By Sanjay Manandhar

By all counts, the current recession is bad. It might even be prolonged, prompting people to utter arcane words like stagflation and even the D word. But in the coming years, looking back, it may prove that these times were actually an inflection point for a sustained growth in digital signage.

First, the real fuel for large digital signage networks, ads and sponsorships, is actually moving beyond a token amount to something meaningful. Ironically, the shift of ads to digital signage can happen even as the broad ad market is seeing a serious downturn. Anecdotally, I’m seeing some digital signage advertisers get a significant uptick in ad revenues during this downturn, albeit coming from a small base. Why is digital signage benefiting when the broad ad business is off by 20% to 60% (depending on where you look and whom you ask)? My theory is that advertisers are genuinely cutting ad budgets, but, instead of cutting the same across the board, they are cutting more from more traditional media, such as print and TV, and adding a bit on some of the newer media like Internet, mobile, and digital signage. Internet is hardly new and is swiftly garnering the respectability of traditional media. So it appears some advertisers are trying the targeting and dynamic nature of digital signage, thus giving a nice uptick of ad dollars which, given the broader climate, can seem very countercyclical or counterintuitive.

Secondly, digital signage has gone through a sharp climb up the hype curve in the past few years, which is being rationalized right now. Removal of the froth is always good for any industry. In the past few years the digital signage hype created great expectations in the early adopter customers but, equally, it produced large numbers of new entrants, both in technology suppliers and network operators. Oversupply always engenders price reduction, which we have seen in display hardware, media players and also in software. Equally, the lack of a uniform media buying mechanism for ads in digital signage has meant that prices of the ads are coming down. These dynamics are removing the more recent entrants and weaker companies, both technology suppliers and network operators. While the demise of any entity is regrettable, the industry will grow stronger with quality companies and network operators.

Finally, the “try” will create a permanent “line item” in the budget of advertisers and ad agencies. The ad fuel will grow the industry and create sustainable ecosystem around it in hardware, software, content and applications. We have seen the “try” convert to a permanent line item for cable TV, for the Internet and other newer media. I’m confident digital signage will follow a similar path when it comes to acceptance by the advertising community.

Tags: ad agency, Ad budget, Digital Signage, Inflection point