Tuesday, September 30, 2008

Revisiting the make-buy argument for digital signage software now that Coolsign is for sale...

If Adrian's DailyDOOH update is to be believed (and hey, why not?), one of the more established digital signage software packages out there -- Coolsign -- is to be sold:
Just over a month ago Planar engaged an investment banking and asset management firm with instructions to sell its Coolsign division.

Planar remember is primarily a high end screen manufacturer (and very much struggling itself at the moment) but in July 2006 it bought itself into the software arena with the acquisition of Clarity Visual Systems (Coolsign) for the not insignificant sum of USD 46 million in cash and Planar stock.

Coolsign is not surprisingly running at a loss at the moment but has revenues of USD 6.6 million. The folks looking after the fire sale are looking for a price of 3 times revenue - i.e. USD 20 Million or so.

We doubt if there will be many takers even at that price.

Yeah, I'd definitely have to agree with that last part. But the fact that Coolsign is even on the block indicates a larger problem, for Planar and perhaps for the industry at large.
First off, Planar has been hurting for a while. Their stock has taken a pummeling, and now they're trying to raise cash by any means possible. While at one point they might have been able to go back to the market and sell some new shares, the current climate on Wall Street makes that close to impossible, even for a company with good financials.

However, Coolsign, with over $6M in revenue (which is pretty good for digital signage software vendors), is still running at a loss. With smaller firms like Localvision signing off, Focus Enhancements's recent bankruptcy (with more on the way), and bigger players like Broadsign and Enquii either announcing new private capital raises or admitting to having done them in the recent past, we're starting to see several factors come together in a perfect storm of digital signage doom and gloom:

1. Too much competition, not enough innovation: We track over 300 competitors -- firms that claim to sell digital signage software. Seriously, 300. There isn't enough differentiation between them, and I'd be surprised if the vast majority had fewer than 100 sites installed by now. But they suck up capital and add hype and confusion to the market.

2. Tightening credit markets mean less capital to work with: It seems like too many digital signage software companies spend WAY more than they actually make, which is a big problem now. Panicked VCs are tightening down and parent companies have less to spend on their digital signage subsidiaries. Plus, with access to credit now all but out-of-reach, fewer networks can lease equipment for new installations or factor advertisement revenue streams to stay afloat.

3. It costs a boatload to make this stuff and keep it up to date:
WireSpring probably has one of the more sane cost structures out there, and we can easily spend over a million bucks a year on R&D and basic QA and support. When you consider the number of competitors I mentioned above, plus all of the guys that are building their own software to "save money" for their internal network (which is how Coolsign started, actually), you can imagine that there are very few software guys out there that are actually turning a profit, and thus very little software that generates a positive return.

So, what has to happen?

Simple. First off, there will be more messy bankruptcies and quiet "going out of business sales." Just like after the dot-com bubble, lots of companies will try to sell their half-finished, never-quite-worked-right software and other "intellectual properties." Hopefully, nobody will buy them, and they will die quiet deaths.

Next, there will be consolidation. Some industry players will band together to form better-capitalized entities with bigger customer bases. Others will choose vertical integration, forming full-service companies that can count on revenue from more than just technology.

Finally, the "builders" will eventually go away, and the "buyers" will at last win the make-buy argument. Just as practically nobody builds their own inventory or accounting systems anymore, more people will realize that making in-house digital signage software is a losing proposition. More people will turn to off-the-shelf solutions and customize them instead.

I know what you're thinking: this sounds self-promotional. After all, my company stands to win if this happens. But point out a flaw in my logic above that would suggest otherwise and I will happily debate it with you.

The bottom line: if Coolsign, with a significant revenue stream and excellent market presence, is going down, rest assured that many more will follow.

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Friday, September 26, 2008

WSJ rips into GSTV's pump-top digital signs

Pump-top digital advertising was a tough idea for me to swallow when it was first attempted some years back.  People -- even when gas was cheap -- just don't like pumping gas.  Most don't connect the money that they're spending with the value that they're getting in the form of easy, convenient and fast transportation (rush hour traffic aside, of course).  But between "cheap" gas now costing well over $3.50 per US gallon and everybody panicking over what's going on with Wall Street, the Fed and the proposed $700 Billion that we're apparently going to be spending to "fix" banking excesses, the average joe  (myself included) filling up at the station has gone from merely tolerated to well despised.

So it's not too surprising to hear people complaining about loud and unavoidable ads playing at many station pumps these days.  The GSTV network gets it from both barrels from the WSJ's Brian Carney, but most of the pump-top networks that I've come across look the same, and I suspect all would catch flak from him.  However, I don't think that would be enough to cause him to write and publish an opinion piece on the matter.  For that, he needed insult added to his injury, which he got in the form of an ironic ad:
The particular commercial I saw was, sadistically enough, for some
car that supposedly gets such good mileage that gas pumps engage in
various acts of sabotage when these fuel-sippers pull into the station.
"Gas pumps hate us" is the tag line.

"Well, I hate gas pumps," I thought as I filled the capacious tank
of my seven-seat, V-6-sporting, low-mileage minivan. "But I hate
watching TV at the gas station more." Oil companies, take note: If you
are worried about your public image, do not run GSTV ads that are
designed to call attention to how expensive it has become to visit your
place of business.

So yeah, probably not the best choice of ads.  What could GSTV and others do at this time of economic uncertainty to endear themselves to viewers instead of alienating them, though?  Well, here are some ideas, each with its own logistical and cost issues, of course :)

  • Only show ads for sale-priced items at attached convenience stores (emphasizing value)
  • Don't use audio on ANY ads
  • Devote more time/screen area to news and information - you know, the stuff people might actually be interested in watching
  • Make pump-top advertising opt-in, and offer a discount per gallon for each ad watched

It's not an easy problem to solve, to be sure. But as long as people don't start avoiding GSTV-enabled stations en masse, the company will continue trying to grow out their network, as will others.  Bottom line: network owners are going to have to start making sure that their medium only adds to the environment before visitors start going elsewhere.

Thursday, September 25, 2008

So, what's gonna happen to Wireless Ronin (RNIN)?

Yikes, it has been a bad week for one of the few publicly-traded digital signage companies in the US market.  Granted, it's been a bad week for most publicly-traded markets, but RNIN is facing some exceptional challenges right now.  As we noted a few months ago, the company had to write off a huge portion of its 2006 and 2007 income as a bad debt, and unless their estimates for next quarter are extraordinary, 2008 doesn't look to be doing them any favors in the revenue department either.

This week, in a triple-whammy, the firm's stock got downgraded, longtime CEO Jeff Mack announced he was leaving, and consequently, the stock saw about a quarter of its value evaporate. While an interim CEO has been appointed whose sole job is to find the next leader of the firm, clearly investors must be wondering what the company has going in its favor these days.  With the credit market so tight right now, it's hard to fund new projects, and RNIN's cost infrastructure is far too high for their own good.  As one commenter on Yahoo! Finance put it:
The current consensus is for a loss $1.15 per share for 2008, that is up from an estimated loss of $.94 just 90 days ago...They have been low side for the past 4 straight quarters, meaning the company lost more than expected. As they look to 2009, the estimated loss per share is at $.83 versus a loss per share of $.58 cents. That translates into RNIN burning through $17.25 million this year, and $12.45 million next year. Add those two number up, and you burn through more cash than RNIN has. Do you think they can do a secondary offering to raise more cash with a 2 or 3 dollar share price? I think not...
That's a hugely important point in this crazy market right now. RNIN has relied on the cash raised from two successful public offerings to keep them going while trying to ramp sales.  Unless there's a major turnaround in the market soon, they'll have a very hard time selling more shares to raise a significant amount of money.  And offering debt is totally out of the question given their performance.

And before you go bashing me for being a RNIN-hater, the fact is that I'd like to see these guys be successful.  We gain basically nothing for having them fail, and in fact it might hamper our own ability to raise money in the future.  What confounds me to no end, though, is how these guys managed to get such a high valuation and extract such a large amount of money from the public not once, but twice.  On the private markets they'd never be able to secure a $50M+ valuation with such tiny sales and such large expenses.  It's like they've exploited some bizarre reverse wisdom-of-crowds effect.

We'll continue to track this company to see if they can pull it out (or at least appoint a CEO that can stabilize them).  But as of right now, I would not be bullish on them at all.

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Friday, September 19, 2008

The morning press - digital signage news for October 8

Here are some of today's interesting clips from the web:
  • Outdoor digital ads have 70% recall - A survey conducted exclusively for Out Of Home Media (India) Pvt. Ltd, found that the average weekly reach of the company’s network in Mumbai, New Delhi, Bangalore and Pune totalled 5.46 million people, with more than 70% of them recalling the OOH screen.
  • Flyte Systems and DisplayIQ Install Live Airline Information at Two Hotels - Flyte Systems is the only company that provides real-time airline departure information. Hotels implementing Flyte Systems airline information on the DisplayIQ interactive digital signage platform are the Fairmont Chicago and the Hyatt Regency Phoenix. A third installation is anticipated at a Ritz Carlton property by year end.
  • Channel M Rolls Out Its First Bilingual In-Store TV Network - Channel M is rolling out a new in-store network for PLS Check Cashers, one of the nation’s oldest and largest check cashing establishments. Advertising and programming on the network, installed across the country at PLS Check Cashers stores, will be offered in both English and Spanish to reflect customer demographics and language preferences.

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Looking for more digital signage info? Check out WireSpring's Kiosk and Digital Signage blog for in-depth industry analysis and even more news about the digital signage industry. While you're there, feel free to read up on our digital signage software and services

Wednesday, September 17, 2008

C-stores show 88% sales lift with digital signs versus static signs

The press release that showed up in my email said:
Digital Promo network (DPN) today announced the preliminary results from a 1-year study of Point-of-Sale (POS) sales data collected from their 400-store C-Store centric network, which includes 240 stores equipped with networked digital screens and 140 control stores. The network reaches major and minor DMAs on the east coast. The results measured for advertised products across multiple categories, showed sales increases of up to 88%. When averaged, advertised product dollar sales rose 26% while product volume increased 18%. DPN plans to release actual category data and the applied methodology prior to NACS.
There has been a fair amount of research on the role of POP displays of all sorts in convenience stores -- POPAI did the seminal research report on the subject a few years back. But while many have speculated that digital displays would produce even better results, the DPN study may actually indicate that.

We won't know for sure what the real impact is until they do release that category data at NACS, but the mere suggestion that they might let others see that information is pretty encouraging at this point.

AdAge dotes on real time 'face recognition' for digital signs

I'm pretty sure that my position on the issue of privacy in retail stores and semi-public spaces is pretty well established by now. In today's 3 Minute Ad Age video, we've heard that advertisers have quite a different opinion, likening the data to "outdoor advertising's version of TV's commercial ratings." While that's hardly true -- dOOH measurement data is both more accurate and more sneakily acquired -- I suggest you take a second or two to check the video out, though anybody already familiar with the technology won't hear anything new.

Expect the debate to get turned up a notch in a few weeks. Word on the street is that both POPAI and the ISMI have something to say about the issue.

Tuesday, September 16, 2008

Zoom zooms to the front of the pack

As MediaPost noted yesterday, Zoom Media, who has traditionally haunted nightlife venues and recently purchased Alloy Media + Marketing's Insite division to grab a footprint in about 2,000 bars across the US, just announced that they purchased ClubCom, which operates displays in 1,600 health clubs and gyms in the US, UK, Germany, Japan and Australia.  The article notes:
That means Zoom now operates 16,000 digital screens in 2,250 venues, in addition to another 55,000 static billboards distributed across a total of 8,500 venues. The terms of the deal were not disclosed. Announcing the acquisition, Zoom touted the high concentration of 18-34-year-old adults, particularly males, in out-of-home "lifestyle" venues like bars, nightclubs, restaurants and fitness clubs, as well as the large amount of time spent at these venues. On average, the typical dwell time for all three venues is two to three hours per visit, with at least one visit per week.
While the new direction of the company is as of yet a bit unclear, I might speculate that:

1. Zoom determined that advertisers were less interested in the activity taking place at the venue, and more about the people who frequent them (and how often). Otherwise, how else would you explain a bar network and a gym network merging?

2. ClubCom was either in pretty bad shape, or else Zoom was much better capitalized than anybody thought. Buying an established network of a few thousand screens isn't cheap, if just for the asset costs alone, so ClubCom was either in dire straights due to bad management, or had a lot of unused cash sitting around and felt it could be aggressive. I couldn't say which it was without talking to somebody about it.

So Zoom is certainly doing its part to speed up the consolidation of the network side of our industry.  Who's next?

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Thursday, September 11, 2008

Walmart to air voting PSA on their network

On the heels of yesterday's story about the Ad Council looking for more digital out-of-home networks to air their commercials for mass-transit systems comes this press release indicating that Walmart will be putting their network to good use soon enough too:
As part of an ongoing effort to engage its customers and associates, Wal-Mart Stores, Inc. (NYSE: WMT) will begin a voter registration campaign with public service announcements (PSAs) on its in-store television network later this month to encourage 136 million weekly customers and 1.4 million U.S. associates to register and vote in the November elections.

The campaign will include two, 15-second PSAs that will encourage viewers to register to vote and cast their ballots in the upcoming election. The PSAs will run in stores through Election Day.

The company will also launch a voter registration portal on its corporate website beginning today, and feature posters with voter registration information at nearly 600 Sam's Club U.S. locations.
Over the years I've seen the Walmart network run local emergency information pending hurricanes and tornadoes, and I've even seen spots focusing on community businesses and organizations. But this is the first time that I'm aware of that the retail giant has used their in-store TV network to help rock the vote. It makes perfect sense, of course - a huge percentage of people shop at a Walmart every week, but one has to wonder what's in it for the big W? The conspiracy theorist in me wonders if they determined that the audience most likely to see these in-store ads might vote for Walmart's preferred candidate.

On a related note, is it still Wal-Mart, or is it Walmart? I saw a news release a few weeks ago indicating that the company was switching to the second variant there, but today's press release still uses the older, hyphenated style? Which one is it?

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Wednesday, September 10, 2008

The Advertising Council uses SeeSaw to get PSAs

Hey folks. I'm back from a bit of a hiatus. Rather than try and back fill the blog with old news (and it doesn't look like there was that much of it anyway), I thought we'd just start off fresh. And given that the debate over whether or not digital signage is "green" (or can be made greener, at least) continues, this little tidbit from The Advertising Council made me smile:
The Advertising Council, in
partnership with Environmental Defense Fund and Ogilvy New York,
announced the launch of a new series of broadcast and online viral
public service announcements (PSAs) designed to urge Americans to take
advantage of mass transit, carpooling and biking to combat global

The online viral PSAs will also be posted on popular social
networking and video sharing websites, and environmental and consumer
blogs. The Ad Council will be distributing the broadcast PSA to TV
stations nationwide, with a particular emphasis on major cities with
public transit. Additionally, as a result of a partnership with SeeSaw,
the world's most extensive digital out-of-home media network, the PSAs
will air on screens in convenient stores, health clubs and on college
campuses throughout the country. Per the Ad Council's model, the PSAs
will air in time slots donated by the media.

The use of mass transit systems has already jumped nearly 6% nationwide since the start of the summer thanks to high gas prices, and with green and economic forces finally coinciding on the issue, the Advertising Council and the Environmental Defense Fund finally have a chance to do some good and appeal to the masses all at once.

And what better place to do so than on out-of-home networks? While we probably won't see too many bus shelter networks devoting time to messages that basically say "ride the bus" (what would people be doing there already, after all?), office buildings, retail stores, and even roadside billboard networks could be great places to get the message out. I think it's still a bit of a stretch to consider all of SeeSaw as a single network ("most extensive" or not), but this is a great opportunity for them to show off just how homogeneous their system makes dOOH look, gain some publicity for themselves and the industry as a whole, and, of course, promote a worthy cause.

Now all that's left is to see which networks, if any, are willing to devote some time to these unpaid messages. I'll be keeping my eye out for them.

Wednesday, September 03, 2008

Walmart to roll out 2nd generation digital signage network with PRN and others

There has been much speculation about what (if anything) Walmart was planning to do with their in-store TV network, which has been more or less the same for quite a few years now. Some suspected they would in-house network and media operations. Others thought they would continue to let PRN operate it, much as they had before. Today it looks like the cat's out of the bag:
Custom programming on the new network will be provided by Studio2, a newly formed company led by key advertising executives who are experts in in-store communications and were involved in the development and testing of the new network.

Network operations, implementation, advertising sales and HDTV wall programming will be provided by Thomson's Premier Retail Networks (PRN), Walmart's current partner for these services.

Response measurement, learning, and message optimization technologies will be provided by DS-IQ, which supplied analytical insights for the network pilot last year.
PRN's involvement on the network end isn't surprising, since they have a rather low-cost means of getting content to lots of screens, and all of the usual best-of-breed content delivery features. However, Walmart decided to split the content part out into an entirely new company, which I think is pretty remarkable. While we've long felt that there are very few -- if, in fact any -- digital out of home agencies out there right now, it would seem that Walmart has not only agreed, but decided to take matters into their own hands (in a way that really only they can). I would more than expect that they'll take on other clients besides Walmart, which will probably result in a bunch of new best practices for digital signage content floating out there. Here's hoping that we see some additional validation of our own findings :)

Also noteworthy is DS-IQ's involvement. Needless to say, this is a HUGE deal for the company and their technology.

What I'm still waiting to hear is what, if any, role Saatchi X -- another entity essentially formed at Walmart's demand -- will play. After all, they're supposedly THE expert group when it comes to marketing at-retail, and we know they already spend a good deal of time poking around in Walmart stores on behalf of their biggest client.

I'm sure we'll be hearing more about this network in the news, and of course lots of people will be out there watching the roll out as it starts up in September.

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