1. Hackers. Actually, I've always dreamed of having a digital license plate. Not for showing ads -- to change or black out my plate number at will James Bond-style, or maybe to tell the driver behind me that I can totally see him picking his nose. (I'm talking to you, white Subaru Legacy wagon driver on the 405 last night.) With an audience as large as California's network of roads and car thieves aplenty, you can bet there will be an army of hackers trying to get in.
2. Glitches. A bunch of pixels on your plate burn out. The plate number doesn't come back up when the car starts moving again. The government's ad-broadcasting system crashes. You get the idea.
3. General backlash. Personally, I don't want any vehicle I drive to advertise for Walmart or McDonalds. I don't patronize either, and wouldn't encourage others to. No one should have to run ads that represent business practices or beliefs they may not agree with. Offering drivers the ability to choose their ad preferences and sorting out those specific transmissions sounds like a logistical nightmare. Further, the government would be running ads on our personal property, yet we wouldn't necessarily get fair compensation for it. With such a huge deficit to make up, I doubt the state would waive license fees.
What do you think of the digital license plate idea?