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Savvy investment signals growing importance of digital signage industry

The summer of 2005 may mark the coming of age for digital signage — the onset of large-scale investment and acquisition in the narrowcasting industry. Recent news highlights:

  • Thomson has announced its $285 million purchase of PRN, which reaches 200 million viewers monthly via in-store networks at 6000 retail locations.
  • 3M has a definitive agreement to acquire Mercury Online Solutions, a provider of digital signage and kiosk hardware and software.
  • InFocus has purchased The University Network, a Memphis-based operator of signage networks on 75 campuses across the United States.
  • The IPO of Focus Media, mainland China’s largest signage operator, raised nearly $200 million on Nasdaq, and has reported more than 50 percent quarter-over-quarter growth for its fiscal Q2 ’05.

These latest capital investments are far more significant in 2005, when competition for capital is much more intense than the last flurry of investment during the late-1990s tech bubble, said Bill Collins, principal of WBC Narrowcasting Group, a Cincinnati consulting firm.

“When you look at those three acquisitions, plus the very successful Focus Media IPO, there’s a lot of capital coming into this industry,” Collins explained in an interview with Digital Signage Update. “The fact it’s happening now shows you that some savvy investors are looking at this industry seriously, weighing its prospects against other sectors, and then choosing digital signage.”

For example, Focus Media briefed dozens of institutional investors prior to its IPO, which Collins said indicates that its investors “knew what they were buying.” Focus has a growing number of screens at retail in the People’s Republic, along with a vast array of signs in China’s exploding number of high-rise office and residential buildings. Moreover, the company’s leading competitor in China, Target Media, has received tens of millions from The Carlyle Group and also is expected to go public on Nasdaq before year’s end.

The 3M and Thomson acquisitions indicate thoughtful investment strategy too, Collins said. 3M studied the market carefully for several years before acquiring Mercury Online. As the largest technology player in large-scale digitally printed signage, 3M understands the retail signage space and will leverage this acquisition to foster convergence between digital technologies and content used for large-format screens and printed signage.

“That's what's exciting about 3M and Mercury – they seem determined to make those two media work well together,” Collins said.

Thomson’s PRN acquisition will help a major player in cinema advertising move more aggressively into digital content production and distribution — not just at retailers such as Wal-Mart, PRN’s stronghold, but also in North American cinemas. European moviegoers have proven more receptive to in-cinema advertising than their counterparts in North America, but high growth is anticipated as digital content networks improve both the sophistication of cinema advertisements as well as the ease of producing and distributing ads to movie theaters.

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