The Retail Signage Situation
Dec 1, 2007 12:00 PM,
By Michael Goldman
One afternoon while filling up my car, I attempted to distract myself from the painfully expensive cost of fuel by watching a little TV at the pump. Of course, at this particular filling station, the networked digital signage system wasn’t working well, with the video flashing on and off, and the sound essentially nonexistent. All of this got me thinking about the state of digital signage for the retail industry. I know — hardly a scintillating daydream for most people, but on the other hand, it helped me forget about laying out $50 to fill up my Honda.
Having seen a variety of digital signage applications in recent months at gas stations, supermarkets, and convenience stores, it suddenly occurred to me that this business must have really taken off in the last year, affording fresh opportunities for installation professionals. But then I remembered I had been cautioned a year earlier that it was a tough business to make a buck in for installation types, and the failed video at the gas pump seemed to lend weight to that warning. Just who was making money off these systems, and how were they making it?
I decided to check in with the guy who gave me that warning — Ron Gross. Gross is CEO and chairman of DynaTek Media in Scottsdale, Ariz., and he was also the author of S&VC’s cover story a year ago (see svconline.com/digitalsignage/
features/avinstall_retail_signage_primer), detailing the lessons he and his company have learned in recent years designing and installing turnkey digital signage systems for retail outlets. In that cautionary piece, Gross freely detailed the mistakes, false assumptions, and wrong turns he took over the years while building DynaTek into a major end-to-end digital signage system provider. I figured he could tell me all about the changes in technology that have transpired in the last year to further open up this lucrative market.
Such technology changes have occurred, but the real evolution is on the business side of the equation, he says. To profit from the digital signage revolution, he says installation companies must either change how they do business or partner with others that have done so.
“What’s changed in the last year, in my opinion, is that the retail industry has taken a much more aggressive interest in looking at digital signage,” Gross says. “However, they do not yet fully realize the real value of such systems, and they do not yet fully accept the price tag. As a result, many people [in the retail world] don’t understand why [turnkey systems] cost so much, and they somehow think they can buy [consumer] monitors, mount them, plug them into the Internet, and get what they want. They don’t understand that these systems are really private little broadcast networks and there is a lot more to it than they are expecting.”
Gross says he anticipates it will be another year or two before the retail industry fully absorbs the real value and costs associated with networked digital signage systems. For now, anyway, that means AV companies will be limiting their opportunities if all they worry about is installing such systems. The lowest bidder will usually get such jobs, he says, and they, in turn, will mount and plug in hardware of varying quality and leave their client floundering to manage it adequately over the long term.
After many years and millions of dollars, Gross says he concluded that DynaTek needed to move its business beyond only designing and installing systems. The company, he says, had to start sharing in the long-term advertising profits that can flow from successful networks, thus moving beyond its traditional business.
“We determined it is better to negotiate a sharing relationship on the advertising revenue, and not rely so much on simply putting in the equipment,” he says. “After working on that model for five years, we believe we can be a great partner with the retailer in that regard, and if we can, then so can other companies. Partnering with our customers, we realized, is a better way to go. It’s much better for us to act as the umbrella for the entire project and share in the revenue.”
And speaking of partnering, Gross suggests that installers without the resources or bandwidth to engage in such risky business are better off partnering with those who can pursue such goals. DynaTek, therefore, periodically hires other installers to work on major projects.
“It’s always a major risk moving from being a systems integrator to operating a more broad-based business,” he says. “It’s not for everyone. But generally, technical integrators need to find ways to create additional business. My suggestion is that if they cannot invest in it themselves, they should find a partner in the industry who really wants to do that. There is a market for intelligent systems integrators to marry what they do really well with what companies like ours do really well, since we have become more of a facilitator of the whole thing.”
Gross insists his company has made all this work and adds that others can too. “The industry has yet to mature,” he says, “and to build anything of consequence, you will have to make significant investments, or find significant partners, to make it worthwhile.”