Sunday, November 23, 2008

In-store Displays Are More Effective Than Price Cuts, Says OgilvyAction

As reported in Advertising Age this morning, research by shopper marketing agency OgilvyAction indicates even price cutting isn't as effective a sales tool as in-store displays (the low-tech kind, specifically, though presumably the results would apply to digital signs too). The trend is most true for impulse purchase items:
Research OgilvyAction conducted with more than 6,000 shoppers across multiple channels in the U.S. in February and March indicates far more impulse purchases are driven by tactics like those low-tech cardboard displays found at the end of aisles rather than temporary price reductions.

And while that survey came before the economy turned much worse in September, research in the past month by the agency for a snack-food brand at convenience stores had similar findings -- in fact, display drove nearly twice the number of impulse purchases as price reductions.

Specifically, OgilvyAction's research from the spring indicates that 29% of U.S. shoppers impulsively buy from categories they didn't plan to when they entered the store. Of that group, 24% said they were influenced by secondary displays (away from the product's usual aisle), 18% by in-store demonstrations, and only 17% by price promotion.

Interestingly, the report also adds some new fuel to the fire with regard to the percentage of purchase decisions affected in-store. While POPAI had touted a number near 70% based on their own research from 1995, more recent research suggested the number is more like 40%, and this report found that 31% of shoppers picked a brand in-store based on the influence of some kind of display.

Ogilvy hopes that the data will be used to encourage retailers and brands to use more merchandising instead of automatically launching price reductions at the first sign of sales trouble.  However, the firm also noted that price cuts can have hidden benefits, as during recessions consumers tend to shop just as frequently as before, but trade down to less expensive brands (which price reductions could help stop, of course).

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Tuesday, November 18, 2008

Danoo and Arbitron find in-store TVs can get you to watch in-home TVs

It still strikes me as funny (or maybe ironic) that TV networks are using in-store digital signage networks to entice viewers of the latter to watch more of the former, but I realize there's a legitimate business model behind that decision.

And just how legitimate is it, you might ask? Well Danoo, one of the larger "hyperlocal" networks in the US today, would tell you the following, if today's press release is anything to go on:

The Arbitron research focused on audience reaction to on-screen ad campaigns, including one for the Sony Pictures feature film “Nick and Norah’s Infinite Playlist.” Most significantly, the study determined that viewers’ intent to see the movie more than doubled, from 19 to 45 percent. Results also indicated that one in four viewers recalled the ad, and all people responding to the survey were six times more likely to name “Nick and Norah” as a newly-released movie.

In two Danoo research studies tracking recent campaigns for the Fox Networks television shows “Fringe” and “House,” the company found similar levels of audience engagement. Advertisements on Danoo’s network drove a 50 percent increase in aided awareness for the new show “Fringe,” and intent to view nearly tripled (from 7 percent to 19 percent) among people watching the screen. Even with an already-popular show like “House,” Danoo’s advertisements drove a 25 percent increase in intent to watch among their audiences.
I don't really know anything about advertising network TV shows, but I'd have to imagine that now's a better time to do it than any time in the past two decades. One of the big benefits of digital out-of-home advertising is that you can include a call to action and encourage viewers to complete a specific act.  For advertising-funded networks this might typically be in the form of a "buy now" type message, since the advertisements are usually for products sold in store. However, TV networks have always had a bigger challenge: they need to communicate the benefits of the program being advertised, encourage the viewer to watch the program, and then hope that the viewer makes it out of the store, all the way back home, and then remembers to turn on the right channel at the right time.

Today, though, all the viewer really has to remember is the name of the show being advertised. Then, with a quick trip to the web he or she could pull up the network's website and start streaming the episode (for most major network shows, anyway).  That removes a lot of detail from the recall process -- there's just one thing to recall instead of three -- and it also removes the timeliness since viewers can stream network TV over the Internet at any time of day and any day of the week.

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Tuesday, November 11, 2008

Citi Downgrades Focus Media (FMCN) to Hold, Slashes Price Target

So just a few months ago I noted how, unlike their American peers the publicly traded Chinese digital signage operators seemed to be doing pretty well.  Well, it looks like the economy is catching up with at least one of them -- the biggie, in fact -- Focus Media.  As a recent StreetInsider article noted, "Citi [is downgrading] Focus Media from Buy to Hold. Price target [is] slashed from $53 to $18." Apparently, Citi analysts are less than bullish on the availability of advertising dollars in China during this economic downturn:
"We remain convinced that the Digital OOH business, with over 175k LCD displays & digital frames, and Allyes, proven business model with dominant market share - are valuable franchises, but believe near-term visibility in the current environment has diminished, and that advertiser demand is uncertain. Accordingly, until we get greater comfort on how long the weakness is likely to persist, we cannot recommend buying the stock."
Global forecasts for both network growth and network advertising growth were relatively bullish in the last few reports I've read, so I have to wonder if this news will have any major impact.  Focus is one of the few firms that could pull the entire sector's numbers down since it's so big (relatively speaking).  The good news, at least, is that there's no domino effect to be had, here. In other words, Focus missing sales targets will hurt Focus, but probably have no effect on other networks, even in China.

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OOH ratings: Arbitron's in, Nielsen's out

I've seen so many things attributed to the crappy economy at this point that I'm having trouble keeping things straight.  Does it mean harder times ahead, or more opportunities than ever? Less business or more business? Good things for the digital signage industry, or bad?

The latest news from Arbitron doesn't do anything to clear up my confusion. As today's press release indicates,
"EYE, the mall media specialist, has signed an agreement with Arbitron Custom Research to measure the effectiveness of mall-based advertisements and the psychographics of EYE mall shoppers.
Arbitron will conduct on-site mall surveys in multiple markets across the United States. This study will be comprised of two parts: adult and teen. The adult study will evaluate the effectiveness of EYE advertising based on demographic information as well as specific questions concerning shopping behavior, shopper segmentation and advertising appeal."

Contrast that with the recent news from Nielsen, which noted that,
"The failing economy just took its first research casualty. Nielsen and IMMI announced late Friday (Nov. 7) they would suspend their syndicated Out-of-Home Report, which measured viewing to TV outside the home. Since launching in April, the service only managed to sign two clients, ESPN and Zenith Optimedia.

"In the current climate, there is limited economic support for this new measurement service," the company said in a prepared statement.

The final report will cover viewing through Nov. 9, 2008.

Nielsen didn't completely close the door on the project. "We recognize that measuring the out-of-home component of television viewing is an important need for our clients. We will continue to work on out-of-home measurement solutions, including efforts with IMMI," the company said.

The service was based on a panel of 500 participants in six local markets (New York, Chicago, Los Angeles, Miami, Houston and Denver) plus 1,700 national panelists. To collect data, IMMI gives respondents a cell phone equipped with software that uses pattern matching to track media exposure."

I understand that this is a bit of an apples-to-oranges comparison. After all, Arbitron's bread-and-butter are the self-contained research projects like the kind EYE has requested. Meanwhile, Nielsen had taken a much more ambitious approach of measuring the impact to a general set of OOH stimuli. Also, while it's unclear that Arbitron could parlay the EYE deal into a larger, more generalized measurement service for digital OOH media, Nielsen could always come back and re-activate their program if there was sufficient demand.

Personally, I don't think the economy had anything to do with Nielsen's suspension of this program. I think there are simply too few traditional media buyers interested in the medium. The people who continue to keep most digital signage networks in business today aren't using Nielsen data or even traditional CPM figures to make their purchase decisions. They're continuing to rely on pilot data and a gut feeling, which will help keep the smaller players alive for now, but could well hamper industry growth when the economy improves.

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Friday, November 07, 2008

Wireless Ronin (RNIN) takes a beating. Will they survive?

With $20M in the bank, it's hard to imagine a company in our industry going out of business, but Wireless Ronin seems to be trying hard to do just that.  They announced their 3rd quarter numbers last night, which look roughly like this:
  • 3rd quarter revenue of $1.9 million for the third quarter of 2008, up 73% from $1.1 million in Q3 2007.
  • 3rd quarter net loss of $4.6 million compared to a net loss of $2.4 million in Q3 2007.
  • Basic and diluted loss per share of $0.31 compared to a basic and diluted loss per share of $0.17 last year.
That's bad. They still lose more than $2 for every $1 they take in. The firm's stock price has been hammered down to about $1M more than the cash they have in the bank.  That's certainly harsh, though more fair than the preposterous $100M+ valuation they were trading at last year.

Even worse than the revenue numbers, though,  are the margin numbers. From the press release:
For the third quarter of 2008, gross margin averaged 5.2 percent, compared to a gross margin of 36.8 percent in the third quarter of 2007. The 2008 gross margin was impacted by investments in the company's NOC and costs to support customer pilots and program tests. Excluding these investments, gross margin would have averaged 20.7 percent through the first three quarters of 2008.
So for every dollar of gross margins they earn, they lose about $46. RNIN, I have news for you: pilots will continue to happen, so I doubt you'll ever be able to simply eliminate those costs.  In our industry, it's a big part of the cost of doing business.  I can't speak to what the company has been spending on their NOC, but I can practically guarantee it was way more than necessary.  In fact, a digital signage company that builds their own NOC is almost certainly doing something inherently wrong. Use a company like NTT/Verio for colocation, or even better, Rackspace for managed hosting.

So, will they survive?

Like I said in the beginning, $20M is a lot of cash to have in the bank, and at the present burn rate still gives the company almost a year to get their act together.  With a head count of 125 employees, you can be sure there's also plenty of room for further layoffs, and my advice would be the sooner the better. RNIN needs to slim down to a svelte 25 or 30, close their NOC, outsource everything that isn't related to selling high-margin products and services, and stick it out until some of their bigger prospects decide to open their wallets.  It'd also help to find a CEO who knows something about this business and its cycles.

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Thursday, November 06, 2008

The morning press - digital signage news for November 6

Here are some of today's interesting clips from the web (and I've been away for a while, so I have a bunch of items that have been on my list for a while):

  • CBS Outernet Builds Out GameStop TV Network - Since inking a deal with GameStop in June, CBS Outernet has so far installed a new, high-definition, digital network with 40" LCD screens in 1,500 GameStop stores. Installation of the remaining 2,500 stores will be completed by June 2009.
  • Network Digital Signage Report: Examine the Infrastructure, Displays and Technology - MultiMedia Intelligence believes that digital signage networks have a permanent place in the communications landscape. The biggest immediate challenge to digital signage is the current global economy. But once that red-flag is lowered, it is likely that investment in digital signage solutions will be as great as it has ever been.
  • Costco Adds Custom Media to In-Store TV Mix - The retailer has worked with Thomson's Premier Retail Networks, Inc. on its in-store media network and content strategy since 2004. The new agreement extends this relationship into 2010.
  • Digital Out-of-Home Ad Spend Triples - The U.S. digital out-of-home (OOH) media industry - which includes video ad networks, digital billboards and ambient ad platforms - is on pace to grow 11.2%, to $2.43 billion in 2008 and now comprises 29.1% of overall out-of-home ad spending.
  • ABI: Digital Signage Market to Double in Five Years - The research firm said this growth will be driven by retailers and advertisers desire to better target consumers in the out-of-home media market. The report predicts that in the United States, the overall market for digital signage software, hardware, installation and management services will reach around $1.4 billion by 2013, up from the $641 million market in 2008.

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