Digital Signage: Justifying The Price

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Published in September 12th, 2008

Digital signage continues to expand into a wider breadth of markets for an ever growing list of applications. Some facilities, such as malls, postal offices and universities deploy them to communicate relevant information to a targeted audience. Others - for example, sponsors and advertising firms - use them to build brand awareness and promote products.

Despite the growth in popularity that digital signage has enjoyed, pricing models continue to vary wildly. While established promotional channels such as television, newspapers and websites adhere to widely accepted advertising pricing models, no such standards currently exist for digital signage placement. In this article, we’ll examine a few factors that are likely preventing such standards from being adopted.

Widespread Adoption By The Market

One of the reasons why advertising through conventional channels follows an accepted price structure (typically a CPM model) is the availability of data. Simply put, a medium (i.e. magazines) that has proven effective over decades of widespread use can easily conform to pricing uniformity. By contrast, digital signage has not yet developed that track record. Compared to other advertising platforms, it is new and to many sponsors, unproven. That being said, evidence of expanded usage suggests that digital signage will continue to grow. It will eventually yield enough data to encourage a similar pricing structure to that used by other platforms.

Measuring ROI

Return on investment is another sticking point to uniformity in pricing. Because the technology is comparatively new, many businesses are uncertain about the ROI it will yield. Deployment of screens throughout many branches of a business can represent a significant investment. Because data is sparse (again, compared to conventional media), the ROI can be difficult to predict. Because ROI is an element of pricing, many sponsors are leery of moving forward.

Market Demand And Market Price

Another potential hurdle to the development of a uniform pricing model is low market demand. While the technology is enjoying quick spurts of healthy growth, demand still lags considerably behind traditional media. This is understandable given the short time that digital signage has been available. However, over time, the increased demand will not only boost the price of ad deployment, but it will also push the platform toward a standardized pricing model.

Lack Of Message Integration

While the capabilities of digital signage are expanding, they’re still limited. The networks on which advertisers and sponsors broadcast their messages are usually proprietary. That is, they are closed and don’t offer the level of flexibility needed for seamless message integration. This is in stark contrast to television, newspapers and magazines; in these media, an advertiser could broadcast his message statewide, nationally, or even globally. And the message can be integrated within various types of content. Once the digital signage industry resolves this issue - and it likely will do so soon - sponsors and advertisers will be more willing to move to a consistent (and theoretically, more predictable) pricing model.

Increasing The Value Of Digital Signage

The value of implementing an array of digital signage displays will be based upon the scope of the installation and the use of the network. For example, a restaurant with 1,000 branches can expect to invest millions of dollars to install one (or more) screens per branch. They could potentially offset this expense by selling space to advertisers throughout the network. Or, they could deliver their own advertising to their audience, thereby increasing revenue further.

Justifying the price of installing a digital signage system requires careful analysis of that system’s use and the resulting effects on ROI.

four winds interactive is a leading provider of digital signage networks and software.

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