Digital Signage – InfoTrends Sees Significant Growth for Narrowcasting

Market research and consulting firm InfoTrends last month forecast strong growth for digital signage in North America for narrowcasting applications between now and 2011.

The research firm expects compound annual growth rate in the number of narrowcast digital signage screens of nearly 12 percent between 2006 and 2011. It also forecasts strong compound annual revenue growth of 18.5 percent for the period, attaining total revenue of $2.59 billion by 2011. For the sake of comparison, the narrowcasting industry was valued at $1.1 billion at the end of 2006 with an installed base of 630,000 screens at 97,000 sites.

The findings are part of a new InfoTrends report, “Narrowcasting: The Opportunity for Digital Signage and In-Store TV Networks,” the third major study the researchers have conducted on this market.

Questions regarding the efficacy of using narrowcasting to deliver targeted advertising appear to be evaporating. InfoTrends reports that respondents to this year’s study were much less concerned about the lack of measurement of ad program effectiveness than they were in its 2004 study. The researcher attributes the growing body of data showing narrowcast systems to be effective as the reason.

Additionally, the report showed that of the 51 current users of networked digital displays or in-store TV systems who responded to a structured survey for the report, 80 percent plan to increase the use of their network over the next three years, and the remaining 20 percent expect to maintain usage at current levels.

What’s this all point to? Digital signage networks for narrowcast advertising are becoming part of the mainstream -not some sort of fringe experimental medium reserved for the daring and avant-garde. Rather than being seen as a risk in the eyes of media buyers, they are becoming an essential communications avenue for marketers and advertisers wishing to influence consumer spending decisions at the point of purchase.

It isn’t particularly surprising that narrowcast digital signage networks are entering the mainstream. Put yourself in the shoes of advertising buyers and marketers who are witnessing a radical transformation of an advertising mainstay: television. Once a medium they thoroughly knew and understood, TV is moving away from a controllable, definable advertising proposition to one that’s putting viewers in greater control of what they watch and when -most notably for this discussion, commercials.

Consider an article this week from the Denver Post trumpeting the fact that venerable ratings agency Nielsen Media Research has enhanced its tracking of TV viewers for the digital age. According to the article, viewing for one particular show after three days on a DVR was 108 percent of the live views of the same show. Sounds pretty good so far.

However, the article quotes a executive from Group M, a New York ad agency, as saying that many ad agencies have analyzed how viewers watch in delayed mode (i.e. via a DVR) and have determined that 60 percent skip the commercials. Viewed in light of the fact 18 percent of TV households have DVRs and more are on the way, and it becomes apparent that as so-called “live views” give away to “delayed mode” viewing, the number of viewers watching commercials will slide precipitously.

Narrowcast networks with digital signage displays positioned at the physical location where consumers decide to make a purchase don’t give people the option of fast-forwarding past the commercial. For that reason alone, it wouldn’t be surprising to see InfoTrends’ forecast for digital signage narrowcast revenue growth and growth in the number of screens in North America exceeded.