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History Lessons

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  • 1. iP Signs - History Lessons Page 1 of 5 History Lessons: What Radio, Television and the Internet Can Teach our Industry By Terry Scannell Founder iP Signs 25 Jan 2007 Monetising radio took decades; are our expectations for digital signage unrealistic? Photo: Paul George Bodea Agency: Dreamstime.com It is often said that the digital-signage industry is embarked on new quests – for a business model, for measurement standards, for a new market appropriate to a disruptive technology. But the reality is that marketers and advertisers have gone down the same path at least three times in the last century, following a predictable route. First, new industries in this area are dominated by the technologists and the entrepreneurs. The market is highly fragmented. Next, as the technology gains a foothold, business models are adopted. Next, standards are adopted. Then, as these industries reach critical mass, networks are formed which lower the costs of content production and delivery. As these small networks grow they are inevitably linked together to bring greater reach and even lower costs. Unfortunately, for all involved the passage of time seems to also be one of the ingredients. Consider three examples: radio, television, and the Internet. Radio Radio was invented around 1895 (depending on which invention you think was the really significant one). It took a quarter of a century to find a business model that would work. It was a time when the dominant ways to advertise were in newspapers and on outdoor billboards. There is even evidence that newspapers threatened their advertisers with not running their print ads if they bought radio time. In its infancy radio was the province of do-it-yourselfers and ham radio operators throughout the U.S.; in 1910 it is estimated that there were 800 hobbyists who operated in the city of Chicago alone. Most did their work for free. In the same year the federal government acted to shut down United Wireless, calling it “one of the most gigantic schemes to defraud investors that has ever been unearthed in this country”. In short, it was an industry filled with self-promoting scallywags of every sort imaginable. Luckily, we are spared such issues in our industry... Broadcast advertising, which is now the financial backbone of the industry, was not invented until 1922 when Ma Bell (AT&T) came up with the idea of a toll station. The station, located in the New York City area, sold radio time to all comers. It was not until this concept was invented that the industry found a business plan that would propel it forward. http://www.ipsigns.com/historylessons.html 28-Jan-08
  • 2. iP Signs - History Lessons Page 2 of 5 Once a business model was in place, a race to build out networks began. Also in 1922, AT&T and a group composed of GE, Westinghouse and RCA began to put together the first radio networks. From 1927 to 1934 radio revenues grew from $4.7m to $72.8m. There were vast innovations in content production. The original ‘content’ was the broadcast of signals to synchronize time. Later came the broadcast of news, music and many other elements that survive in today’s radio-programming mix. But the only real reason, from a business point of view, for content after 1922 was to get more people to listen to the advertisements. Television 1907 was the first time that a cathode ray tube was used to produce an image. Still, it was not until 1926 that what we would consider something resembling television was demonstrated. The 1930s were a time of limited availability of television sets. Nonetheless, FDR was the first president to be televised in 1939. Depending on when you start the clock running, it was 20 years after its pre-Depression emergence before television became a dominant marketing force. In 1940 the U.S. Federal Communications Commission announced the creation of the NTSC (National Television Standards Committee). Its standards were adopted in 1941. The first commercial in the U.S. was broadcast on 1 July 1941, just before a Brooklyn Dodgers-Philadelphia Phillies baseball game. It was for the Bulova clock-and-watch company, showing a superimposed clock over a map of the United States, along with the announcer declaring: “America runs on Bulova time!” This commercial cost the Bulova company ten dollars to run. That would be about $1400 in today’s money. The medium’s development was all but arrested during the Second World War, at the end of which there were only 7000 working TVs in the U.S., and nine broadcast stations. The earliest American television networks (NBC, CBS, ABC and DuMont) were actually part of the larger radio network systems, and many of the early television shows were simulcasts of popular radio shows. Networks offered centralized sales, distribution and production services which lowered costs for individual affiliates. This system was geared towards generating advertising revenue as well, because advertisers were interested in the ability to reach nationwide audiences By the 1978-79 season the big-three broadcast networks had a 91 percent share of prime-time audiences. This represented the peak for television. The Internet http://www.ipsigns.com/historylessons.html 28-Jan-08
  • 3. iP Signs - History Lessons Page 3 of 5 Among several pioneers sometimes credited with conceiving the idea of the Internet is J.C.R. Licklider. He articulated the idea in a January 1960 paper in this way: A network of such [computers], connected to one another by wide- band communication lines which provided the functions of present- day libraries together with anticipated advances in information storage and retrieval and [other] symbiotic functions. In 1962 Licklider was named head of the U.S. Defense Department’s Defense Advanced Research Projects Agency (DARPA). There, he and others developed the technological and other key concepts that propelled the Internet forward. Time again was a factor. It was almost 35 years between the concept of the Internet and its commercialization. The Internet as we now know it embodies a key underlying technical idea – open-architecture networking. Simply put, this means you can use any technology you want at the end of the line but, thanks to standards, all the nodes can still communicate with one another. The commercial development of the Internet was curtailed because of its origins. Until 1980 commercial use was restricted and only the government and academia were able to use The Internet. As commercial uses began to evolve the open architecture of the Net was threatened. In 1994 Michael Dertouzos of the Massachusetts Institute of Technology and others formed the World Wide Web Consortium to ensure that standards, particularly open standards, would prevail. Today, business models are still being discovered. But, subscription services, ads, pay-per-click, buying words and the rest are all playing a part in the huge move of money into this dynamic area. How to speed things up The history of radio, television and the Internet can teach us in the digital-signage business something: that if we apply the lessons we can glean from history we may be able to speed things up. But we also have to accept that time is a factor, and has to pass before our sector booms. Nonetheless, here are four things that I believe we can do, based on the lessons of history, to make our industry more successful in less time. First, stop saying that measurement standards are critical. History suggests that standard measurement systems are not critical to the adoption of new media. No history that I reviewed gives credit to the creation of Nielsen or Arbitron (for example) as being essential to the success of radio or television. Generally what happened was that when people advertised their sales went up. So they bought more ads. In our own lifetimes, it is obvious that standard measurement systems were not essential to the adoption of the Internet and its http://www.ipsigns.com/historylessons.html 28-Jan-08
  • 4. iP Signs - History Lessons Page 4 of 5 commercialization. We are just now getting those standards in place. While these standards are accelerating the use of the Internet for marketing and sales, they were not a necessity. I am not against standards of measurement. I think they will be nice to have. What I am saying is that they are not a got-to-have, and when we say they are, we slow up the adoption of digital signage. Second, let’s agree on a name. We should agree on some standards. Let’s pick an easy one. How about we agree on a name? I have experimented with Google AdWords. The terms relevant to our business that get clicked on the most are “digital signs” and “digital signage”. Let’s use one of those because that is what our customers seem to think we should call it. I suggest that at GlobalShop a group meet and decide on this or some other name in short order. I will use what ever they agree on. Third, let’s agree on open technical standards that will let one network talk to another. We need to sit down as an industry and agree as quickly as possible to some technical standards. First on the list should be a technical standard which will allow BroadSign to talk to Scala and Scala to Nexus and so on. I have not met a software person yet who does not believe they are the master of the universe; every software person in our industry came into it with the idea that they could drive the standard. The problem is that with more than 100 proprietary platforms now available, that thinking is slowing us all down. It is also delaying what will inevitably be forced upon us by the marketplace. To delay this only delays the day when the digital- signage industry takes off. Finally, recognize that there are three important things: networks, networks and networks. We need to put our differences and egos aside and start to create networks. Networks for the creation of content, networks for the selling of ads, networks of installers. For example, the efforts of Mike DiFranza from Captivate Media, PRN and others to create a digital-signage advertising bureau should be supported. If you see a network that has a chance of moving your business forward, take some time and sign up. The law of the networked economy is that the value of your node increases geometrically as the number of nodes increase. Think about it this way. What was the value of the first fax machine? http://www.ipsigns.com/historylessons.html 28-Jan-08
  • 5. iP Signs - History Lessons Page 5 of 5 It was zero. It had no other machine to communicate with. Now you can buy one for $300 and leverage the total invested capital worldwide in all fax machines. That is what will happen with digital signage. http://www.ipsigns.com/historylessons.html 28-Jan-08

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