Out-of-Home Digital Advertising - Overview & Trends

Digital Out-of-Home (DOOH) Advertising uses IP-based digital displays to help market to a targeted audience at a particular venue. The ability to remotely plan and update site-specific or screen-specific content is powerful. OOH digital advertising networks are called many things - emerging media platforms, digital-signage networks, in-store television, new digital media, and place-based media. In the last few years, marketers have taken advantage of advances in digital, network and flat-screen technologies to broadcast programming, information and advertisements in places they could not have imagined in the past. Networked digital signs allow for rapid change, content customization at a granular level, near real-time diagnostics, and accurate proof-of-play reporting. Each of these is critical to achieving a high return on investment (ROI), especially in an environment where advertisers are paying for display time.

Hundreds of potential advertising platforms now exist. The most attractive are those where people congregate, eyeballs are focused and minds make purchasing decisions. The most viable are where screens can be mounted affordably and paid for through advertising. Interpublic Group estimates that over 700 out-of-home digital ad network platforms have emerged since 2002, with many more to come. A handful of networks have emerged in cinemas, big-box retailers, grocery stores, malls, office buildings and doctors' offices. The findings of a study conducted by InfoTrends shows that digital signage displays have 47.7% effectiveness on brand awareness, increase the average purchase amount by 29.5%, create a 31.8% upswing in overall sales volumes, generate a 32.8% growth in repeat buyers and result in 32.8% more in-store traffic. The digital signage market has a few different manufacturing leaders: NEC Display Solutions, Sony, LG Electronics, Samsung Electronics, Sony, Mitsubishi and Sharp. About 50 other smaller manufacturers follow these larger players.

Digital Signage Ecosystem

A traditional digital signage ecosystem includes:

  • Content creation tools
  • Media and network management software
  • Player hardware and software
  • Integrators to build systems

The players in the digital signage ecosystem include:

  • Content Providers
  • Network Operators
  • Project Design
  • Software Developers
  • Bandwidth Providers
  • Display Manufacturers

Economic Models

  • Ad-funded Digital Signage In an ad-funded digital signage deployment, a third party provides a digital signage system to a venue at little or no cost to the venue owner. The third party then sells ads to recover the initial capital investment and the operational expenses.
  • Traditional Digital Signage In a traditional digital signage deployment, the venue owner purchases the digital signage system to address a specific need such as informing, persuading or marketing its offerings to potential customers. The venue owner then maintains the system, content and signage operations.
  • Ad-supported Digital Signage An ad-supported system is a hybrid of the ad-funded and traditional models. In an ad-supported model, the venue owner purchases the system, but then works to sell advertising to either offset the cost of the system or to make money from it. This is a model that is typically used by large retailers, mall operators, arenas and stadiums.

Audience Measurement

One of the most complicated issues surrounding the digital OOH industry is determining exactly who is viewing content on a particular network. This helps in designing targeted content and determining Cost Per Impression (CPM) rates. A number of different organizations have made an effort to develop audience measurement guidelines for digital OOH. The Canadian OOH Digital Association/Association Canadienne de l'Affichage Numérique (CODACAN), for example, issued its guidelines in September 2009. CODACAN's audience measurement formula considers the following factors:

  • Opportunity to see: measure how many people had the opportunity to see the screen
  • Dwell time: duration for which the audience was in the presence of the screen
  • Loop length: duration of the programming, content and advertising, before it repeats

CODACAN's metrics are modeled in part on those developed by the Out-of-home Video Advertising Bureau (OVAB), which issued its own audience-measurement guidelines in 2008. In the future network operators will be able to measure viewership through retina scans or facial recognition. Some network developers are testing applications that can sense the gender and approximate age of the person viewing the screen, giving advertisers valuable information about the consumers exposed to their message. Applications will be able to deliver content based on the characteristics of those viewing the screen at any particular time. These technologies have privacy implications that will need to be addressed before they can be rolled out.

Pricing Challenges

While traditional advertising media has a long track record and established metrics to measure effectiveness, it's not the case for digital OOH. Many agencies tend to compare CPM of digital OOH with that of traditional OOH, such as that of roadside billboards. The current economic slowdown in 2008 and again in 2011 has impacted pricing as ad budgets have been reduced. Despite the effectiveness of digital OOH, the medium doesn't yet have a standard place in the ad agency structure. Many in the industry tend to lump DOOH under other categories, such as traditional OOH, as opposed to giving it its own line on the budget. The other factor affecting pricing is the lack of a uniform way of planning and placing ads. The current system typically involves meeting with account representatives or working through a content aggregator. The industry is evolving into more automated ways of aggregating networks with the ability to deliver ads directly to the screens via the Internet.

Trends and Opportunities

  • Amid a sharp downturn in global advertising spending and a decline in traditional OOH advertising, digital OOH media is among the fastest growing media and will continue on an upward track, according to various forecasts.
  • The Digital Promo Network Point-of-Sale Study reveals that Convenience Stores show 88% sales lift with digital signs compared to static signs. According to Adcentricity, "Networks operating in retail venues are dominating Digital OOH spending, following the same patterns as traditional media spending – with automotive, financial services and telecommunications by far the biggest categories."
  • The technologies involved in digital signage continue to advance and changes in supply structure are accelerating industry revenue and streamlining display deployment. Delivery of messages and ads will be more effective in the future as there is technology advances. Allow anyone to book an ad and have it delivered automatically to any audience on any network in any geographic location and be relevant. There are a number of new ad delivery booking systems in the digital signage industry such as BookingDOOH.com and VUKUNET.
  • Twitter and location-based social media have mobilized nearly everyone, providing great benefit for the Digital Signage industry as an interactive advertising and communications tool. Digital OOH billboard interactions with mobile and User Generated Content (UGC) will drive engagement.
  • Signage providers are selling anywhere from one display to as many as 50 displays per site. The average is four digital displays per site.
  • Location-Based technologies will play a greater role in digital signage. The opportunity exists at store level for a rich interactive experience. For instance, a restaurant can allow customers to upload a photo of your meal with a message that can be displayed on a digital display and then shared with their friends on Facebook.
  • Revenue models are increasingly becoming more attractive as hardware prices per-screen continues to drop. Overall, prices have deflated by approximately 30% over the past few years. This makes the ROI for digital signage much more attractive. Also, because of media convergence, economies of scale can be achieved, therefore making planning and purchase of DOOH much easier than ever before.
  • Research has shown that digital signage communication has potential to lift product and service inquiries, as well as purchases and usage. This creates brand awareness as well as customer relationship management opportunities. There is an increased reach for a product or service with digital signage, and social media enables a higher level of engagement. Through social - texts, downloads, mobile browsing, sharing, voice - there is great potential to increase foot traffic to locations and web traffic to sites, thus increasing in-person, web, and mobile purchases. The opportunity for providing campaigns and context to the user experience that work fluently across the four screens - TV, Web, Mobile, Digital Signage - is becoming a greater reality.

Challenges

  • Agencies are allocating spending to DOOH, but they have yet to fully adopt or grasp the full capabilities of this marketing channel's potential. Part of the problem is that ROI is not fully understood. Another problem is new networks are cropping up at a fast pace. This makes it tough for agencies and marketers to fully understand and keep track of the media available to them or even to understand the benefits of what one network offers over another. According to Adcentricity, 70% of all network sales are from local sales efforts, driven by the network sales staff. Most networks have no national sales force, which translates into agencies and brands being unaware or uneducated on the value of DOOH offerings.
  • One of the primary challenges for digital signage is the lack of standards around measurement and creative units.
  • Many of the systems for DOOH are complicated and expensive. There are many different players involved in getting a digital signage deployment launched. Thus the opportunity for creating large, scalable campaigns is an overwhelming challenge because it is a complex landscape to traverse when it comes to networks and systems.
  • Mobile and DOOH integration is complex. However, together they will be the drivers of the interactive and customer engagement model for the digital signage industry. There are also varying formats, files structures, and standards between systems, which creates technological challenges.

The value of digital advertising is compelling since if done correctly it can result in a cohesive communications strategy that includes interactive engagement, true measurement of audience participation and impact, and the ability to precisely target the right audiences.

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