Guest post: Mark Hemphill, ScreenScape
This blog pointed out recently, once again, how there are a lot of bad statistics out there that try to describe the size and scope of the digital signage market. We agree that a lot of what gets referenced seems meaningless to us, as well.
But the question come up often: How big is the digital signage market?
Here’s one simple way to approach that question. It’s not perfect, but we feel as though it builds up towards an answer, or an analysis, that is more satisfactory than pie-in-the-sky forecasts.
Digital Signage is about Place, so let’s use Places to Guide us
Digital signage, at its roots, is inextricably linked to, and can be grounded in, real world business networks. A more practical way to look at the market opportunity is by looking first at the retail bricks and mortar landscape itself – the businesses which one day might use digital signage technology.
Every business on the planet that has a physical venue, or that has a retail partner with a venue, can be seen as part of the total addressable market for digital signage solutions. The key questions that get us closer to the total value of that market are as follows:
- How many venues are there in any given market that might, in theory, one day use digital signage?
- What is a reasonable estimate of the average revenue per year that one of these venues can generate for its preferred digital signage vendor?
The Digital Signage Market in Canada and the United States
Let’s put this model to work using the Canadian and US markets. Government census data is relatively easy to find and can be used to help answer the first question. Click on the graph (and wait) for a sense of where this data comes from.
The US census of 2012 counted 1,062,083 retail establishments1 in the United States. In 2011, using Statistics Canada data, the Retail Council of Canada counted 190,1002 retail stores in Canada.
|Total number of retail stores||1,252,183|
Next we need an estimate for the average revenue one of these average venues might represent to their preferred supplier. For the sake of argument we’ll use $40 USD, the monthly subscriber fee for ScreenScape Digital Signage.
|Avg revenue per customer per month (USD)||$40|
|Revenue opportunity, Retail, North America (monthly)||$50,087,320|
Additional Place-based Media Venues
In addition to retail venues there are many public places that make for ideal locations for digital signage. These range from hospitals to health clinics, universities to fitness centres, and hotels to golf courses. The US census of 2011 counted 6,588,336 public establishments in total. For the sake of simplicity we can say, as a rule of thumb, that for every retail store there are five non-retail establishments.
|Number of venues, total (6x retail)||7,513,098|
|Avg revenue per customer per month (USD)||$40|
|Revenue opp, All Venues, North America (monthly)||$300,523,920|
Using our subscriber fee as a stand in for the average revenue opportunity associated with each average customer, that comes to $3.6B USD annually.
Is this a bulletproof number? No.
Is there plenty to quibble with here? Yes.
Naturally, it’s hard to imagine the presence of digital signage in every single public-facing venue, certainly not for some time. On the other hand, there are, and will be, plenty of venues that, rather than having one screen, will actually have several dozen.
Furthermore, the average revenue per customer that any given vendor might generate through one customer relationship naturally depends on a host of factors. $40 per month might seem rather low when you consider some of the more sophisticated requirements of a high-end digital signage project. It really depends on the nature of any given vendor’s product line, whether they are a full service provider or prefer to focus on one part of the total solution. It also depends on pricing, on the nature of a vendor’s particular target market, and so on.
There is no perfect model that accounts for every angle and every instance. That’s why they call it a model. However, we humbly submit that this sketch, grounded in real world venues, does well to help us visualize the total market for digital signage solutions, over time – at least as well as any forecast we’ve seen to date.
The best method for estimating the market opportunity for digital signage is likely this method PLUS a thorough analysis, triangulation, and normalization of all similar, credible approaches. It’s looking at various approaches together that helps us to circle the problem and arrive at the best conclusions. How do the different approaches compare? What do the results say? Do they offer up a market value range that is consistent with the others? If it’s possible to accurately measure the size of the market, the value range that is common to a variety of approaches is likely your best bet.
From Digital Signage Systems Towards an Internet of Screens
We should stress that the broader, longer-term market opportunity of place-based media & marketing, is actually much bigger than we’ve suggested here.
The first phase of the market opportunity is in building out the infrastructure, the plumbing if you like, of digital signage systems. This is the market that us vendors are competing for in 2016 – the sale of new software and hardware solutions – and that’s why we’ve focused on it here. For ScreenScape, it refers directly to the revenues we generate through software subscriptions as we build out our network.
However, a true Internet of Screens is certainly coming. The traffic that travels over and through the combined global digital signage infrastructure will evolve. Just like the World Wide Web it will become more interconnected, more sophisticated and begin to offer new and exciting marketing opportunities. Therefore a secondary longer-term market opportunity exists, beyond the sourcing of the software and hardware infrastructure, in the metered flow of content and in the growth of advertising services that have been enabled by digital signage systems.
The leading providers of digital signage technology solutions, who today charge for usage fees or licenses, will find themselves in a strong position to become the leading providers of place-based marketing services, leading to new business streams that are based on transaction or brokerage fees.
Ad-based digital signage networks, the world of outdoor digital media and what, today, we commonly refer to as Digital-Out-of-Home (DOOH) marketing, together is but a very early incarnation of that bigger opportunity we like to call the Internet of Screens.
Get the long form analysis
If you found this approach to sizing up the current digital signage market valuable, you should know that it is just one excerpt of a more in-depth analysis we’re working on that takes more than just a quantitative look at the nature of the digital signage market. It takes a qualitative approach as well, looking at various contours within and beneath the umbrella term digital signage. It’s a more thorough analysis that helps to answer questions like:
- What is the difference between the digital signage market and digital-out-of-home (DOOH)
- How will the market opportunity for digital signage evolve over time?
- How can you break down the opportunity into distinct sub-categories? Who’s buying?
- What are the use cases for digital signage? for digital out-of-home marketing?
If you are interested in receiving a copy of the long form analysis, you can request one here.
1http://thedataweb.rm.census.gov/TheDataWeb_HotReport2/econsnapshot/2012/snapshot.hrml?NAICS=44-45. An establishment is a single physical location at which business is conducted and/or services are provided.
2The Structure of Retail in Canada – Statistical Appendix