Wednesday, October 18, 2006

Impart Media Group switches business models in search of profitability

In a nod to the fact that digital signage networks can cost a tremendous amount to set up (especially if one's business model is to pay the up-front cost and hope to make it up on ad sales down the line), Impart has announced that it will no longer take this approach, and instead will join the 250+ companies out there (WireSpring included) who sell digital signage software. They'll also be using a hosted model to provide centralized management for customers (and a recurring revenue stream for them). Here's the most interesting part of the press release:

In an effort to respond to the changing environment, the company has recently reduced operating costs and overhead by approximately $100,000 per month. This significant adjustment in operating costs and realigning of corporate overhead -- along with new contracts -- will get the company to a positive cash flow position sooner than previously forecasted. In concert with this corporate refocus, the Mobile Media business unit, inherited in the acquisition of Limelight Media, has been permanently closed, since it was not in line with the company's digital and electronic focus. Additionally, the business that is defined as the capital intensive revenue model, where the equipment supplier provides all of the capital expenditures (and assumed risks) for the placement of equipment in venues, such as retail stores, malls, public spaces, and airports and subsequently sells advertising -- has been frozen due to the tremendous upfront cash requirement and uncertain return offered by this revenue model. The company has decided to focus on the placement of its own proprietary equipment offered by the Impart IQ(TM) digital signage and interactive media products. The capital expenditure or CapEX revenue model will be revisited, once the company achieves profitability and raises additional capital to strengthen its balance sheet so that it can secure venues that are demographically desirable and insure optimal, out-of- home audience reach resulting in high margin advertising dollars.
While certainly less expensive than deploying thousands of plasma screens, changing from a media sales organization to a software development firm isn't going to be easy. Of course, the CEO is new, and he was brought on to make these kinds of hard decisions, so perhaps stemming the cash hemorrhage by switching models is the right thing to do, even if it is gearing up to be just another one of literally hundreds of competitors already playing in the space.

Tags: Impart Media Group, digital signage, digital signage software, out-of-home advertising

1 comment:

Ben Caswell said...

Thanks for your Blog, Bill. And insights. We were just discussing the barrier to entry in the digital signage business is the capEx. Not sure becoming a software development firm is the answer. Not sure yet what the answer is though........