Strategy Institute's 4th Annual Digital
Out-of-Home Media Investor Conference

The effects of the economic headwinds on digital out-of-home media, and
why the recession has been good for the digital signage industry.

NEW YORK, NY —October 12, 2009— Last year’s Digital Signage Investor Conference was notable for the events that preceded the conference. The economic crisis that led to the current recession had just started to unfold. Rumors were everywhere, and a cloud of uncertainty hung over the event.

Fast-forward to today. The effects of the recession on the digital out-of-home industry was the thread among presenters at Strategy Institute’s 4th Annual Digital Signage Investor Conference, a 2-day event held on October 6th to 7th at the Embassy Suites Hotel in lower Manhattan.

The Rules of Engagement Have Changed

“Bad economies make opportunities for seismic changes in consumer behavior,” said Beth Ann Kaminkow, President & COO of TracyLocke, a Dallas-based integrated marketing agency and a keynote speaker for the event.

Consumers are asking deeper questions about their own purchase decisions. Retailers report that shoppers are making fewer impulse buys—a big change for the retail industry compared with only a couple of years ago. Consumers are trading down and their decisions are now driven by price.

“Marketers need to understand that the rules of engagement have changed,” said Ms. Kaminkow. The consumer’s shopping rituals have changed, engagement now happens online and instore. “Marketers need to challenge old assumptions. Young consumer’s perceptions are different, the old methods don’t apply anymore,” said Ms. Kaminkow.

The recession has created a shift in power, destroying billions of dollars in brand equity and consumer loyalty. While some companies have declined, other companies have emerged as winners. Consumers are placing greater value on invention, innovation, authenticity, and integrity.

“This recession has accomplished what marketers spend lifetimes trying to do: disrupt ingrained purchase behaviors and encourage change,”— Kelton Research

A brand’s power to influence consumers through traditional media has become greatly diminished. The retail experience has changed due to the increased influence of the Web. Consumers have gone ROBO (Researching Online, Buying Offline). Advertisers who are looking to connect with consumers need to have a deeper understanding of the journey that shoppers make on their path-to-purchase. Today, more consumers are doing product research outside of the store venue then ever before; however, 50% of all purchase decisions are still made in-store.

“Shoppers want relevant conversations, not one-way sales messages,“ says Laura Davis-Taylor, Founder and Principal of Retail Media Consulting, and co-author of Lighting Up the Aisle: Principles and Practices for In-store Digital Media.  “We need to measure our message strategies to ensure that shoppers like whatever new digital tool we put in front of them. If we ensure that shoppers like what they see, vendors are more willing to fund it with brand advertising.”

If you’re looking for funding or if you’re evaluating an investment, the viability of the initiative will be tied to your ability to measure the effectiveness of the network. “You must try to measure how many people were actually exposed to a screen, how many people looked, what they looked at, if they did something afterwards and, if possible, what sales were generated. The opportunity with in-store digital media is not to build what’s technically possible or most appealing, rather, it’s to build what makes sense,” said Ms. Davis-Taylor.

"If you’re looking to invest in a digital out-of-home technology play, you need to look beyond the features, functions, and potential ROI of it. You need to look at the potential it has to effectively engage viewers and how that may translate into business value,“ added Ms. Davis-Taylor.

The Power Shift

“In 1970, an advertiser only needed to buy 3 channels to reach the majority of consumers. Media has become so fragmented that the same advertiser today would need to purchase time across 117 channels to achieve the same level of reach,” said Stephen Nesbit, President & COO of Reflect Systems and moderator for the Conference.

Television is not delivering viewers as it has in the past.  As an example, All In The Family, a situation comedy that ran on CBS from 1971 to 1979 was able to deliver a 60% share of the market. By comparison, a popular show such as American Idol only delivers a 17% share today. How can today's advertisers effectively reach a broader audience? In many ways, the retail store has become the new mass-media outlet—more than 140 million shoppers see Walmart’s Smart Network each week.

This shift in power is having an impact not only on advertisers, but also on the traditional supplier–retailer relationship. Mass retailers now own the supplier and the consumer.

Walmart’s 360-degree brand activation is well executed. They have seamlessly integrated in-store promotion with the Web, print, television, and mobile marketing to engage consumers in a brand conversation. As a result, a consumer’s purchase intentions are highly influenced by promotion, and they often leave a store with something different than their original purchase intention.

The Shake-Out to Break-Out Period

Digital out-of-home is experiencing a “shake-out to break-out” period according to Leo Kivijarv, PhD, VP
at PQ Media, a leading provider of alternative media econometrics data and publishers of the Global Digital Out-of-Home Media Forecast 2008-2012 report.

Digital out-of-home remains one of the fastest growing alternative advertising mediums, and is still growing despite the fact that the US is experiencing the worst economic environment in more than 70 years. However, the recession has caused some casualties. “Within the digital out-of-home space, about 40 companies have been sold or have gone out of business in the last 18 months,” said Dr. Kivijarv.

Another interesting point raised by Dr. Kivijarv relates to television ad buying and digital video recorders (DVRs). According to PQ Media, advertisers will begin shifting their ad spending away from television when DVR usage reaches more than 30% of consumer households. 

A newly released consumer research report (September 2009) by the Leichtman Research Group shows that 36% of households in the United States have at least one Digital Video Recorder—an increase from just 8% four years ago. In addition, TiVo reports that primetime programming that aired in February 2009 during the 8 pm and 9 pm timeslots experienced a marked increase in time-shifted viewing.

Does this mean that a change in ad spending is around the corner? Perhaps. However, television is still getting the lion’s share of ad dollars in 2010.

To keep a perspective on digital out-of-home's growth trajectory, Dr. Kivijarv reminded his audience that it took radio more than 30 years before a competitive medium emerged. In today’s market, digital out-of-home has emerged alongside myriad new media vehicles that are competing for the same advertising dollars. While 2009 will show negative growth for the alternative advertising sector, there will be individual success stories. Dr. Kivijarv predicted that the digital out-of-home market would return to double-digit growth within the next 5 years.

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