Digital signs create new buzz in ad biz

Digital signs are popping up on billboards, at gas pumps, at the Mall of America -- and a group of Twin Cities companies selling software that remotely controls the digital signs is hoping to cash in on the new advertising medium.

BroadSign International of Minnetonka, Wireless Ronin Technologies of Minnetonka, Telentice Global of Golden Valley and 3M Digital Signage, a unit of the Maplewood firm based in Bainbridge Island, Wash., provide software that ensures digital signs display the right information or advertising at the right place and time.

The market for such software is still relatively small -- no more than $100 million worldwide, analysts say. But digital sign advertising has become a $500 million-a-year business as an alternative to traditional broadcast and print mass media.

Are we really watching? Nobody knows. But market researchers are working feverishly to find out.

"The major factor holding back the growth of digital signage at this point is that its effectiveness isn't proven," said Aravindh Vanchesan, an analyst for California-based research firm Frost & Sullivan. "But new studies by the Nielsen Co. and others are trying to correlate product sales with the exposure people have to all these advertising screens."

BroadSign, which said this week its software will control a 44-by-31-foot information screen above the entrance of the Democratic National Convention in Denver, is a sort of computerized middleman. The firm doesn't sell advertising or own digital signs, but it does license its software to the firms that do. BroadSign's software controls the flow of information to and from the signs through its Canadian data center.

"We control 150 different digital sign networks around the world, and we know what content and what ads are being run on them at any time," said Rick Engels, BroadSign's CEO.

After three years in the digital sign business, the company is operating at break-even but doesn't disclose revenue, he said. It has 55 employees, including 10 in the Twin Cities; the rest are at its Montreal data center.

BroadSign's largest shareholder (holder of a minority stake) is Petters Group Worldwide, where Engels was CFO before moving to BroadSign.

Reach Sports Marketing Group of Eden Prairie uses BroadSign's software to distribute advertising to 110 digital signs in ice arenas and community centers, including about 40 in the Twin Cities. In the Plymouth Ice Center, a split-screen digital sign tells who's playing on one side, while displaying ads and game scores on the other.

"Our developers create an ad, then log into the BroadSign software and publish the ad to an individual screen," said Darren Wercinski, the Reach Sports CEO. "We have a group of ads that runs on the sign about every 2 1/2 minutes; the advertisers are local businesses, such as dentists, fast food restaurants and real estate agents."

Wireless Ronin's business is similar, but it licenses its software while reselling digital signs made by others. Some of its biggest clients are Kentucky Fried Chicken (menu signs), Reuters (information signs in bank lobbies) and Chrysler (interactive showroom displays), said Scott Koller, Wireless Ronin's executive vice president of sales and project management. Recently the firm installed digital signs that show movie trailers in the lobby of the CineMagic Atlantis 15 theater in Burnsville.

Digital signs typically cost $2,000 to $5,000 each, and the cost of running them remotely with software can range from $10 to $100 a month, depending on how often the signs are updated, Koller said. Wireless Ronin, a publicly traded company, lost $10.1 million last year on revenue of about $6 million. It has 140 employees, including about 90 in the Twin Cities.

"Digital signs are an emerging market, and the reason is the underlying problem with print advertising in places like banking, retail and quick-serve restaurants," Koller said. "You print the material, send it to a location and hope the manager puts it up and takes it down when he or she is supposed to. Digital signage does all that for you."

Telentice, which has 26 employees, including four in the Twin Cities, purchased its software from Japanese computer firm Fujitsu, and for historical reasons has a much larger presence outside the United States -- it controls more than 15,000 screens internationally.

Telentice CEO Howard Witherspoon concedes that "in many cases, we don't know if anyone saw the advertising" on a digital screen. Instead, return on investment is calculated based on the number of people who pass through public places in a day, he said.

Representatives of 3M Digital Signage could not be reached for comment.

The problem facing all the software firms is that nearly 40 companies are competing to be the premier digital signage software provider, says Sanju Khatri, an analyst at California research firm iSuppli Corp. And that's too many for a nascent market, he said.

"We're definitely going to see a lot of consolidation," added Vanchesan of Frost & Sullivan. "Companies such as Google, Microsoft and NBC are starting to look at digital signage seriously, and if they get into the market, they'll absorb smaller companies."

Steve Alexander • 612-673-4553