• by Erik Sass  @eriksass1, October 31, 2008

Close on the heels of a cheery forecast for ad revenue for digital out-of-home media, another research firm is forecasting comparable growth in the nuts-and-bolts end of the business, including making, installing and managing digital signage. Together, the two forecasts suggest digital out-of-home will not only survive the current economic downturn, but see a significant boost in the future.

According to the forecast from ABI Research, the overall U.S. market for digital signage software, hardware, installation and management services is poised to grow from $641 million in 2008 to $1.4 billion by 2013, an increase of almost 120% in five years.

Spread out evenly over this period, that equals a cumulative annual growth rate of about 17% per year. However, given the vertigo-inducing economic plunge now underway, average growth rates will probably be lower in the next one to two years, and higher thereafter.

Michael Wolf, a research director with ABI, was cautious. "We certainly expect the economic slowdown in the United States and other markets to impact retailer and advertising spending on new initiatives over the next 12 to 24 months." However, the situation should improve rapidly after that, given advertisers' interest in reaching consumers through new channels, which will probably only grow as time goes by.

Wolf said advertisers and retailers are seeking a "differentiated approach to reaching the consumer, particularly one that gives them an interactive component and more robust targeting."

Looking to the future, ABI Research forecast growing use of demographic targeting based on visual recognition software, as well as integration of RFID sensors with digital signage. Several companies have already made use of the latter technology for in-store advertising, keying digital signage to display relevant messages when a consumer picks up an RFID-tagged product from the shelf.

ABI's findings seem to agree with another recent forecast from Patrick Quinn Media, one of the few research consultancies to size the overall digital out-of-home advertising market and produce predictions for future growth.

In Quinn's forecast, digital out-of-home will undergo a shakeout in the near term, as economic woes drive mergers and acquisitions as well as outright failures. However, this will be followed by a boom resulting from advertisers' interest in new media options. Like ABI, Quinn says they will be drawn by new possibilities for integrating digital out-of-home with in-store advertising, in addition to the emerging synthesis of place-based media and mobile marketing.

Overall, Quinn sized the digital out-of-home advertising market at $2.43 billion in 2008, up 11% from $2.19 billion in 2007. According to Quinn, the market tripled in size from 2002-2007. In the years to come, the forecast has ad revenue growing at a cumulative annual growth rate of 12% from 2007-2012, which puts it just under $3.9 billion in 2012.