The Digital Advertising Network Revolution

Prepared for Strategic Capital Partners Portfolio Management AG by Osborne Reports

In downtown Shanghai, a digital screen 16 stories tall faces the Huangpu River. It is mounted on the Aurora Building. On the face of this behemoth electronic sign plays an ever-changing series of advertising messages and images.

In Manhattan, a taxi pulls to the side of a busy street to pick up a passenger. Fixed on the roof of the cab is a bright digital sign, flashing a succession of colorful, attention-grabbing ads.

On the wall above a row of urinals in the men’s room of a popular London night club, flat-screen digital displays expose their captive viewers to a sequence of marketing messages targeted specifically to men. In the ladies’ restroom on the other side of the wall, similar wall-mounted displays revolve through a very different set of digital advertisements – messages targeting women.

Getting the right messages to the right people at the right time has been the goal of advertisers since prehistoric man began drawing pictures of bison on cave walls. The object of the marketing world is still the same, but the tools have changed dramatically. Instead of painting on rock walls, growing numbers of marketing specialists are displaying bright, moving digital messages on the faces of electronic signs, which can be mounted almost anywhere.

Clearly, one of the most exciting and fastest-growing tools in the advertiser’s toolbox today is the “out-of-home digital advertising network.”

This refers to a network of digital signs located outside people’s homes – signs that deliver images and messages using electronic screens. These networks permit central system management and remote scheduling of content to deliver targeted messages to specific locations at specific times in order to pinpoint audiences. Out-of-home digital advertising networks are also referred to as “narrowcasts” or “captive audience networks.”

Like their painted or printed poster, placard and billboard antecedents, the purpose of digital advertising networks is to get sales messages to people who are likely to be influenced by those messages, at the best times and in the best places. But that’s where the similarities end. Digital signs take advertising to a new level. They are bright and alive. They move. They change. They grab and hold attention longer than lifeless printed advertising can.

Thanks to technological advances in recent years, digital signs and networks of multiple digital signs can now be cost-effectively placed almost anywhere people will see them – even above urinals.

Digital advertising displays can be placed in a wide variety of venues – from the roofs of moving vehicles to the sides of skyscrapers. Plus, multiple messages for multiple advertisers can be displayed sequentially on the same digital sign, or concurrently in different panels of the same sign if the display area is large enough. These messages can be programmed on a scheduled basis to maximize effectiveness by targeting various audiences with different content at different times, and the schedules can be controlled via a number of types of communications media from a single computer in a strategic location. Importantly, digital messages are easily updated with user-friendly software systems.

In contrast, changes or updates to traditional printed messages must be designed, approved, produced and finally installed – a time-consuming and expensive process.

The fact that digital signage can be so easily, quickly and inexpensively changed and updated underlies one of its most compelling characteristics: Information and entertainment can be mixed with advertisements to capture and hold viewers’ attention, making the advertisements more effective. (This applies, of course, to those displays that are placed in areas that are conducive to longer viewing periods – airport terminals, for example, as opposed to freeway billboards.)

A network of digital displays in a chain of fitness centers could run a series of health and fitness tips, news programs, important membership notices or any other content that would grab the attention of its members, interspersing it with advertisements for the nutritional supplements and training programs offered by the centers, as well as current and coming membership promotions.

A chain of women’s fashion stores could show the latest clothing trends and makeup tips in strategic, high-traffic areas within shopping centers, mixed with advertisements that would draw consumers into the stores and convert local foot traffic to buyers. Providing the right mix of entertainment, information and promotion will attract more visitors. In shopping malls, for instance, experts claim that 60 percent of programmable time should be reserved for advertising and 40 percent for programming, which could include music, short movies and live news.

To fully understand the attraction out-of-home digital displays exert on today’s advertisers, the contrasting disadvantages of traditional advertising media must be mentioned. Television advertising, for example, has become increasingly costly, while audiences are using technology such as Tivo, DVR and on-demand programming to avoid having to watch ads. Plus, with so many options for entertainment these days, once-large audiences are dwindling in many markets. Targeting is another problem for traditional television, newspaper, radio and general consumer magazine advertising. Some marketing professionals claim that mass audiences do not exist, so why place expensive ads for lawn-care products or hemorrhoid remedies on the television and radio, or in newspapers and magazines, when only a fraction of the viewers or readers would be interested in them, let alone want to buy them?

Out-of-home digital advertising networks are stepping in to fill the void. Electronic displays carrying advertising messages are popping up almost everywhere. “Everywhere” includes stores, malls, airports, restrooms, hotels, theaters, taxis and buses, restaurants, bars, fast food stores, office buildings, doctors’ offices, gas stations, convenience stores, train stations, bus terminals, subways and other venues – even on cell phones. In addition, many traditional roadside billboards are going digital.