Wednesday, August 29, 2007

Kiosk software vendor NetKey to buy digital signage firm Webpavement

I was really surprised to find this press release this morning announcing that Netkey, probably the biggest kiosk software vendor out there, has purchased Webpavement, one of the original digital signage software companies. In retrospect, though, there were plenty of clues that something like this was in the works for some time, and I probably should have seen it coming.

First, Netkey has been on the prowl for a digital signage firm to purchase for months (at least), and I've spoken to several folks who claimed to have turned them down for one reason or another. So it's clear they've been thinking of a non-organic way to quickly get into the digital signage market for at least a little while. Second, while they had a tiny booth at this year's Digital Signage Expo (and Webpavement had none), according to the most recent booth layout diagram that I got for the show, Netkey plans to drop a good $25K or so on space at next year's event, so it looks like they'll be working hard to try and build their brand in the market. And finally, while Webpavement was one of the companies we used to encounter a lot in head-on competitions, the only time we ever hear about them these days is when one of their former customers is converting to our kit, so I guess they've been struggling.

Not surprisingly, the press release doesn't say anything about the terms of the sale except that Netkey will be carrying over Webpavement's product line (at least for now). If I had to guess, I'd say we're talking about a sub $5 million purchase since Netkey is clearly looking at this is as a technology play, and while I could be wrong, Webpavement doesn't have a ton of customers that Netkey will be able to derive ancillary revenues from anyway (not to mention that I doubt Netkey had that much in the bank).

Now what they do have are customers. In spades. Netkey's biggest client is Target, whom they do all sorts of kiosk projects for, but they're not allowed to mention them in press releases, so it's unclear how deep that relationship goes. Of course, Target already has some digital signage in the form of Channel Red (which I believe is powered by Reflect Systems, who will have to stay on guard now), but there hasn't been any indication that they're planning to expand their digital signage project. Netkey also has a very capable interactive kiosk platform and a remote management system that will almost certainly overlap with Webpavement's "Sign Administrator," so it will be interesting to see what "new" products Netkey offers at the 2008 DSE.

Before I close, I have to say that I'm so relieved that Netkey is now the, "the only company able to offer businesses a comprehensive suite of best-in-class software products and services designed to increase sales..." etc, etc. Yup, they're the only one. So all you potential customers and prospects out there, if you're looking for the one good company on the market, there they are, and apparently there are no others (which, needless to say, comes as something of a surprise to me). And I thought hyperbole was dead :)

In all seriousness, any companies looking to start a new network would probably be doing themselves a favor to stay away from Netkey/Webpavement right now, since the companies will likely be focused on the merger of platforms, businesses and technologies for the next few quarters. Will they emerge as a new digital signage powerhouse by DSE 2008 by late February? I guess it's not outside of the realm of possibility, but with digital signage companies already coming out of the woodwork it's going to take some serious legwork to demonstrate what's unique, different and better about their product.

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