More on the Ad Revenue Model

There are many companies today making efforts to create a company based on selling advertising on digital signage networks. We receive frequent calls from prospective customers with high hopes for building signage networks. Unfortunately few of these companies achieve their goal.

In my opinion the model is viable yet premature at this point. It is a capital intensive project to start and has an extended ROI based on the ramp up time for both installing a decent network and getting traction with advertisers. To date most of the major brands have shyed away from digital signage for several obvious reasons. I've listed a few below:

1- Lack of scale- Major brands are not interested in purchasing time on 10 convenient store screens within a market. They want scale. By scale I mean penetration into the majority of MSA's (Metropolitan Statistical Area) in the USA or atleast the top markets. To reach this level is expensive and difficult to achieve unless you can convince a retailer like Kroger or Walmart to get on board. Luckily for the model, those two retailers are already testing the waters.

2- Fragmented ownership- I've seen advertising models where the ad company gives away equipment (PC, Screen, even internet connectivity) to 3rd party locations and then shares a portion of the ad revenue with that location. This is a precarious model depending on what type of location is being added to the network. As time goes by those operators tend to loose interest in protecting the equipment or helping out with a network issue. Possibly more important is they do not have the knowledge nor time to help trouble shoot an issue which can then prompt an expensive truck roll out to the location.

3- Lack of metrics- Although Digital Signage is becoming more popular for out of home advertising, the industry as a whole lacks defined metrics. In my recent post about Neilsen, I referenced a study completed by Neilsen which tracked performace of a network controlled by SignStorey and located in Albertson's. This study was a positive step in the right direction but the industry needs many more examples. Until recently most of the metrics published in the marketplace have been done by digital signage companies themselves and lack the power of 3rd party studies.

In addition to the above reasons, I suggest reading an article from the folks over at Networld Alliance. You can find that article here http://www.selfserviceworld.com/article_16268.php