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Digital signage: A bright beacon for solution providers

Digital signage technology gives solution providers a chance to service companies with advertising and internal communications needs.

It's hard to miss it.

At airports, on factory floors, in university dorm common areas and corporate lobbies -- whether consisting of text signs that can be changed on the fly, or sophisticated interactive kiosks that allow users to select informational video feeds, digital signage is finally coming into its own.

"It's an entirely new channel for information transactions, and it's growing rapidly," said Tom Johnson, president of Digital AV, a Fort Wayne, Ind.-based value-added reseller (VAR) of Scala digital signage software.

According to many solution providers, the digital signage market is finally taking off, after more than a decade of being billed as "next year's success story" -- and despite the struggling economy. "We're seeing about 30% growth over our 2007 sales," said Jeff Dowell, global sales manager at 3M Digital Signage in Bainbridge Island, Calif.

"Anytime there is the opportunity to engage a potential consumer, and a reason for that consumer to pay attention, someone is putting a screen up," said Rocky Gunderson, founder and vice president of marketing and network development for SeeSaw Networks in San Francisco, a large "out-of-home" digital media network that sells digital signage advertising time to media buyers.

A hybrid of television, traditional out-of-home advertisements like billboards, and Web-based content, digital signage is a network of public electronic displays that can be used to deliver information, entertainment or advertising across a wide variety of venues, including retail shops, manufacturing floors, transportation hubs and corporate offices.

The advantages of digital signage over traditional, static ways of displaying information include the richness of the media, which can involve audio and video as well as text; the fact that the content can be updated instantaneously and tailored to particular audiences, locations or even times of day; and that it has a "wow" factor that makes it more effective for garnering attention than traditional signs.

"The challenge is that people are so distracted by other electronic information media, they simply don't pay attention to the written word anymore," Johnson said. "Businesses have to look for new ways to communicate."

Three deployment models for digital signage

There are several different models for deploying digital signage, according to Dick Trask, director of public relations at Scala, a maker of digital signage software based in Exton, Pa. In the most prevalent model, a business owns its own digital signage network, usually for internal communications to employees or for advertising to customers within company-owned locations.

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Beyond the network, it's all about applications

The second is an advertising-based system, in which the digital signage network is managed by a third party and businesses pay for advertising time on it.

Finally, there's the Software as a Service (SaaS) model, in which a VAR provides all the hardware, software, networking and services to keep the digital signage network operating for a monthly fee.

Duane Weber, president of AutoComm Inc., an Appleton, Wisc.-based reseller of Rise Vision digital signage software, has seen his sales increase fourfold this past year, but believes the industry is still in the early adopter phase.

"Most of our clients have less than 100 screens. They're waiting to see what the big guys are doing," Weber said. He said that, particularly during difficult economic times, corporations are increasingly asking for evidence that there is substantive return on investment (ROI). "Even smaller banks -- which are in a market we serve -- are asking what they can expect to get out of it in terms of sale lift," he said.

Although solution providers can make money on hardware and software, it's really in services that they make most of their margins, said David Womeldort, executive vice president of BroadSign in Minnetonka, Minn., which provides an on-demand platform for digital signage that currently has more than 150 networks and upwards of 10,000 screens in 25 countries. "The ongoing revenues are consulting-based," he said.

Although sales are getting easier, "education is still a big part of the sales cycle -- which can be a long one," said David Miller, business development manager of the Digital Signage Group, a full-service provider of digital signage hardware, software and services based in Poulsbo, Wash. "A lot of times, people don't necessarily know what their message is, or what they want to accomplish with digital signage -- whether that's increasing sales, up-selling or distracting people from tedious wait time."

As an example of the latter, digital signage is being used in conjunction with traditional entertainment that plays in a video window broadcasting CNN or another television channel, "wrapped" with advertising, said Jeff Curtis, senior vice president of sales and marketing at Helius Inc. in Lindon, Utah. "You see this in car dealerships, bars, airports and other locations -- anyplace where people are hanging out, and advertisers want to grab their attention and still get their message across."

Key to digital signage success: Verticalization

And resellers do best in the digital signage market when they focus, said Ryan Cahoy, managing director of Rise Vision, a SaaS provider of digital signage services based in Epibocke, Ontario. "They have to be diligent and focus on those sectors of the market where there is a real communications need." In particular, VARs that sell into the healthcare, educational and government markets are seeing "pretty astronomical growth," he said.

This is only going to escalate over the next 24 months, when digital signage will become more mainstream, Weber said. "With the falling prices of monitors, it's going to become an increasingly attractive way to communicate," he said. He also believes a major shakeout in the digital signage software market is pending. "Right now the market is fragmented, with too many small players," he said. "We're going to see a great deal of consolidation into a few large companies over the next few years that will drive further growth."

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