Digital Real Estate

I have made connections to digital signage and other industries in the past with posts on home automation and search engine optimization. This post will be similar in that it will go into how digital signage is a bit like investing in real estate–only in our case, the estate is digital. I have come up with six ways in which digital signage is similar to investing in hard land and rental asset properties.

Real Estate is a Limited Resource

Just as the Earth which we occupy is limited, so are the retail, hospitality, government, and manufacturing facilities which digital signs can be installed. The digital “land grab”–as it has been so poignently referred to–is an accurate description of our industry. Many of us have been seen firsthand the networks that have either folded completely or have been sold for a “song.” While this ordeal is a very natural occurrence for a market in distress, it goes to show that the haves can have more if they simply wait for those who have not used their “limited resource” wisely.

Ad nets and private nets alike will eventually become dependent on the digital signage that will infiltrate nearly everything we do. And, while space is limited, the market is still in a state of pirated disarray. It’s like the story of the Oklahoma Sooners: get it before someone else does, shoot or be shot. Sad really, but in the words of Walter Cronkite, “and that’s the way it is.”

Upfront Capital Investment is Necessary

I always find it interesting when people want something for nothing. They want to get someone else to give them everything below cost, or worse, for free. This does not play out well in the real world. While the adage, “it takes money to make money” may not be true for every scenario, it certainly applies if you want value. This applies in estates both digital and real. I remember a case study I performed several years back on Second Life, the virtual Internet world. The study opened my eyes to how many people spend their time. It was also interesting to see how companies like Dell and Apple were setting up virtual stores in the game and how because the Second Life world’s land was limited–people were snatching it up as well. But that’s a bit off topic.

To make it short and sweet. Capital is needed for investing in a digital signage network. Plain and simple. Step one, get a plan. Step two, present that plan to investors and banks. Step three (assuming steps one and two go to plan), work the plan. Plan the work, work the plan. Real estate is no different. Weighing the numbers of whether a rental property will have a sustained ROI is all investors want–really. The same goes for pitching your digital media business.

Recurring Revenue Stream Possible

Much like a rental property can bring in a recurring revenue stream, so can digital signs. There are many levels in which this is possible: ad revenue, sales lift, content creation, hardware sales and even SaaS fees. Simply put, digital media hosting and ad-on products and services can be a source of revenue for business veterans and those entering the realms of the industry for the very first time.

Speculation is Present

Speculators will always be present when potential and foreseen opportunities abound. I know we have seen them. I wish I could tell you about all the advertising networks who want to start up, or about all the requests to be added to our directory. With speculation comes all the ugliness of “claim jumping” and “turf wars.” Encroaching on someone’s territory is the best way to set yourself up for something similar.

And, digital signage–despite its recent growth curve–has been the recipient of the trends of the general market as well: tightened lending and decreased advertising expenditures. While some companies have the desire to operate a digital sign business, they may not have been able to muscle it out with the recent credit crunch. I was a eyewitness to similar circumstances that gripped the housing markets in late 2007 and into 2008 while living in Las Vegas. A fellow employee daily worried about her adjustable rate mortgage as she saw it steadily climb.

One this is for certain: nothing is for certain. But for those who are smart to weather the storm, the speculation can be worth the risk, especially if you are able to get and hold your real estate through the crisis. In that case, pulling out in the long run means a stronger and sustained future.

Asset Depreciation

Like any asset, there is depreciation. Purchasing signage hardware and software means that it will soon be outdated. Computer hardware is especially bad. I could probably do an entire post on how computer hardware is like a new Corvette: once you drive it off the lot, it depreciates up to 20%. Does that mean you don’t go for the Cadillac of hardware and software? Not necessarily, but regardless of what model you do decide upon, keep in mind it will lose value the moment it arrives and even more after you’ve installed it and it’s been running a few months.

While homes depreciate, land rarely does not increase in value. As the market for digital media becomes more and more flooded, the value of digital real-estate will continue to climb–even if the “asset” housed on that estate is worth scraps.