"The use of digital displays, for information or for advertising, in out-of-home markets is on the rise worldwide," said Chris Connery, vice president of large format commercial displays at DisplaySearch.

LCD and plasma displays need to improve their ruggedness, sunlight readability and weather resistance in order to succeed in the emerging market, Connery said. Flat panels also need more seamless tiling techniques to compete with 65-85-inch, four- to six-sheet printed poster boards used for bus shelters and kiosks today, he added.

A survey in progress by the Digital Signage Association suggests new technologies such as multi-touch and stereo 3-D displays will help expand the market.

DisplaySearch said display makers, such as LG Display which is building an eight-generation LCD fab and Sharp now building its tenth generation fab, will be seeking new markets. But it's unclear who will pay for the advertising infrastructure needed to fuel the new market, according to DisplaySearch.

Part of the estimated $8.4 billion of the economic stimulus package allotted to the Department of Transportation could include digital signage replacing paper posters in mass transit projects, Connery said. Vancouver may also adopt the technology as part of its plans to expand mass transit for the 2010 Winter Olympics, he added.

DisplaySearch is hosting a conference on display technology for digital signage in San Jose on September 1.