid.

As for content, Coast to Coast now has a full graphics department, but it doesn't shoot live video for television-type ads.

"We sit with a customer and we talk about the concept … we come up with a story board and say, 'Here's what we think works best.' Once we get approval, we animate," Khatib said.

The business model

Probably the most attractive part of DSaaS for users is that it's cheaper to buy into than on-premise equipment. That's a good sales pitch for VARs.

"Instead of investing in capital expenditures, this helps them spread the cost over time," said Ryan Cahoy of Rise Vision.

Cahoy said partners can then negotiate payment plans for services with users as they see fit.

"We're giving VARs the ability to private-label our solution, and they can set their own model," he said.

Ingram Micro also offers leasing plans for the technology that is needed. That slashes the customer's initial investment while giving the VAR a long-term annuity stream, Prewett said.

Beyond the financial benefits, DSaaS enables partners to offer remote management, which can prevent system crashes in a technology that is fully customer facing.

Prewett recalled being in a grocery store recently where small digital signage screens at each register had crashed and weren't displaying content.

"I said something to the manager, but he said, 'I don't know how to fix it,' " Prewett recalled. "You don't have to have someone come out to your company to fix this kind of problem [when the solution is hosted]."

How to break in

For VARs new to DSaaS, the trick is to stay small at first.

"They [VARs] think they need huge opportunities [like major airports or chain stores], but that couldn't be further from the truth," Cahoy said. "That's only 10% of the market. If you take everybody who wants five or 10 displays, that's 80% of the market."

Cahoy pointed to patient waiting rooms in clinics and lobbies of office buildings, while Prewett mentioned airports in smaller cities, metro train stations, bus stops and restaurants.

"Look in your backyard," Cahoy said. "If you've already got an IT relationship, you can also offer digital signage."

That's exactly how Coast to Coast scored a deal with a Washington Mutual branch in California.

"We had a strong relationship with the bank manager," Khatib said. "We were then able to get to the regional manager and talk [him] through having a pilot program at that branch."

Now the bank has a network of Samsung LCDs with a PC in the background and a content management application. Coast to Coast also does content development for the bank.

What about the economy?

While digital signage providers swear the business is booming without pause, Sizemore's view is not quite as bright. He called 2009 a "black hole" for digital signage technology development, which will slow long-term market uptake.

Still, at the end of the day, even in a bad economy, businesses have to be creative with their marketing. With fewer people watching television ads because of digital video recorders and Internet access that is still not universal, "digital signage is a far more powerful marketing tool," Sizemore said. It reaches every passerby.


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