That RMG is rumored to have been unsuccessful in an attempt to raise a war chest of cash to do acquisitions, and has now gone in the opposite direction is not a failure. Instead, it is a reality check and a reset from the previous shotgun/footprint strategy outlined last year. Since the company is largely owned and controlled by a couple of venture firms, it speaks to a changing mindset at the boardroom level. Instead of continuing to make opportunistic buys of disparate network properties, it appears to signal a retrenching around the best properties: ones that happen to center on transportation. By undergoing the retrenchment, it opens the door to future acquisitions that would actually fit the new focus of the company. There are numerous examples of retail conglomerates that lost their focus and regained it by resetting strategy around core properties. My favorite is Genesco, an old line shoe company (Genesco is shorthand for General Shoe Company, its previous name) that at one time owned the Bonwit Teller department store, numerous specialty apparel manufacturers and retailers, and a soccer equipment business, among others. A retrenchment around footwear allowed them to hone their skills as specialty retailers with multiple tight demographic targets, and eventually create and acquire new concepts that leverage their strengths. Once close to bankruptcy, they are prospering as never before. The guts to divest, and the patience to develop the retail teams that complement their manufacturing legacy has paid off. Perhaps that is the goal of RMG. The next step will be the rebuilding of infrastructure and organization around the new focus. With any level of success, you can expect them to be back on a growth path, perhaps through acquisition, with a much more attractive story to tell potential investors.

So what happens to the networks being divested? A good guess is that the fitness property will end up in the hands of a new owner who already has a presence in that vertical. That type of buyer may be challenged by the need to consolidate technology platforms, but that cost would likely be built into any buy offer. The net effect would be further consolidation in the fitness vertical, and similar ability to gain efficiencies for the new owner. Of course, the eventual buyer may also be someone not currently in the space who wants to establish themselves and use RMG’s network as a springboard for growth. Time will tell. As for the coffee shop network, now known as the New York Times.com Today Network, we can only hope that a sale will result in a new name, and perhaps some more thought around screen placement for starters. My own guess is that the bidding for that network won’t be quite as spirited, and for good reasons. There is not a list of potential buyers that comes to mind, as there is for the fitness network.

The most successful networks out there have something in common. Think about the healthiest and highest growth DOOH network companies. Focus is the underlying theme. RMG’s moves indicate that their Board has come to the same conclusion, and how they got there matters less than getting there. Like a plant or a tree, a little pruning often results in more robust growth and better health. Look for focus and operational efficiency to be the drivers of continued consolidation in all aspects of the industry going forward.

Tools, applications and analytics effectively drive Social TV, and the best examples of the state of the art manage to merge all three. The industry is technology-driven, and benefits from the fact that the end users own all of the hardware at the point of engagement, an interesting contrast with our own world. A tech-driven, young industry is, as you might imagine, heavily slanted toward Silicon Valley, where pitch decks only have one word on each slide, lame metaphors flow like coffee, and anyone over 35 is either washed up Board fodder, a venture capitalist, or both. Cynicism aside, the energy and optimism of the young entrepreneurs who run the various companies is fuel for innovation. The omnipresence of Facebook, Twitter and Google provide both the backbone of the social media infrastructure and the model for success that these startups strive to be. The rush to develop the killer app is on, and that is where the comparisons to DOOH begin.

The obligatory west coast slide: Does it represent exit value, big data, or how many times it has been used?

The apps themselves diverge in their approach to second screen engagement. Frameworks and development environments seem to target program-specific applications. Branded apps cast a wider net with check-ins that leverage a very cool technology called automated content recognition (think Shazam for video). Gamification, the buzzword that currently serves as verbal Viagra for people who simply renamed reward systems and intermittent reinforcement to prove that they are smarter than you, is a common feature across all forms of applications. And it generally works, as B.F. Skinner would attest. It seems clear that the most popular feature of the companion apps is some element of Twitter. Twitter streams, Twitter “rivers” and infographics based on Twitter data get the most attention from users, even when sharing screen space with much sexier features. The element of sameness across many application providers is another parallel to digital signage. The core problem/challenge is well-defined, and solutions tend to cluster around a set of common approaches. Differentiation is hard.

The Social TV industry already has over 100 application shops in place, with many more in stealth mode, and others under the radar or in “pre-funding” phase. There was actually a poll taken during the Summit that asked whether the overabundance of application startups would drive consolidation. Sound familiar, anyone? If the experience of DOOH is any guideline, that poll question will be recycled for years.

Perhaps the most significant parallel between DOOH and Social TV is one of common frustration with the world of agencies. I think it is summed up best by paraphrasing a question that came from an agency type in the audience: “I understand a Gross Rating Point… so how are you going to help me understand what I am buying from you?” The question was met with an audible growl from the crowd. Like digital signage, the Social TV folks have a challenge in helping media buyers value and measure their offering, and it won’t be done using the same metrics as traditional TV. I’m not sure that there needs to be a leap of faith if engagement, click-throughs, and even purchases are quite measurable. Still, like our industry, Social TV suffers from serial testing and toe-dipping, as opposed to long term campaigns and commitments. It makes for a rollercoaster ride for the startups.

Interestingly, the Social TV industry has its own measurement and analytics companies, notably Trendrr and Bluefin Labs, that comb the social sphere to determine what is hot with the socially engaged. Clearly sensing that the same old approach would not play with this crowd, a presenter from Nielsen promised that her company would be incorporating social metrics soon. Recognition that there is value in the social media stream is a huge statement from one of the most traditional media companies out there. It is one that should not be lost on the out-of-home crowd.

Prior to lunch, Jason Kates of rVue asked the audience if they could identify the largest unserved network available to them, one with over a million screens capable of delivering over 300 million targeted impressions per day. The answer, of course, are the networks that comprise the digital out-of-home industry. The message was not lost on the attendees, even if Jason dared to use more than one word per slide. They understand that for the most part, the domain of Social TV is 7 PM to midnight. From 7 AM to 7PM, their engaged consumers are generally not at home, and until now, unreachable. But during that huge chunk of their day, those socially-engaged consumers are exposed to DOOH screens. Sensing opportunity, the Social TV folks weren’t shy about asking questions and seeking to learn more. I viewed that as a strong positive reinforcement for the notion that there is something to be gained by linking our industries more closely.

Actual teenagers watching the Super Bowl (photo: Scott Macklin)

Social TV has linked social media, mobile and tablet computing, game elements and rewards with traditional television to create measurably greater engagement. The DOOH industry arguably owns the eyeballs of the socially engaged outside the home. We need each other, and while this is very much about connected consumers, this is not about mobile per se. In fact, those who are riding the mobile-DOOH convergence pony confuse the tools with the medium that will be the actual glue. Social media is that glue. It is by definition participatory and engaging, and it is part of the fabric of life today. There is innovation occurring and there are valuable lessons being learned. Ignore the mountain of data and the growing hordes of connected users at your own risk. Game on.

The clues are everywhere, like dots waiting to be connected.

• Twitter recently added its 500 millionth user. It was an engine of revolution in Egypt, and has scooped the traditional media many times since the Miracle on the Hudson was captured and tweeted by Janis Krums.
• Facebook has filed for an IPO that is expected to hit the market with a $100 billion enterprise valuation, just a tad more than $100 per user. Despite its flaws, it is the undisputed king of social media, and if someone ever calculated the bandwidth consumed by its users every day, it would be staggering.
• Smartphone penetration in the US has crossed the 50% threshold.
• Apple sold 18.7 million iPads in the fourth quarter of 2011, and the new iPad is breaking more records. These days, if an Apple product is found on a desktop, it is increasingly likely that is only there being recharged.
• Smart TVs and internet-connected game consoles, streaming boxes and other dedicated devices are fast making televisions yet another node on the internet.
• A Discovery Communications survey revealed that co-viewing, watching television while using an iPad, “increases many viewers’ connection to programs and advertisements.”
• GetGlue lets you check in to TV shows, movies and music to earn stickers and discounts. Viggle will reward you for checking in to TV shows from your smartphone. Watching a TV show while using a companion app on a second screen? Second Screen Networks syncs ads inside the companion app to those appearing on TV in real time. Bluefin Labs and trendrr are fast becoming the new age Neilsen and Arbitron by analyzing social media trends related to TV shows and ads. And the list goes on…

Social TV is the concept that connects all of these dots, enabling consumers to engage with the entertainment and brands that they love; allowing television networks to build their franchise, and programs to amplify their buzz and engage with viewers even when the show is not airing; giving advertisers the opportunity to extend the traditional 30-second ad to something much more engaging, much more personal and far more valuable.

At the Social TV Summit in New York last year, co-host and media expert Jack Myers noted that “Social TV is not only a movement in the business, a trend in the business, but a business in the business: and a real revenue opportunity not only for the many emerging players, but for the established and legacy media companies.” He predicted a dramatic shift of marketing dollars over the course of this decade toward social marketing, about $30 billion of which would end up pegged for Social TV annually. Clearly, there is a vibrant and well-funded ecosystem establishing itself around the axis of television, mobile devices and social media. New value propositions pop up frequently as new players engage.

Viggle: Engage, collect points, earn rewards. (photo via Function, Inc.)

Today, the newest value extension to Social TV is established: digital out-of-home.

The digital out of home (DOOH) industry as measured by the installed base of networked displays has been growing rapidly for the past ten years. The technologies enabling network owners to control huge networks of digital displays with pinpoint granularity have matured. However, the majority of ad-supported networks have failed to reach their goals with respect to ad revenue. Even the most successful networks are often saddled with unsold inventory. One of the speed bumps is that media buyers simply do not understand the space, as the metrics and behaviors are not the same as the familiar television world, even if the screens look similar. To them, the medium is irrelevant.

Irrelevant. Is there a more humiliating word for an industry that touches hundreds of millions of people daily? I doubt it, and it seems likely to remain irrelevant until the metrics and behaviors of out-of-home become synchronized with those of television. And we are not talking about the metrics of traditional ratings and behaviors like time-shifting. We are talking about new metrics and new behaviors that are defining how we consume media and relate to that media and to each other.  Social TV.

Today, out-of-home venues offer the current stakeholders in Social TV (the legacy networks, the brands and the Social TV startups) the opportunity to greatly enhance their reach and effectiveness. Imagine extending the reach of a TV program or ad campaign through the integration of social media tools and apps with networks of out of home screens, perhaps augmented by special benefits, offers or rewards to keep engagement high. Would a Revenge fan make his/her way to an out-of-home network venue to check in and thereby receive a preview or clue as to what Emily Thorne is up to next week? Would a brand want to reward consumers who like (in both the Webster and Facebook definitions of the word) their product online, on TV and in the store? Would a TV network want to engage in a second screen dialogue with viewers outside the home, to be continued on a second screen while the show airs (or vice versa)? If the answers are yes, then DOOH becomes immensely relevant when it joins the Social TV ecosystem.

I seldom use this blog to tout Real Digital Media or to announce customer wins or strategies. But this is different. We are fully engaged with our partners at rVue and with others in the process of defining Social TV for the out of home industry and providing the products and services that will add a third screen to today’s two-screen Social TV ecosystem. Done well, the shift toward Social TV will change how DOOH networks drive revenue. It will change how loyalty programs are defined, executed and measured. It will change how content is distributed and how OOH networks operate. It will create a “couch to cash register” continuum for networks and brands to consider in their consumer campaigns. The renewed relevance of what we all work for is at stake, so it is worth talking about before the finished products are fully baked. To be sure, the message and concept will be co-opted by opportunists, but so be it. We are off and running. The dots have been connected. Let’s get busy on the transformation to relevance, the transformation to Social TV.

The Crowd. I experienced it first hand, and heard several others say the same thing: the level of sophistication of the end users at DSE this year was well above past shows. In the past, we have spent hours educating people on the fly in order to be able to begin a normal sales dialogue. That was not the case last week. We were invariably talking to people who had thought through what they wanted to accomplish with digital signage, and who had good, probing questions to ask. There were fewer entrepreneurial network builders, and more corporate reconnaisance teams. That was great to see, and I will optimistically call that both a sign of maturity for our industry and one of acceptance of digital signage’s relevance at the corporate level. I participated in one session, the Content Lightning Round, which had no presentation slides, only audience questions for a panel of four experts (well, three experts plus me). The questions and shared pain points were consistently advanced. Many focused on how to deal with organizational challenges that impact content strategy. It was both fun and refreshing to have a session be a conversation. Kudos to Pat Hellberg for conceiving it and herding the cats. Bottom line, I don’t think folks positioned as experts are going to get away much longer with high level rehashes of the obvious, or with renaming old ideas. And that is a good thing.

The Glass. A couple of people mentioned to me that they were growing tired of display companies muddying the waters with regard to digital signage software. Since I grew tired of that years ago, those words were music to my ears. I completely understand the need for display manufacturers to have some kind of low end software (e.g. freeware) to address a certain segment of their market. But it is hard to find anything resembling a successful move into the realm of real solutions. The roadside is littered with failed attempts at going beyond the basics. Planar tried acquiring a real software company, CoolSign, and could never integrate it into their core business. LG has tried rebranding a light version of an established package, and by all reports that has not exactly taken the market by storm. And of course the travails (and my opinion of) the VUKUNET adventure by NEC are well documented.  Here’s an idea for all the code-minded people at display manufacturers: why don’t you all go to lunch and come up with a standard way to manage an RS-232 interface with a screen? That would fall under the headings of core offering and value added.

The Buzz. There was generally less grumbling about the lack of capital available to various sectors of the industry and more talk of how capital might be applied. I am not sure that means that there is tons of money ready to flow, but I do think it means that both investors and industry players are thinking more strategically about what is next. That would be a positive.

One of the dominant memes at DSE was menu boards. There were so many on display that it appears that many people view this as the next great frontier. I am sure that providers love the idea that it requires lots of hardware, provides scale and also is not dependent upon an ad supported model to get funded. Without doubt, there are deals to be made, but the urgency to make those deals has subsided a bit with some slack appearing in the state laws that were seen to be driving demand. The legal aspect notwithstanding, the market is large, but finite. It will be necessary to differentiate an approach on one or more levels in order to get the attention of the buyers.

The niching of the software segment of the industry appears to be another ascendant theme. For the software players, the days of being all things to all people may be coming to an end with the rise of corporate buyers. Buyers want to talk to people who understand their environment, their pain points and their objectives, and who can demonstrate having dealt with all three in the past. I don’t think hyper-specialization is necessarily the key to success, but a clear focus of effort that is in concert with a development roadmap certainly is. Those who want to dazzle with smoke and mirrors will quickly find themselves masters of nothing. The increasingly sophisticated buyers will easily see through the hokum of empty press releases and constant Twitter babble and demand to be told where the beef is.

Our industry is not unique in terms of having a mix of nice, honest people and some real slime that belongs under a rock. As the years have passed by, my ability to find and embrace the former while sniffing out and avoiding the latter is improving, but it takes constant effort. The sniping, poaching and blatant misrepresentation of reality does no one any good, yet it persists. As an example, one item that generated substantial buzz at the show was BroadSign’s filing for Chapter 11 on the Sunday prior to the show. It was interesting to hear about how some people were anxious to pile on to BroadSign without understanding the actual action or situation. I am told reliably that executive level emails went out from certain competitor(s) misrepresenting the situation and all but burying BroadSign. That is pretty low, and a clear indication of character from where I sit. Our company competes vigorously with BroadSign, but I have respect for them and think that Brian Dusho has done a remarkable job given the cards he was dealt upon assuming his current role. The truth is that there are a number of companies in far more dire situations than BroadSign, despite the filing. This may be heresy to some, but I hope that the planned sale and recap works out for them. Competition makes everyone better. I’d rather save the venom for people who cross the line than kick good folks when they are down.

The Federation. I am happy to report that the Digital Signage Federation, which was born at DSE 2010, is doing very well indeed. Past Chairman Bob Stowe handed the reins and a strong organization to Alan Brawn this year, and Bob received well-deserved recognition for his efforts at the awards dinner Wednesday night. Alan will tirelessly push things to the next level in the coming year. I am particularly proud of how much work has been done in education, outreach, certification and now globalization of the effort. And the work will continue, as DSF strives to provide independent leadership for the industry. If you haven’t joined yet, please do. Your input and energy is welcomed as the industry evolves.

Pinning is the new verb.

I have established a Pinterest account that I plan to use to pin digital signage items of interest. So far I have set up three boards, described below. While anyone can follow another user and “repin” (think retweet) items they like onto their own boards, Pinterest also permits users to allow authorized followers to pin items directly on to their boards. Clearly, a board with a broad array of contributors has more value and interest. Here are the boards I have established that I would love to have others contribute to:

Digital Signage Community: General items of interest, humor or amazement related to digital signage.

Digital Signage Installs: Items related to digital signage installations around the world .

DSE 2012: Items of interest in and around the upcoming Digital Signage Expo in Las Vegas.

I have seeded the first two with a few examples, and i will get to the third next week. If you would like to contribute directly to these boards, simply sign up for Pinterest (if you haven’t already), and follow the board or boards that interest you. I will figure out how to enable you to pin directly. All basic rules of Pinterest apply, and if you do your best not to use the comments as a marketing channel, you can stay. Oh, and no cats, even though mine are very cute. The intent is not to monopolize the digital signage Pinterest discussion, but instead to get it started and make it open. I think and hope that these boards can become a great resource and springboard for discussion for everyone, and I am sure that ideas for additional boards will come up. Others can and will set up boards of their own, and they should. But it has to start somewhere, and now seems like the right time. Happy pinning!

UPDATE: The tools on Pinterest for determining who is following a board are, shall we say, lacking.  If you followed and have not been notified that you can contribute, drop me an email and let me know!

The idea of aggregating the many DOOH networks, segmenting them as necessary and selling cross-network campaigns in an easy manner to advertisers has been around since the second network launched, whenever that was. If one is confident in their ability to package networks and then sell advertising, the commissions typically charged (30% seem to have been the norm) would support a nice business that could be expected to grow at a rate at least as fast as the industry in general. Those assumptions look nice on a business plan, but they were never validated. Ask ten people why, and you might get ten good and different answers. In the end, the biggest challenge for aggregators has actually been the biggest challenge for the industry as a whole.

Simply put, DOOH networks are managed by a dizzying array of software platforms, a surprisingly large percentage of which are homegrown. There are few, if any real adopted standards for terminology, network performance, data collection and reporting. To-date, the few industry platform providers of significance have failed to move the home brew crowd over to the world of known APIs and quasi-standards. Network operators displayed a tendency to over-report actual installations, often counting planned and dormant sites as installed when providing network overviews to aggregators. Detailed, reliable reporting capabilities vary widely, and if you haven’t heard a story about an advertiser going to a paid-for network site only to see a non-functioning display or a playlist that does not include their ad content, then you haven’t been listening. Aggregators learned quickly that having lots of networks did not help their credibility in the sales process when a large percentage of them could not perform or report reliably. They responded by pruning away the worst offenders, beefing up the toolsets for taking deep dives on the remaining networks, and attacking niches of specialty networks. But that was apparently not enough. Advertisers crave predictability, and ad buyers do not like to bank their credibility and jobs on what they do not feel comfortable with. Sadly, predictably variable performance and spotty reporting does not create comfort with ad buyers. As a result, big DOOH ad buys gravitated to larger networks providing wide reach and one-stop shopping. Issues with measurement, reporting or performance were simply elements of price negotiations. It was just easier, faster and generally more effective from the buyers’ perspective.

This never reached its potential. Will digital signage suffer from the same challenges? (Pieter Breugel painting)

With the aggregator channel seemingly fully disrupted, the industry is left with media planners and DSPs providing cross-network platforms and services for DOOH ad buyers. Because they are not actually selling ads, the economics of their business are different. The use of technology provides some opportunities to mitigate the Tower of Babel that DOOH networks represent. That said, the variation of technical capabilities across networks still remains. Presumably, these companies have watched the ascent and descent of the aggregation business model, and can apply lessons learned. As for the networks, some of the homegrown folks may have to take the tumble for industrial strength and trusted software platforms. Others may have to take a look at their first generation platform and determine its viability going forward. The aggravation suffered by the aggregators is not an isolated case. Change is upon us in all aspects of the DOOH ecosystem. Don’t blink, it isn’t going to stop any time soon.

Others have accurately commented on the increased presence of digital signage on the trade show floor. In reality, the variety of offerings was only slightly higher than the past two years, but the more positive sign was that retailers were talking about it and demonstrated some understanding of how it fits in. In a comprehensive review of the buzz at the Big Show, two out of four editors from Retail TouchPoints listed digital signage as a significant theme.  That’s great progress and a good indicator of interest. As exciting as it is to have digital signage beam its way into the general consciousness of retailers, the overwhelming theme that I noticed at the Big Show was Big Data. And when retailers figure out digital signage’s role in that arena, things will get really interesting.

Data is back in a Big way. (Pic via www.haacked.com)

Big Data has exploded as a tech meme in parallel with the growth of ever richer sources of data from ever expanding sources. If you have seen the IBM ads with the “smarter planet” theme, they are based upon the use of Big Data. If you have watched the popular TV series Person of Interest, “the machine” churns out insights based upon the analysis of Big Data. Essentially, the challenge of Big Data is the management and analysis of a huge number of disparate data points in a manner that makes connections that lead to insight. That can be applied to managing traffic patterns, power grids and medical records. But in the world of retail it is all about managing merchandise and customers: Operations and Marketing. The merchandising and operational opportunities are the easier targets, and most of the solution providers churning out Big Data stories were focused there. Retailers can taste the ROI on price optimization, smarter merchandise allocation and supply chain improvements. Yet the customer marketing piece provides what may be a much larger payback.

The old database marketing standard for stratifying customers, RFM (Recency, Frequency and  Monetary Value) is as valuable today as it has ever been. But RFM has been traditionally applied in a world where direct marketing offers (think catalogs, direct mail) are costly to produce and distribute and where it makes sense to make those offers only to those prospects most likely to respond. Technology advances allowed for a variety of offers and tests to be managed, but analysis was always applied to what a customer had already done, not to what they are doing. Today, the customer databases filled with transactions are augmented by volumes of data from web encounters, mobile encounters, and increasingly, in-store media encounters. Today’s imperative is to make relevant offers to customers in near real time based upon who they are and what they are doing now. Big Data gives rise to Big Questions. What store is the customer in? Have they launched the retailer’s smartphone app? What part of the store are they in? What media was playing on the digital signage display when they reacted to an offer? When was their last visit? How can we tailor an offer to this customer to optimize this visit? How can we drive loyalty?

The ability to make enough connections from all the data points and to align them with insights on customers themselves in sub-seconds may very well be a differentiator between the winners and losers in retail and food service. Pulling together all of the relevant data points is part of the job. Figuring out how to stratify customers in a more useful way is another. Being able to operate a virtual offer engine against that data and segmented customer base is where it needs to go. One offer has never fit all customers. Direct marketers have known this forever. Now we operate in an environment where offers can be made at little cost to customers holding the delivery device in their hands while they are at the point of purchase! This is transformational, and a technical and marketing challenge of the highest order. Digital signage will play a role as an activator and as one delivery channel for offers. Data coming from media players will make marketers operating their offer engines that much smarter. Content reacting to intelligence about who may be watching becomes more relevant and effective. Big Data leads to Big Questions and Big Opportunities. The future belongs to the marketers.

My first professional encounter with kiosk technology was back around 1990. I was a young consultant working with a local company in Boston that wanted to provide health and drug information via kiosks to customers in drug stores. To put the timeframe in proper perspective, the technology driving the effort was a laser disk. The idea sounded good: put the knowledge base of the Physicians Desk Reference and other medical references at the fingertips of consumers worried about symptoms, interactions and side effects. Lead them to informed interactions with a pharmacist; help them make decisions about over-the-counter products; and of course provide screen time for potential advertisers. That particular company never gained traction, but they had identified a void in the information flow to consumers and a vertical (health care) that abounds with products and potential sponsors even today.

Since that time, informational kiosks of many stripes have been successfully deployed in retail, public spaces and in corporate environments. Wayfinding, gift registry, customer service and even HR applications are among the drivers of growth in that sector. Transactional kiosks have emerged to dispense movie tickets, airline boarding passes and postage quite successfully. Companies like Zoom Systems and Coinstar have blurred the distinction between a kiosk and a vending machine. Even as the growth of kiosk deployments continues, the pieces are falling into place to drastically alter their lifecycle.

Simply stated, two layers of mobile technology are going to make informational and many transactional kiosks items of fond memory: smartphones and Near Field Communications (NFC). Smartphones, such as the Apple iPhone and various Droid entries, continue to make their way into the pockets of more and more consumers, with 3Q 2011 U.S. penetration pegged at 44% by Nielsen. Their ability to support applications and to connect to the web has quickly made them a go-to personal platform. A Motorola Solutions Survey published in December provides some good insight into the trend toward greater in-store mobile usage among customers and store associates. Among other findings, the survey reports that 43% of consumers responded favorably when asked if they would use a branded store app for wayfinding and shopping lists. Those phones are not staying in the pockets, folks!

The smartphones alone will not displace kiosks, as they are only a vehicle that can move a customer interaction from a kiosk screen to a personal device. Consumers appear widely ready for that. Something still has to replace the initial screen tap or button press to start a session. The elegant trigger for initiating that interaction is still missing, but it is coming. Today, it is possible to provide a link to a web or mobile app using a QR code, SnapTag or even an audio cue. That link could come from a static sign or a digital sign. Both methods provide a one-to-many relationship between the sign and potential consumers, making simultaneous sessions very much a possibility. But each of these techniques have their limitations, and none are likely to survive when NFC is widely available on popular smartphones, a wave that will likely be led by Apple, and quite possibly this year.

NFC would allow a digital sign to run a full screen attractor loop, enticing customers to wave their NFC enabled phones at a hotspot to check in, launch a branded app, begin a web-based session, or download a barcoded coupon. Need a store map? You got it. Your friend’s bridal registry list downloaded to your phone? Easy. Money saving coupons? You bet. Movie tickets? I don’t see why not. NFC triggering and delivery combined with digital signage will serve more customers the way they want to be served (on their smartphones), allow for excellent tracking and measurement, and displace the need for the kiosk device itself.

It is inevitable that one-to-one messaging is going to move to the small screen, and the big screen will be used to engage consumers for specific interactive sessions on their mobile devices. That leaves the mid-sized screens of many kiosks in a tough place. There will of course still be a place for kiosks that have special purpose, such as delivery of physical goods or documents, requirements for special devices such as biometric kiosks and more. But even these will likely have an NFC or mobile hook. The smartphone screen will assert its influence very soon. If big screen digital signage operators play it correctly, they can displace many kiosks going forward.

I closed my conversation with Horatio with a monologue, with apologies to the Bard of Avon:

Alas, poor Kiosk! I knew him, Horatio: a technology of infinite use and many
applications: he hath guided my experience a thousand times; and now I am
sad to see him wither away! Here is that touch screen I have tapped I know not
how oft. Where is your gift registry now? Your wayfinding? Your recipes?
Your database of relevant information that were wont to set shoppers on a roll?
Not one now, to mock your attractor loop? Are you sad? Now get you to my
lady’s chamber and tell her, and have her charge up her smartphone, to the
new reality she must come; make her laugh at that.

Condensed monologue courtesy of www.savagechickens.com

Horatio didn’t disagree, he simply invited me to Denmark to see it in action.

As the concept of digital signage and the technologies to support it grew in tandem over the past eight to ten years, the predictable emergence of entrepreneurial network owners and technology providers grew at the same pace. In the early stages, start-ups were the norm on the network side, with many evolving into significant companies of real scale. Others have remained in the small to mid-size range, or disappeared altogether. Few came in to the space as big, going concerns. Most of the start-ups had to take on every task in the process of creating, acquiring and distributing content; selling, trafficking and reporting on advertising; selecting, mastering and operating software; as well as acquiring, deploying and managing sites and equipment. There was not much choice in those matters, and many of those companies still do it all. Now, as larger companies contemplate DOOH networks and represent a potential quantum leap in investment and growth, they will have a different slant on who-does-what.

To larger companies entering a new space requiring skills and tools that are outside of their current core competencies, the idea of hiring staff and creating new internal capabilities is often anathema. They generally prefer to outsource as much of the work as possible, often as a way to avoid an increase in headcount, and sometimes as a way to mitigate project risk. As such, they work with third parties to acquire and manage content; to sell and manage advertising; to select and acquire technology; and to deploy equipment in the field. Then comes the tough part: operations. The operation of a network requires (among other skills) deep expertise in the software platform that manages content and sites. For a third party to build a business around that, they need to invest in the training and maintenance of a particular platform, and bank upon the success of that platform in order to realize economies of scale. Because of this phenomenon, there are only a few folks that provide network operations center (NOC) services, but usually limited to one or two software platforms. The dilemma of how many platforms to support (and which ones) is complex, and often decided opportunistically rather than strategically. There is risk in the model. Do they invest in cross training people or dedicated resources for additional platforms? If so, how many? What happens if customers from a supported platform are acquired or go away for any reason?  As a result, there remain pockets of operations providers that are essentially specialists.

The existence of so many software platforms in the space makes the development of a healthy NOC subsystem within the DOOH ecosystem a difficult matter. Looking at an example outside of our industry, many large companies have looked to outsource financial operations, usually based upon one of the big platforms in place. Back in the day, that included Oracle, Peoplesoft and JD Edwards. It isn’t shocking to learn that Oracle now owns all three brands, but what that has done is consolidate the skills and infrastructure required to offer consulting and operations services to large corporations. We are certainly not at that point in digital signage, and it is a concern. As very large companies decide to take the plunge on digital signage, and they will, the demand for these services will increase. It is not clear how that demand will be met or by whom, although there are people thinking about it. To a certain extent, the answer may dictate winners and losers on the platform side. It remains to be seen whether the limited choices for outsourcing a key function will be a barrier to entry for large companies, or a driving factor in the development of a NOC giant or two. Choices made by a new echelon of network owners and an evolving subsytem of service providers may play an important role in shaping the industry going forward. Where there is concern, there is also opportunity.

Best wishes to all for a season of joy, peace and family from everyone at Real Digital Media.

Over the course of the next twelve months, expect both the unexpected and the long overdue. At long last, the overcrowded software space will be boiled down through market forces, mergers and acquisitions and flight to niches… Eyebrows will be raised by strange bedfellows on the M&A side and surprise failures.

Since that was written, we have seen C-nario acquired by YCD, as well as some signs of some struggling vendors. Earlier today, my intrepid pen pal Adrian Cotterill of The DailyDOOH posted a story on an investment document making the rounds proposing a Wireless Ronin-Keyser Group merger that would result in a private company. That would cover the strange bedfellows meme. Some thoughts on the concept:

Why now? Wireless Ronin has raised around $70M since going public, and what is left is in the low single digits, and they remain unprofitable. Being public has exposed them to more scrutiny than perhaps any company in their peer group. Their ability to raise more capital in a secondary offering is likely to be near zero without major positive news and trends. So perhaps a combination with an established, very probably profitable company that is already a selling partner makes sense. It changes the story, the capital structure and the focus. And it takes the public company overhead off the table, which is probably a very good thing.

What’s the come-on? The initial announcement of the partnership between the two companies, which came as Ronin announced quarterly earnings, left little doubt what the goal of the partnership would be. McDonald’s is a longstanding and huge customer of Keyser’s, and the implication of the announcement and discussion in the earnings call was that Keyser would walk them into the McDonald’s digital menu board business. I have not seen the investment document, but I’d bet there are similar, carefully worded suggestions of glory therein. Ironically, on the web page of Keyer’s Florida Plastics division is a picture that shows the McDonald’s McCafe menu boards, which Ronin most definitely has nothing to do with. Those snickers you hear are coming from Dayton, Ohio. Makes one pause to wonder. A strategy to focus upon the menu board space is fundamentally sound, and might be accompanied by a sale of their web based and automotive businesses to help fund a deal. Identifying and securing a niche is certainly clear thinking. But that niche is going to be competitive, so putting all of the digital eggs in one basket introduces further risk.

What about RNIN shareholders? Current shareholders of Ronin shares would probably welcome a premium to the current valuation to cash out and wash their hands. That being said, the company is currently valued at about $18M, net of cash on hand, not adjusting for debt. That is roughly two times revenue for a company that is still losing money and not growing particularly rapidly. Some might argue that it is already overvalued. So for someone to pay a premium to take out RNIN’s public float would be a risky venture. Of course, if there was Special Sauce providing strong confidence in terms of future growth, there might be less risk. But there might be some angry shareholders if they got taken out and a McDonald’s deal suddenly materialized. And perhaps some disappointed new investors if it didn’t.

What does it all mean? These type of investment feelers are not unusual, and don’t always mean that a deal will get done. That being said, an investment bank has been engaged to figure out if the pitch will resonate. And given the deal structure of a merger into a private company, one might deduce that Keyser management is driving the bus. These are signs that a Board of Directors is seeking to optimize value in the short term, and that change is coming, in one guise or another. If Wireless Ronin’s ability to do a secondary offering is indeed limited, then the cost of being public exceeds the benefits. Exploring some kind of buyout and private financing should not surprise anyone. The Keyser partnership may offer the quickest path to that, along with the implied refocus on menu boards. This will be interesting to watch. In the mean time, keep an eye out for more surprises and strange bedfellows.

Update (12-7-11):

Today, Wireless Ronin filed an 8-K detailing a direct placement of 3.3 million shares priced at $1 per share. Their placement agent, Roth Capital Partners, will receive 7% of the proceeds, netting about $2.9 million to the company. The press release and related 8-K documents do not make it clear whether there was a single investor of multiple investors participating, or whether they were existing or new investors. But no matter: my statement above that their ability to raise capital thru a secondary was near zero has been proven incorrect, even though it required a 5% discount to the December 6th market price to pull it off. Additionally, the company’s CFO responded to an angry shareholder’s inquiry regarding the DailyDOOH post as well as this one, by classifying them as “rumors” (quotes were his) since they were not confirmed (or denied) by the company. Kudos to the company for raising the cash. The Clintonesque deflection of the matter at hand, not as deft.

This Blog seeks to contend that a unified platform is necessary for the accelleration (sic) of this industry.

<I am all for acceleration of the industry, so I read on.>

We believe Google/Motorolla (sic) combo of Android and DOOH will do just that. So…we call this new platform or if you prefer, interface, DOOHdroid.

<Oy.>

The page also features a video interview with Patrick Quinn of PQ Media, conducted by Tony Hymes of DOOH.com. The interview, done after Quinn’s well-received presentation at this year’s DSE conference, outlines key obstacles to stronger growth in the industry. He speaks at length about fragmentation and the need for consolidation; the need for one industry voice; the lack of trust in metrics used by network operators, and the need for universal buying and planning platforms. All solid points, backed up by primary and secondary research. None of it seems to be a cry for a mobile operating system, which by no means should ever be confused with a platform in the sense that Patrick was using the word. The combination of questionable proofreading and basic understanding of what the issues appear to be left me uneasy. The assertion that Google/Motorola/Android would arrive to “unify” the industry and spark explosive growth was even more off-putting. But we’ll get back to that in a moment.

The only other active page of the DOOHdroid site was a short, undated blog entry in which the author reveals himself as a Floridian, inspired by comments made by Jason Kates and Rob Gorrie, both of whom look at the world through a lens of media planning and buying. When Jason rhetorically asks “what can DOOH learn from Google?”, he understands that the answer has to do with the removal of friction from transactions and the value of applications. When Rob speaks of “fluidity through a platform”, he is speaking primarily about a planning, buying and execution platform for agencies, and to a lesser extent about digital signage platforms. Either would argue that a unified planning and buying platform (presumably the one they control) would close the trust gap that Patrick Quinn speaks of and accelerate ad revenue growth in DOOH networks. As inspirational as both of these guys may be, they aren’t talking about Droid.

Let’s be clear: if Google wants to “unify” the industry, they have the resources to buy enough networks, agencies and solution providers to force that to happen. It would cost a darn sight less than acquiring Motorola. I seriously doubt whether that would be their approach, though. The natural place for them to start would be at the DSP or media planning/buying level. Entering on the planning and buying side would be a natural fit for Google, and would also allow them to leverage learnings and tools from AdWords as they execute. The ad dollars are what would attract Google. It is unlikely that they would want to own networks, as it is very much not their type of business. They have done very well by serving web sites and ad networks without owning them, thank you.  As for software solutions, that would be more of a possibility than network ownership, but would probably be part of a strategy related to using applications to funnel ad dollars through their infrastructure. Any play there would probably be more related to customer acquisition than technology acquisition.

The whole Android thing is a red herring to me. Even if Google wanted to achieve hegemony over DOOH, they would not likely care what operating system was running on media players, any more than they care whether you access Google.com on a Mac or a PC, an iPhone or a Droid. They would care about where the ad revenue is flowing, how to make it flow faster and how to leverage existing Google infrastructure. That happens at the planning, buying and execution level. It does not happen at the player OS level. Besides, if the media player market was so attractive, it would attract Apple (if only it would), and iOS is a pretty competitive environment for app development and media management.

I applaud the anonymous DOOHdroid author for being excited and sparking a conversation. While Google is resourceful enough to immediately dominate the DOOH industry if it chose to, it is very unlikely that the button they would press would have a robot icon on it. Instead they will follow the money, and the button will have a dollar sign on it.

1. Engagement metrics will drive perceived value to the advertisers in our increasingly connected society
2. “Location awareness” is a game changer
3. Ads will become trailers, with the call to action quite possibly being further engagement, rather than a purchase per se

Singh goes on to list six implications of these changes for marketers, and while his insights are focused on television advertising, they are spot on. It is worth a few moments to apply his thinking to digital OOH, and to ponder the implications for our industry.

Engagement as an indicator of value is a notion whose time has come. Traditional media metrics tend to lean upon the concepts of impressions and recall, but engagement seems to be something on a much higher plane than either, and inherently more valuable to the advertiser. I’d go so far as to say that short of carefully constructed sales lift studies, measurable engagement may be a better proxy for effectiveness than anything else.It is one thing to recall a Pepsi commercial, and I am sure Mr. Singh and his colleagues would be thrilled that you did. It is quite another to engage with the Pepsi brand, whether by visiting a web site, scanning a barcode or accepting a coupon offer. Singh’s other key changes recognize this fact and play off of it.

For most people, location awareness certainly evokes the idea of mobile location-based services. But in this case it is much more than that. It refers to the importance of context in the effort to create engagement. Singh refers to a Pepsi campaign that linked a Foursquare promotion to television commercials. The context of the Foursquare check-ins drove additional, relevant content to the consumers. Engagement! In a digital signage context, a television campaign could start on TV, and have different branches in various out-of -home venues. The thread of the campaign might be picked up differently in a grocery environment than in a QSR environment, with different engagement cues and activation goals based on the context of the message. Now layer on the richness of mobile location-based services, and you add new dimensions in engagement and measurability.

The idea of the TV advertisement as a trailer for a longer story simply picks up on the preceding scenario. Rather than a TV ad being a 30-second end unto itself, it is an introduction to a multi-channel, multi-platform invitation for the consumer to connect with a brand. As the engagement moves outside the home, the opportunity to measure impact and success increases, through the use of smartphone apps, sales data, and venue traffic measurement technologies.

Singh’s article reveals the current thinking of digital marketers of big brands, and it is not the same old thing. It seems clear that if engagement, location awareness and multi-channel, connected campaigns are where the big spenders are headed, then it makes sense for them to embrace the role that DOOH will play in closing the deal with their customers and prospects. All these ideas are making me thirsty to refresh everything.

That ecosystem can expand well beyond the diagram above to include mobile applications, web tools and more. Customers will demand it, and it will happen. Me? I can’t wait.

In line with the notion of an ecosystem, that expansion would be analagous to the concept of Biodiversity within a natural ecosystem.  Wikipedia identifies the role of Biodiversity as follows:

A greater degree of species or biological diversity – commonly referred to as Biodiversity – of an ecosystem may contribute to greater resilience of an ecosystem, because there are more species present at a location to respond to change and thus “absorb” or reduce its effects.

It seems like enough time has passed, the wait is nearly over and the digital signage ecosystem is in position to become a part of a more “biodiverse” OOH marketing and messaging ecosystem. That expanded ecosystem would be customer-centric. This is a good transition, as it drags us into the realm of strategic apps, the goal of all new technologies. The technical portion of the emerging marketing ecosystem in retail might look something like this:

Here are some of the essential characteristics of the extended ecosystem:

Multiple points of integration

The on site systems, including digital signage, customer-based mobile apps and POS systems as depicted above, must be integrated with each other to provide maximum benefit. This can occur in a number of ways and will vary by implementation, objective and business rules. Additionally, they must be integrated with external systems including corporate applications (customer management, inventory management, etc.) and media planning applications.

Analytics

Each of the systems referred to above generates data that can be analyzed and used for multiple purposes. Clearly, the data must be captured, organized, stored and accessed in a manner that makes it useful to downstream systems for proof of play, sales impact analysis, content assessment and offer refinement, to name a few. The ability to gain insights through advanced analytics speeds reaction time to trends and allows for near real time adjustment of offers and content, as well as subsequent measurement of impact.

Cloud Services

Given that the integrated marketing system generates data from applications that may be owned by the venue owner (POS), the network operator (digital signage) and many customers (mobile apps), the analytics database and applications may best be positioned as cloud-based services, whether that cloud is public or private. Using analytics, advertisers will be able to jump on trends by increasing frequency, changing content, or segmenting a buy via a cloud based ad server. Inside marketers will be able to refine promotions on its one-to many platform, digital signage. Similarly, they will be able to customize messaging and offers to individuals thru the mobile platform using a cloud based application fueled by analytics.

Is this getting too far ahead of today’s reality? I don’t think so. We have to recognize that digital signs are one type of endpoint in the OOH world, and that digital signage platforms are point solutions. Our value is best realized by integrating with and supporting other endpoints and applications to advance an overall marketing and communications strategy. The tools are there, the need is growing. The wait is nearly over.

If it were easy, anyone could do it.

At the very foundation of digital signage is the simple concept of file transfer. One way or another, a file must make its way from one point to another. It is not, to use a tired metaphor, rocket science. Marry a simple core technical concept with the lure of a gigantic, untapped market and you will certainly attract many developers. Such has been the case with digital signage, where the preponderance of those 340 solutions are basic, untested noisemakers who have proudly “cracked the code” on moving files around. That is easy, and anyone can do it. But there are some hard bits to this business, and the newbies, freebies and wannabes inevitably find that out if they survive long enough to see a real business application of their software magic. Scheduling, security, stability, scalability, screen control, synchronization and support are just a few of the complexities that start with the letter “s”. Resolving these and the rest of the alphabet soup of challenges requires identifying or discovering them, and then having the time, resources, capability and architecture to address them efficiently if not elegantly. Few have or will have the ability to carry that off, so the rest are left to trumpet their approach to what is easy, rather than what is innovative.

The innovators of function, architecture and business models have to deal with the noise of the followers while trying to reach the few buyers who understand and appreciate the complexities of the business. Innovation often falls victim to the market noise and price pressure generated by non-innovators and opportunists. That said, I have seen lots of innovative thinking in the digital signage space: ideas, partnerships and functions that advance the art as well as the business. But we will almost always suffer in comparative innovation to far reaching B2C technologies and their huge target markets. Digital signage is a B2B market, unlike mobile apps, and innovation will truly be unleashed by the competitive requirements of a rationalized market. If Mike’s vision of independent developers writing to open specs ever comes to fruition, it will be after the market is rationalized, and platforms of true scale (and therefore opportunity) emerge.

So yes, there are too many software players in a market that has grown nicely but not meteorically. And yes, it is hard to sell in a space where the barrier to entry is low and the awareness of what a complete solution really looks like is equally low. And yes, innovation is tempered by both preceding factors. But those things tend to wash out over time, as they will here, if only because it really is not easy.

Digital signage is neither necessary nor sufficient

There, I said it. And it is true. Digital signage does not solve a mission critical problem that makes it necessary. It is a technical approach to the distribution of rich media messaging that was enabled in part by the emergence of broadband. There is not a single retailer, medical office, gym, bar, college campus or corporate office that needs digital signage. Each can execute their core business functions without it, and many still do. That does not mean that digital signage adds no value. It most certainly does. But so does a navigation system in a car, although few would argue that navigation is truly necessary. This simple truth seems to have escaped those who continue to bring new solutions to market without determining a need.

Compounding that, digital signage implemented as a standalone island of messaging limits its ability to solve problems and add value: it is seldom sufficient. In order to achieve its optimal value, digital signage must be part of architecture, part of a solution, not the solution itself. In retail, there must be integration with store systems, customer management systems, inventory systems and mobile applications. Without all of the above, the ability to use analytics to optimize both content and customer-specific offers is limited. Interestingly, at the Digital Signage Investor Conference yesterday, RMG CEO Garry McGuire said that his company is morphing into an analytics company. He is really on to something that will fundamentally change the nature, position and strategic importance of digital signage. RMG’s ability to complete their evolution will only increase as steps are taken to integrate with premise, external and customer applications, as they must.

The road to making digital signage necessary is dotted with signs that point to its lack of sufficiency and passes thru the intersection with other technologies and applications. At the end of the road is the core of a strategic marketing system. Stand by: there are going to be many approaches to making this happen, and do not assume that it will be easy. The skills and competencies required do not all reside where you think they might. It is going to be an amazing ride. Doubt that, and reality will hit you hard, bro.

Challenges will be met, dessert will be served

Prior to the explosion of smartphone usage, makeup application was probably second only to eating in terms of causing auto accidents. A few years back, I was driving my daughters to school when I got rear-ended by a nice lady putting on her makeup while approaching a red light.  My daughters were fine, but I suffered from some whiplash, with quite a bit of pain in my neck and between my shoulder blades. A friend referred me to a chiropractor, and despite some skepticism I went in for a visit. I bought in to a treatment program and it helped. In the process, I learned about subluxations, posture and other things.  I genuinely liked the chiropractor and his passion for what he does. The relationship worked out well for all involved. I got the relief that I needed; the practitioner got paid for quite a few office visits and services by makeup lady’s auto insurance company; the insurance company limited their loses to a predetermined maximum. Was it all the adjustments and unusual exercises that cured my ills, or was it simply time and massage? Once I had full movement of my neck I was happily indifferent to the answer.

There is no shortage of skeptics when it comes to chiropractic. This annotated article highlights many points of contention, several related to the measurement of what is actually measurable. One comment of note from the article rang a bell and raised some questions: “Material things can be measured, making it possible to set up and test hypotheses about them using the scientific method. Vitalistic concepts (such as “life force or Innate Intelligence”) are neither measurable or testable.” How much of what is being measured in digital signage relates to that which is material and therefore measurable, and how much represents our version of chiropractic’s vitalistic concepts, and are in fact less or un-measurable? Are traditional audience metric studies the DOOH equivalent of a chiropractic adjustment? Does the patient (network) care if they get the result they want? Are we endorsing vitalistic concepts simply because the insurance company (agencies) will accept them?

Consider this: audience measurement and recall studies are for the most part the domain of ad-supported networks. They are conducted for the primary purpose of legitimizing the basis for ad rates in terms that agencies and brands are comfortable with from their long experience in traditional media. Once accepted in the marketplace, those ad rates serve as a proxy for the effectiveness of a network in reaching a targeted audience. It is similar to the impact of  Robert Parker rating a wine. At the highest level, there are two types of ad-supported networks: those in which products and services advertised are generally available in the same venue as the digital message, and those in which they are not. In venues where advertised products and services are available, why should we care about traffic, gaze, dwell and recall when we can measure sales? If there is a demonstrable sales lift, then the impact of the advertisement and its value can be measured and a value can be associated with a campaign. There need not be an argument over how many people recalled an ad if their behavior can be documented at the point of sale. In turn, non-endemic advertisers can assess the value of a network based upon its performance for endemic products. As we move inexorably toward customer engagement thru multi-channel integration, even non-endemic advertisers will have new tools with which to measure the effectiveness of a network, a venue and a piece of content.

It is the second type of network that suffers from the subluxation caused by little or no empirical sales data. As examples, consider some of the most influential network members of the DPAA, which include some of the largest and most successful networks in the business. For the most part, we are looking at elevators, workout facilities, medical offices, bars and coffee shops. While they are valuable, highly targeted vehicles for brand building, there are not a lot of endemic products in the elevator of an office building or in a gym. Medical offices do drive prescriptions and other services that can be measured if the practitioner agrees to share that kind of data. So there is little wonder that the membership roster includes Arbitron and Nielsen, as most member networks need conventional measures to support their ad rates. Arbitron and Nielsen have added to the advancement of audience metrics in digital signage and do fine work. Both also count on the prevailing traditional media belief system (impressions and recall) with regard to defining the value of a network to drive their DOOH business. The system seems to work for those that avail themselves of it, so like me and my spinal adjustments, there is little reason to question whether it provides optimum value.

But isn’t it time that we all got our brains around measures that reflect the advantages of DOOH? Impressions and recall are great if you are building brand, which is pretty much all you can do on TV. But DOOH is not TV, and we need to measure behavior and the value of targeted messages. We have some ability to do that today where endemic items are advertised in a retail environment. We can also impute some behavior from prescription uptake or ancillary service demand in a medical environment. The breakthrough may finally come when we can fully integrate mobile applications, digital signage and venue applications such as POS. As we move toward that day, we need to do so with networks, agencies, brands and media measurement firms working as partners to define what should be measured: the metrics of behavior, the metrics of results. And we ought to do that before plain old TV gets there and forces their world view on us once again.

Software

Haivision parted ways with Raffi Vartian, the very able VP of Business Development for recently-acquired CoolSign. After CoolSign founder Lou Giacalone’s departure, Raffi was left as probably the highest ranking link to CoolSign’s heritage. The elimination of the position appeared to many outsiders to be a pretty clear signal that Haivision has little interest in preserving the strategy that CoolSign had as an independent company. In fact, over on the DailyDOOH, Editor-in-Chief Adrian Cotterill pronounced CoolSign “dead and buried” in a headline. Given recent events and an understanding of how some acquisitions go, it is hard to be surprised by Adrian’s assessment. In the comment section of that post, Haivision’s CEO responded aggressively, and provided indications that Haivision bought the company for a reason, and is apparently executing its own strategy for integrating that offering with its core business. That strategy appears to include marketing the CoolSign product to the corporate IT customers of Haivision’s core products. If that is correct, then the focus on more traditional digital signage verticals may be non-strategic to Haivision, making a business development function dedicated to a non-core product superfluous. That might also give a hint as to why Lou left. Interestingly, Haivision’s argument against DailyDOOH’s assessment in some ways supports the opening position of Adrian’s post, which asserts that CoolSign as we once knew it is history. But when you pay for the company you can set the product strategy, as Haivision has by plotting its own course for CoolSign. Not great for Raffi, but you can’t keep a good man down for long.

Further south in Chicago, Graeme Spicer and VUKUNET went their separate ways, as reported by Dave Haynes. Graeme was recruited away from Adcentricity to reposition and drive the stillborn CMS/Ad Delivery/Panacea that was VUKUNET. He was not put in a position to succeed. While untold zillions were spent designing, developing and marketing (and subsequently repositioning and re-marketing) the product, it remains a classic example of Field of Dreams investment strategy and straying from core competency. The grandiose VUKUNET vision was unlikely to ever sell a single incremental display, and probably hindered some NEC Display efforts. NEC’s display people openly roll their eyes when VUKUNET is brought up, likely a combination of having to explain its existence to their partner ecosystem and not getting paid to deal with it. Graeme’s departure, whether voluntary or not, is likely a harbinger of more dramatic changes to come. While the Japanese management style is famously patient and long-viewed, eventually someone in Tokyo is likely to decide that enough cocktails have been served trying to find a nail for this hammer to hit, as neither strategy nor execution seemed to address actual customer needs. That makes it a tough sell, as Graeme learned the hard way. He too will bounce back.

Networks

San Francisco-based Brite Media Group announced their acquisition of TargetCast Networks. DailyDOOH covered the news in some detail here. TCN’s earlier acquisition of RippleTV was probably not as synergistic as it was once portrayed, and their earlier deal with Titan did not work out well. All of that left TCN in a bit of a quandary. TCN has some patented IP around the “L-box” that it typically uses to frame broadcast TV programming. Whether you are a fan or not of that technique, there is some significant leverage in the origianl (non-Ripple) model. TCN is able to deploy high traffic screens without paying for the screens themselves, as they typically use existing screens in the bars of busy restaurants. Additionally, they do not have to pay for the core content, as it is broadcast. They deploy relatively inexpensive devices tasked only with serving up and rendering the L-Bar content, which is usually paid advertising, or in-kind restaurant promotions. So in addition to the IP, there is a nugget there for the new owner, assuming they can dump unwanted, high cost sites. Brite Media is new to the digital game, but has selling experience in similar venues. The apparent strategy is to provide digital leverage to existing advertisers. This one will be interesting to watch. If they bought it right, understand that there are differences between static and dynamic advertising, and make the right moves, it could very well work out.

Agencies

On Monday, a very large merger in the advertising agency and technology world was announced with little fanfare in our sector. Donovan Data Systems and MediaBank will combine to create MediaOcean. MediaOcean has a mission to do nothing less than to create the “operating system for the advertising business”. Pretty bold stuff, but two very significant companies in the global advertising world may have the tools to get it done. Between the two of them, DDS and MediaBank provide the backroom platforms for much of the media buying world. Their customers are agencies, and together they will “process $150 billion in yearly global ad spend”. That is a company with influence and reach. A media ocean must be wide and deep, and MediaOcean appears to be both. While there is a significant online component to this merger (with Google clearly in their strategic sights), the buildout of a true operating system for advertising will necessarily encompass traditional media, online, mobile, and yes, DOOH. Keep your eye on the waves in this ocean.

We can expect new strategies and strategic partnerships to be revealed as the coming months unfold. The companies that remember who their customers are, as always, the ones most likely to succeed.

Nobel Prize-worthy science

Looking back, last year’s predictions actually worked out pretty well. Here is my assessment of the seven points:

Direct hits: Industry association confusion will continue… The movement of people will accelerate… Mobile will matter more, but networks will struggle with the best ways to use it.

Partial hits: Network consolidation continues, while new launches are corporately-focused… Agencies will engage and clarify the ad sales environment… DOOH shows true signs of maturity.

Miss: Attrition rears its ugly head in the solution space.

Not bad overall, but maybe I didn’t push the envelope enough. Here is a touchdown and and extra point worth of prognostications for the coming year:

Dramatic changes in the playing field

Over the course of the next twelve months, expect both the unexpected and the long overdue. At long last, the overcrowded software space will be boiled down through market forces, mergers and acquisitions and flight to niches. Display vendor efforts to be in the software business will prove to be costly diversions, and will be curtailed in favor of closer relationships with solution providers. Eyebrows will be raised by strange bedfellows on the M&A side and surprise failures.  As larger, well capitalized entities emerge to form a clear top tier, survivors will work hard to establish niches in which they can prosper. There will be changes on the network side as well. Here, it will be more along the lines of management changes, rationalization of network properties, and the emergence of managed services operators. And don’t bet against a realignment of the digital signage conference space. The current schedule, cadence and politics are unsustainable. That is not a secret. Change is inevitable: embrace it. I’m not sure if an industry can experience a renaissance while there is still an argument over whether it is actually an industry (it is), but 2012 may well be the start of a new era in DOOH.

Ad dollars flow, but retail networks focus on branding and experience

Ad dollars will flow into DOOH networks as never before. The clear engagement of agencies, the emergence and evolution of buying platforms, the continuing quest for measurement standards and closely held but positive results of campaigns will all contribute to legitimizing the channel. At the same time, retailers will begin to understand that digital signage can provide ROI without significant (and in some cases, any) ad revenue. Engaging content that builds brand, enhances the shopping experience and syncs with online and physical marketing strategies will win attention and awards. Ironically, the success of this approach will make the in-store networks even more appealing to advertisers over time.

Mobile strategies coalesce around the practical

Convergence has achieved near-buzzword status in DOOH, and now it is joined by mobile, having been the topic of endless blog posts and mantra-like tweets. No one doubts the value and power of those smartphones in so many pockets. No one ignores the flow of venture capital to half-baked mobile concepts. I am openly a huge fan of NFC, but next year will not be the year of NFC. I think it will be the year that simpler, more pervasive mobile technologies find their way into more digital signage content. Technologies like Twitter streams, QR codes, SMS and to a lesser extent, Bluetooth will see much more exposure. Other techniques that leverage widely distributed features on smartphones may as well. NFC will have it’s day, and it will be an enduring technology. But it isn’t NFC’s day yet for a variety of reasons.

Camera-based measurement will meet resistance

The clamor for better audience metrics drove the investment in camera-based solutions to deliver exactly that. Despite some highly visible and costly marketing of these solutions, I have not detected a clear and consistent demand from advertisers and agencies that such techniques be used, even as overall dollar spend has increased. Without that demand, networks will be loathe to invest. I think there are a few reasons. The cam-based solutions require an expensive retrofit of already deployed networks; some require more powerful and expensive media players in an era where player costs are being driven downward; privacy concerns are not going away, and will soon become visible at the Federal level in the U.S.; and finally, advertisers are finding ways to measure results as an alternative to measuring audience. There goes another cocktail reception invite.

Endpoints take on a varied look

If you want to bet on what is hot, the fastest growing segment of digital signage will encompass endpoints that veer from the traditional hang-and-bang network model. Look for increased interest in small displays; multi-screen matrices; shaped displays and configurations; screens on glass, film and floors; screens riding piggyback on kiosks and vending machines; screens on tablets; Outdoor screens and billboards; and large format LEDs. All of these will extend the reach of DOOH for the good. To be sure, traditional displays in the 32″ to 50″ sweet spot are not going away, and will continue their strong growth. But we will witness a more strategic matching of objective and content to available display technologies. Multi-display network locations will see a mixing of screen formats and types as never before.

The cloud becomes understood for what it is… and what it isn’t

Like convergence, the cloud has been bandied about with disregard for its actual meaning and relevance. In fact, the cloud refers to infrastructure, and not function. The ability to stand up virtual servers with elastic capacity on an as-needed basis is powerful indeed. So is the ability to deploy quickly with minimal capital investment. Look for DOOH providers to use the cloud not to create new function, but to create a new way to offer, deploy and charge for software and services. Those who get it right may change the way networks buy and utilize software. At the same time, look for cloud-based advertising solutions to increase efficiencies in that part of the ecosystem. Near real time, targeted, streaming content for networks equipped to receive it: coming to you soon, courtesy of the cloud.

Institutional capital remains on the sidelines, waiting for the smoke to clear

Most of the VC and PE capital deployed in the DOOH space in the past year has been either follow-on activity or portfolio shuffling and risk mitigation related to existing investments. The biggest capital investment on a network launch may have come from a solution provider! In the coming year, new capital will be more likely to come from corporate entities than traditional institutional investors. The corporate investors may have more insight into the space and the various players, as well as the motivation to get in at recessionary prices. The institutional folks, who are definitely making their usual calls and ramping up their understanding of the space, seem content to pay up later — once winners and losers are more evident. Any new businesses they do fund are more likely to be hybrid players in the DOOH ecosystem rather than pure play solutions or networks. If there is an indicator for this prediction in combination with the first prediction above, it would be the clear shift in the activity ratio of investment bankers to institutional investors in favor of the former.

Well, that’s seven to kickoff the 2012 prediction season. Without doubt, I missed some easy ones. Feel free to sound off or toss out your own predictions in the comment section. Will it be an interesting year?

All signs point to "yes"

Everything in its place, and a place for nothing.

The Graveyard would exist in the best of times, given the nature of the field we plow. However, it seems to me that The Graveyard is actually a microcosm of DOOH: an industry that has tended to get out in front of itself; a technology-based industry that has attracted more dreamers and schemers than true entrepreneurs; an industry that seems to be in a rush to evolve before it even has an identity. And my best guess is that as a group, our collective Graveyards are going to grow before the marketplace resolves the DOOH picture itself.  There are a number of indicators that such a process is underway, and will lead in short order to what I would term an impending DOOH Spring:

The two most recent reports from organizations that conduct active research on digital signage business trends were both trending in the wrong direction. The Platt Retail Institute tracks the North American Digital Signage Index on a quarterly basis. In July, we looked at the 2Q results here. The DSE Business Barometer also polls industry participants on a quarterly basis. Their most recent report showed a definite downtrend in optimism regarding the economy, as well as tempered enthusiasm for digital signage industry prospects. In both cases, industry players answer questions without attribution, and even then tend to err on the side of optimism. Even slight dips in optimism are noteworthy. One wonders if some folks even responded. The negativity would seem to indicate deferred spending plans by customers and prospects and portends some new additions to the collective Graveyard.

There has been a real dearth of significant wins and launches of new networks for quite some time. True, some deals (present company included) are kept under wraps for what seems like ages, but word gets out when big deals go down, and there hasn’t been more than the occasional eyebrow raiser for about a year. That doesn’t mean that there are no new deals and no new network launches. It means they are generally smaller in scope and impact. Instead of a steady stream of new deals, we are relegated to reading periodic updates on existing deals, such as DDN’s Harris’ 7-Eleven network, which is rolling out at a very good pace since the closure of an epic goat rodeo of a process. I hope it does well. So does 7-Eleven, who has no downside. Regardless, there is clearly pent-up demand in the marketplace. There is interest and there is money, but there seems to be no urgency.

There are some very experienced executives from both the technology and network sides that are independent at the moment. What that means is that there are more connected and tested folks out there available to consult, lead and advise than ever before. By way of example, Lou Giacalone recently joined the ranks of consultants, leaving Haivision shortly after they bought Coolsign. I haven’t spoken with Lou since he left, but he has boundless energy and passion for this business, and I suspect he’ll be heard from soon. Steve Nesbit, formerly top dog at Reflect, has done a nice job of keeping active and networked since his departure. Don’t bet against that list of independent veterans growing by two or three by March. There are a few very experienced leaders on the network operations side also working actively independently. Having veteran talent on the sidelines could be viewed as a negative, but the fact that this type of talent has not left the industry means that there are opportunities they are seeing. That would be another signal of pent-up demand.

So what happens in the DOOH Spring? I believe that there will be an unleashing of pent-up capital, pent up demand and pent-up frustration that will transform the digital signage space with great speed. The capital will be deployed to launch new projects and make bets on existing players either through direct investment or acquisition. The pent-up demand will fuel the projects and help clarify the winning sectors and players to the investors. That in turn will create demand for experienced DOOH executives, both as management prospects and advisors. Finally, the frustration of slogging through the doubly thick mud of recession and fragmentation will be too much for investors in many entities on the network and technology sides of the table. They will call in their chips and walk from the table. That alone would have seismic impact on the DOOH landscape, and it may not be a terrible thing.

It will become clear to all players in the crowded digital signage space that if they have not established a solid foundation as well as a go-forward strategy to dominate, then survival itself will be difficult, even as demand explodes. The forces of the DOOH Spring will change things forever. It may not be a Tahir Square moment, but you’ll be able to track it on Twitter just the same. Until then, feel free to whistle past The Graveyard.

Dear Mr. Cook:

Congratulations on being appointed the new CEO of Apple. It is no small task to take the reins of one of the most valuable and revered companies in the world. That task is compounded by having to step into the shoes of your predecessor, Steve Jobs. I would remind you that young Lou Gehrig was probably daunted by the task of stepping into Wally Pipp’s shoes. He made out all right. You will, too.

In today’s dynamic and connected world, the need to constantly innovate is a priority of the first order. Apple has never shied away from that, nor does anyone expect that it will as you assume your new role. There are simply too many good, smart people in the hallways to stand still. If nothing else, the culture will never permit complacency. However, perhaps there is one thing you can do that will send a message to your legion of loyal fans in the technology world:

LICENSE iOS AS AN EMBEDDED, PLATFORM-INDEPENDENT OPERATING SYSTEM.

Apple has spent untold millions developing a tremendously powerful operating system that would almost instantly extend its dominance of the appliance device market beyond Apple’s own products. As solution providers in the digital signage industry, we would embrace iOS almost immediately. Heck, if you would just let us embed our firmware on AppleTV devices, it would become the hottest media player in the space!

Think about this, Tim. Extending the reach of iOS beyond iPhones and iPads is a real opportunity to dominate the ecosystem of appliance devices. It would unleash the creative force of thousands of developers who meet secretly all over the world and perform monthly druid rituals hoping to influence the Spirits to open up iOS. The fire wardens are getting testy, Tim. Let’s just get this done!  Make iOS even more pervasive, and make your mark! I can see the presentation deck for the announcement now: eight slides, seven words, cool pics.

It isn't hard to do...

Good luck in your new position. Let me know if you want some help with that presentation!

Ken Goldberg
CEO
Real Digital Media

One phrase in particular has my hackles raised when it is used and misused in the digital signage space: cloud computing. It is often deployed as the updated buzzword for SaaS (software as a service), when in fact they are not the same concept at all. Cloud computing refers to a highly elastic, on demand computing infrastructure that is massively available and billed based upon usage. SaaS refers to a software application provided as a service on a subscription basis.  The best discussion of cloud computing that I have found is from Scott Maxwell of OpenView Venture Partners in Boston, describing its flavors and uses in a white paper entitled, Leveraging The Cloud. It is well worth downloading and reading more than once.

Maxwell’s paper makes it clear that cloud computing is about infrastructure, while SaaS is about applications. Can a cloud infrastructure be used to host a SaaS offering? I suppose that the answer is yes, but unless the SaaS provider plans to charge separately for infrastructure and application services, than how is that different than a private infrastructure and a simplified subscription plan? To the SaaS provider, it comes down to an analysis of cost, reliability and security. To the end user, the server is not behind their firewall, so they should not care unless there is an argument to be made based upon any of those same three factors. So it is easy to be cynical when you see a software provider claiming to be “cloud based”. You don’t get to muddy the waters just because the Internet is often depicted as a cloud in Powerpoint decks. Being in that “cloud” does not make a solution cloud based. If it isn’t the fully elastic, on demand, billed by usage infrastructure as described by Maxwell, then it isn’t cloud based. It is an Internet-based SaaS offering. Stop trying to go all Web 3.0 on us when you aren’t. Sometimes retro works out just fine:

That does not mean that there is neither a present nor a future for cloud computing in digital signage, because there is. Using our own company as an example, while our SaaS offering runs off our own servers, today we utilize cloud-based virtual machines for tests and simulations and after much planning, we will be moving our fail over environment from physical servers to virtual cloud-based servers in the near future. Could we (or anyone else) move production servers to the virtual, pay by the drink world of the cloud? Of course, but because we have predictable and forecastable CPU requirements, the need for elastic capacity is limited on a day-to-day basis. Costs for the physical environment are known and manageable, and we like having control over security as well. As such, moving production to the cloud today would not result in either a cost or service benefit to our customers. So for now, our primary servers remain on the ground.

Moving forward, there may well be emerging uses of cloud computing for digital signage. The first may be for enterprise licensees of an application. Today, that arrangement would require the customer to stand up test and production servers behind their firewall before installing the application. As we  look ahead, customers may opt to use virtual, on demand servers in the cloud instead of spending capital and maintenance dollars to deploy physical servers in their IT shop. They would utilize what Maxwell describes as a Private Cloud or Hybrid Cloud. Another high value application of cloud computing may well be ad servers. Since the serving of ads can vary from a one location event to a national event spanning tens of thousands of media players, the need for elastic capacity is obvious. Since ad serving is or could be inherently on demand, and contemplates a revenue generating activity, the idea of billing for cloud infrastructure on a usage basis is particularly appealing. And because many campaigns will span multiple networks, cloud-based serving and billing will more accurately allocate costs. It seems to make good sense. There may be other applications of cloud computing that come to mind. Please feel free to continue the discussion with a comment!

Cloud computing is a hot sector for investors and entrepreneurs. Overzealous marketers have already started misusing the term in an attempt to benefit from some kind of buzzword halo effect. But SaaS is not cloud computing at face value. There are current and future high value applications of the cloud infrastructure for digital signage providers and users. But let’s agree to use the term correctly.

This week, we received an inquiry through our web site.  Here it is verbatim, with identifying elements obscured. As tempting as it is to expose the poseur, it serves no purpose.

Name: *******

Company: <fake restaurant name>
Title: Owner
Email: <fakename>@gmail.com

Phone: ***-***-**99
Interest:
I am looking to expand my restaurant, <fictitious name>, into other locations here in **. I have heard that digital media can help me increase sales on high margin items. How much would a content manager cost and what are the features of it?

At face value, a fairly innocuous request that would deserve a response. But there were some factors to consider. First, the gmail address. In my experience, the hit rate on leads that relate back to a gmail, yahoo, AOL or hotmail address is near zero. Anyone making an inquiry from such a domain is either trying to obscure their actual identity, or has no company email to inquire from. Both are big red flags. A web search of his “restaurant” name and the location revealed no hits. Strike two. A quick look at recent web hits made it easy to isolate the visit that resulted in the request. The IP address from that visit was easily traceable back to a competing company’s server. Sloppy work. If you are trying to be clever, why not do it from home, fella? I thought the inquiry deserved a response.  Here it is:

Hi <name>:

Thanks for your inquiry via our web site.  It sounds like you have a single restaurant at this point, and we are really geared toward large scale operators. Perhaps a local resource like <His Employer> in <location> would be a good starting point for you.  If you need their phone number, let me know.  (Here is their IP address: xxx.xxx.xxx.207

Intelligence requires some intelligence.

Needless to say, there was no response.

Gathering publicly available information, networking with people who have exposure to a wide range of products and companies, attending industry conferences, even speaking with customers and prospects about what they have learned are all in play (as long as no one violates non-disclosure agreements). But going undercover to learn whatever information you are after belies an underlying lack of character, ethics and guts. But of course it happens all the time. I would have probably taken a call from that company just to see if there were opportunities to cooperate. He may not have gotten the pricing information he seemed to be after, but he might have learned where our products and strategies intersect with their own, which might have been useful. We might have at least parted as respectful acquaintances. Instead, all I learned was the widely divergent approach toward ethical behavior between the two companies. Too bad.

No F-bombs from either of us in four minutes: impressive.

A couple of weeks ago, Phil issued a rant because he was upset at a friend’s son, who bragged to Phil that he was entering the digital signage space in a big way, and had already purchased 300 Samsung displays and an unnamed software package. Phil took the kid to the woodshed for investing in the technology before he knew what he actually wanted to accomplish. His advice, which was sound, was to have a plan, objectives and goals, and then match the technology to that plan. Sort of like drilling a round hole and then buying round pegs: things tend to work better that way. Phil blamed the mentality of vendors who claim that they can deliver everything without understanding needs. As an example, he went on to take his own vendor, Stu Armstrong, to task for positioning his newly merged company was a “one stop shop”. Phil called BS on that, recognizing (as most sane people do) that adding ethernet extenders to a software company does not make it vertical. Figure out what you do well, and focus on that. At least Phil practices what he preaches. I will confess that I especially enjoyed that segment of the rant, although in fairness Stu’s pitch-laden comments in a previous segment didn’t really sound like he was claiming to be vertical, just willing to be a single point of accountability. Phil clarified a couple of days later, after apparently receiving some emails, perhaps including one from The Future of Digital Signage. In the last rant, which was actually quite calm, he pinned the problem on the vested interests of integrators, who are motivated to sell the lines they carry, not necessarily the best fit for the customer needs. Phil believes that we should all demand “agnosticity” from an integrator, and while I think he has that concept right, it will never be delivered through an AV integrator in our industry. The fact is that most represent several hardware vendors, and will favor the one that they believe will give them an edge in any particular deal. The tipping point may be function, price, margin, availability, warranty or something else. That does not make them bad people, and they serve a vital role in the business. They don’t represent themselves as truly agnostic in the first place. Most AV integrators only resell a couple of software solutions: one of the big channel feeders (usually Scala), and another more accessible solution. There is no effort to look further, because it is simply too painful a process for them to do so. Hardware is easier. Again, this does not make them bad people, just focused business people.

Newbies like the son of Phil’s friend who start with an AV integrator are simply not going to have many solutions to choose from. After all, a Ford dealer is not going to offer you a Toyota test drive and quote. The type of independence Phil speaks of is delivered through consulting firms with requirements checklists, not AV integrators with line cards. A consultant deals with process. An AV integrator deals with product. Our industry is dominated by the AV integrators, and is ready for consultants, and there is plenty of need and room for both.

In the retail IT world that I came from, there were lots of consulting firms managing systems integration for key applications such as POS, merchandising, planning, warehouse management, workforce management and much more. Each had a process for making software and hardware selections, and most were pretty agnostic. Some had the horses to also manage the integration and deployment tasks. We just don’t see that yet in digital signage. While there are a few reputable folks out there providing process, expertise and independent guidance, there are more than a few charlatans selling smoke, mirrors and wire jobs as well. We still haven’t seen digital signage become a practice area for larger firms that have the muscle to implement as well. I’ve often said that when we get to that point, we will have arrived. One reason why we have not may be that even the large corporate buyers of digital signage technology have in many cases either run the process themselves, or outsourced it to a trusted integrator. That would seldom happen in retail. As Phil says in his first rant, “bring somebody in”. It is the best insurance policy against making a big mistake. We have great AV integrators, and we need more great consultants on the front end of projects. They are not mutually exclusive by any means. Having a few more big picture thinkers like Phil Cohen wouldn’t hurt either.

In a recent presentation, Facebook investor Roger McNamee had lots of things to say about the world of media and technology. It is well worth reviewing. The one nugget among many that caught my eye was this:

“Television is the last protected media business,” but it’s going to get disrupted. For one, once televisions are computers, analytics of who watches will get more accurate than Nielsen panels. “Everyone knows that if we go to actual measurement, ad rates will collapse because the numbers aren’t as good as Nielsen makes them look.”

With technology comes precision

Pretty insightful stuff, and concepts that will have television executives shaking in their Armani suits. Nielsen ratings were good for everyone: networks, advertisers and Nielsen, because there simply was not a reliable way, or any real imperative to get a a greater degree of accuracy. And to be  sure, the networks have little interest in being more accurate. The age of TiVo has been disruptive enough for them. The age of granular viewer analytics will be even more so, as McNamee predicts. But will more precise metrics result in a collapse of TV ad rates? If American Idol is still the most-watched show on television, will Coca Cola, AT&T and Ford want to pay less to be associated with it once they know about the impact of bathroom and kitchen breaks? I don’t think so, and the fact that I didn’t have to think very hard to name the three top Idol advertisers should be evidence enough of that. Advertising still works, and pricing at the top end is still a supply and demand business. It is at the fringes of ratings and viewership curves where TV ad rates are likely to drop, closing the gap between a huge chunk of television advertising and digital signage advertising.

How does this impact the world of digital signage networks? If television numbers are less than they have appeared to be for decades, and the net impact on television rates is primarily on second and third tier programming, digital signage may start to look even better on a more even playing field. I don’t think that anyone in digital signage had delusions about CPM rates that would approach those of network television. Nevertheless, if the reach of larger DOOH networks can be established, and the venues of the screens are arguably more conducive to driving a purchase decision than a television in a bedroom, is it not a better value? I think so. Of course this presumes that networks will have research numbers to back up traffic data, whether it comes via old fashioned legwork or emerging technology. Clearly, that is the direction of the serious players in our space. If we lead the charge for precise measurement, there is a chance to make the case for digital signage as a leader in transparent metrics. Television will be left to catch up, and answer questions about the veracity of their numbers. That can only bode well for DOOH networks.

Will better precision on television viewership impact rates for TV?

Will it impact digital signage uptake or rates?

Should Ken have admitted to watching American Idol?

The index relies on quarterly responses from a cross section of vendors, network operators and a smattering of consultants and agency types.  The second quarter index had 32 respondents, including my company. Each component of the NADSI showed a decline from the first quarter, with the overall index off by 11.21%. Components declining more than the average were Capital expenditures (-11.61%), Screens Deployed in Network (-16.72%), Screens Deployed in Industry (-17.67%), and New/Expanding DOOH Networks (-12.4%).  Firm Sales Revenue was off 11.2%, while prices were relatively flat, down 4.98%. These are troubling numbers, particularly the number related to screens deployed, as this is about as good a bellwether as we have for real activity. This trend would seem to have two causal factors. First, existing networks are deploying at a decreasing rate, and second, new networks are not launching in quantities sufficient to pick up the slack. This would likely relate back to flat or reduced ad spending on DOOH networks, as reflected in the index, and quite possibly to the availability of new capital to launch and/or expand networks. Both factors would be worthy of sleepless nights. In somewhat of a surprise, the only industry sub-segment with a positive trend was Agency/Brand, which is odd when seen in the light of reduced spending. That being said, the forward look for revenue, capex and ad spending are all robust.

In the first quarter optimism is generally driven by the annual strong 4Q carryover and a key trade show right before the respondents are polled. But the industry clearly seemed to run out of momentum in the second quarter. The hardware firms, who have the greatest need and an organizational requirement to forecast accurately, were the most negative in the second quarter, but were in a virtual tie for the most optimism looking forward. That would mean that they see firm orders following a quarter of softness. While networks and software firms were also quite optimistic, both of their forecasts tend to get time shifted on a regular basis, and their optimism must be discounted, whereas the hardware folks generally require POs to back up forecasts. So I see the negative trend as indicative of a bad quarter in a bad economy, and a speedbump that we just have to drive over (carefully).

Hold on to your coffee.

It is easy to blame things on the economy, and respondents seemed to do that when polled on their biggest current challenge. But in truth, the economy has been tanking for far longer than 3 months, so that feels like a cop out. Of more interest, a large number of respondents cited competition as big obstacles in the present and the future, seeming to echo the frequent cries of fragmentation, “me too” products and networks, and the resulting confusion that it causes both buyers and investors. If there is one positive thing that the tough economic situation may do for our industry, it may be the acceleration of a process of natural selection on each edge of the DOOH ecosystem. That, in what we all hope is a recovering global economy, would portend better times for the survivors. Maybe that is the basis for all the go-forward optimism. It will be interesting to see how the 3Q Index turns out, since this will be our first chance to gauge its ability to capture current performance and forecast future trends. Steven Platt, Margot Myers and the PRI team are to be commended for their ongoing contribution to the industry knowledge base.

What do you think? Was this a blip, or is the go-forward optimism unwarranted?

In related news, McGuire confirmed the departure of Suzanne LaForgia, EVP of Advertising Sales and Luke Zalentz, EVP of Business Development. LaForgia was a ballyhooed hire just a year ago, after her stint as the figurehead atop the Bilderberg Group of DOOH, a/k/a the DPAA. Zalentz was a long-timer at RMG. Of note is that neither position was replaced. These departures come on the heels of the April departure of Bob Martin, then RMG’s CMO, to work for SeeSaw Networks. Martin had been at RMG for 18 months. There is no Marketing executive currently listed on the RMG management team web page. Are all these moves just turnover, or a thinning of the top heavy herd in preparation for discussions with potential new investors, either private or public?

I'll take door number two, Monty.

McGuire also unveiled a reorganization of the RMG networks into three groups, as reported in the DailyDOOH article:

1. Executive Traveler – which includes all the airplane, airports and lounges;
2. Fitness and wellness – which includes gyms, health centres and pharmacies;
3. RMG Local – which includes taxis, hotels, casinos, and N.Y. Times (coffee bars and casual dining.

This bears an uncanny resemblance to the way RMG described itself two years ago in a Digital SIgnage Today article: “RMG’s three initial audience networks – the Business Traveler network, the Health & Fitness network and the Urban Mobile network.” While this sure sounds a lot more like a renaming than a reorganization, it does seem to confirm the rumored end of RMG’s representation of mtvU, which is a college campus network that still exists in RMG’s online Media Kit (link here), which provides some other clues to the nature of RMG’s business model and potential changes in store.

Let’s look at the pieces of the puzzle. RMG was formed and launched after the Danoo acquisition of IdeaCast in 2009. The legacy Danoo network is now known as the NYTimes.com Today network, and is focused on urban cafes and eateries, with 650 locations according to the RMG Media Kit . Interestingly, press releases at the time of the IdeaCast acquisition claimed 850 locations for the Danoo eatery network, although that may have included some airport shops. In any case, it does not appear to be a growth vehicle based on number of locations. Most people who have observed that network would agree that the screens are generally placed in non-optimal locations within the cafes, that the screens themselves are too busy to be engaging, and that there do not appear to be many advertisers. It is hardly a case study for a world class digital signage network from any perspective. To my limited knowledge, the technology that powers NYTimes.com Today is not leveraged in the RMG portfolio beyond that network. More on that later. IdeaCast brought the In-Flight Entertainment business to the party, which is appears to be the crown jewel of the business. IdeaCast also brought along the Fitness Network, which by some reports is hardly a world beater. The network apparently has lesser ability to target content at the site level due to the nature of its infrastructure, as compared with its key competitors, Zoom Media and Health Club Media Network. A brutally candid view of the Fitness Network appeared here. A 2011 acquisition, Executive Media Networks (since renamed the Executive Travel Network) is deployed in many top airline clubs and lounges, and is reportedly a very good property, and obviously a good fit with the In-Flight business.

RMG’s entry in the Point-of-Care business (now lumped in under Fitness and Wellness) is an acquired company, Pharmacy TV, which went belly-up several years ago after deploying in over 400 Long’s Drug Store locations, later re-emerging with fewer than 100 locations, all far less attractive than Long’s. The media kit also lists two non-owned health-related networks which they claim to represent, although only one of those is also listed on the web site itself. Draw your own conclusions. One might ask where the sales leverage is between the primary businesses of cafes, fitness clubs, in-flight entertainment and VIP lounges and the tightly focused world of pharmacies and doctor offices. Adding to the mix of sales rep agreements are the now-departed mtvU and a casino network based in Caesars, Harrah’s and Horseshoe properties. Finally, there is a Taxi Network in conjunction with Taxi Magic, which appears to be early stage from what I can glean.

All together, there are owned networks that are split between very good and marginal, and a series of ad sales rep agreements that in a perfect world would deliver hefty commissions without the need to make a capex investment. Actual results of the sales rep activity may have varied from the ideal however, especially in light of the executive departures confirmed yesterday. Those executive departures may signal a decisive move away from the third party ad sales rep business, and a reinvestment in owned networks. I believe that the rollup model for networks has some validity, but acquisition diligence will trump opportunism in the end. Kleiner, which backed Danoo/NYTimes from the start, picked up the In-Flight gem with IdeaCast, but also the less attractive Fitness network. The Executive Media Network win was offset by the questionable-at-any-price Pharmacy TV move. The group of networks with which RMG has ad sales rep agreements (or had, based on the conflicts between the media kit and the web site) is a mish-mash of verticals, demographics, technologies and special situations. It does not leverage the strength of the core properties or the time of the sales team. Hence the logic of refocusing on owned properties.

RMG has a defensible top position in an attractive niche in the Business Travel vertical. They are not even close in any other vertical with an owned network. Is this the stuff of an executive summary for a pre-IPO S-1 filing? Decide for yourself.

Yesterday’s news article refers to the desire to raise $250 million for new acquisitions. Potential investors need to ask two questions. First, what percentage of the RMG juggernaut does one get for $250 million? You can bet that private investors, which is probably the path of least resistance, would get a much lower pre-money valuation than public investors. Life is a series of tradeoffs. Second, will the acquisitions leverage strengths or simply be whatever they can find at bargain basement prices? They have not made a game changing acquisition since the relaunch of Danoo-IdeaCast as RMG. The EMN deal was a good niche deal for sure, but they have not been successful in pulling off something bigger, and that is not for lack of trying. It seems clear at this point that RMG has little taste for funding the capex for new networks, having experienced that at Danoo, whose growth stalled, perhaps in an effort to conserve capital. Since McGuire said that he now has three deals in line that would eat the full $250 million, he must not be bottom feeding for the next Pharmacy TV deal. So what could it be? Given the relabeling of the network groups and the size of the potential deals, the candidates for acquisition are relatively small in number. We may never know who the companies are that McGuire is referring to, but I will bet the traditional box of donuts that he knows the executives of at least two of them from DPAA meetings. I have sealed the names of my short list in an empty mayonnaise jar buried in the backyard.

RMG has also struggled to create a consistent technology infrastructure that would deliver operational efficiencies. If they proceed with multiple network acquisitions, that situation is likely to be exacerbated. In fact, one savvy observer told me a year ago that RMG could not successfully go public without making a technology acquisition. The reasoning was twofold. First, running multiple networks on multiple platforms is very costly and inefficient. Rollups need to exploit efficiencies of scale, and infrastructure is a big piece of that. Second, a consolidator like RMG would need to have a captive technology advantage to build and maintain barriers, a story that plays well on IPO road shows. The Danoo legacy platform has not been asked to scale into thousands of sites to date. It is probably not viewed as the answer. If RMG chose to acquire technology, the list of potential candidates for a scalable platform deal is actually fairly short, but it is not clear that it is a current priority. In any case, a harmonization of technology infrastructure will be a costly effort, but will have to make its way on to the pre-IPO to-do list at some point, whether they choose to make or buy.

The tea leaves seem to indicate that RMG is focused on filling its three network buckets with more owned networks, and rationalizing its efforts to sell ads for non-owned networks, which is a very competitive business. A second box of donuts says that they will raise more private money before they consider an IPO, betting that investing in and fixing the model and then hitting some proof points will render a higher valuation down the road. To their credit, RMG was bold and early in the consolidation game. They have learned some tough lessons, and are now at a crossroad where they must choose a path toward the next stage. That path must leverage what has worked and address areas that have not performed as well. As you can see, it is a toll road.

Since the topic is measurement and reporting that relates to advertising, it is no surprise that the world of digital signage orbits around the sun of the agencies. The agencies control the purse strings and the campaign strategies for their clients, the brands, and as such are the focal point of various organizations trying to develop standards in these areas. They are on the Board at DSF, in the DNA at OVAB Europe, and very much active players at DPAA’s critical Media Operations Committee. One of the challenges that can’t seem to go away is the desire of some folks in the agency world to view digital signage in the same way that they view broadcast television. That means having reliable, third party measurement of audience and viewership related directly to ad rates. Never mind time shifting, ad skipping, potty breaks and laptop screens competing with the message on the television. The operative Latin phrase is In Ratings Speramus. The unwavering desire of some to make a narrowcast, targeted, location-relevant technology conform to traditional broadcast measures makes little sense, and ignores the very compelling factors that make a well-planned and executed DOOH campaign a terrific vehicle and a great value, not the least of which is that its effectiveness is not in doubt. Audience metrics are not a simple or inexpensive proposition, but proof of play and compliance ought to be. While there are some enlightened agency folks who do their homework on venues and ask primarily for a promise of delivery along with proof of same (and make-goods as required), the majority are hung up on audience related metrics over delivery, and can’t seem to find the comfort to make commitments. Without doubt, reliable delivery augmented by verifiable audience metrics will demand higher CPM rates than reliable delivery alone, but it should not change the inclination to make the buy itself. We are dealing with rates and value here, and not arguing over effectiveness. Markets have a way of calibrating value, and it will here as well. Yes, it would be nice if we could make DOOH look like good old broadcast TV to agencies, but Mick Jagger said it best:

You can’t always get what you want
But if you try sometimes well you just might find.
You get what you need.

Sing it, Mick.

The second constituency in the search for common ground are the network operators. The conundrum here is that they reflect the fragmentation of the technology base in our industry. Many of the largest network players on the DPAA Media Operations Committee, for example, run on their own legacy, home-grown platforms. They apparently work just fine for them, but from a business perspective, their core competencies are more likely skewed toward site acquisition, content development and management, and ad sales. It may be more convenient for some to rely on audience metrics to drive sales than on proof of performance or campaign compliance. Their motivation to drive toward technical standards that may require them to reassess or reinvest in their technology capabilities has to factor in to how quickly they want standards to appear. To be fair, they are moving ahead, albeit slowly. We need to pick up the pace. From a rock ‘n roll perspective, I would go with the wisdom of Led Zeppelin:

Hear my song. People won’t you listen now? Sing along.
You don’t know what you’re missing now.
Any little song that you know
Everything that’s small has to grow.
And it has to grow!

The Song Remains The Same

And finally there is the third perspective, that of the technology providers. Industry observers love to cite the hundreds of digital signage platform providers that make up the fragmented marketplace, offering a dizzying array of approaches, business models, prices and capabilities. The race to differentiate often degenerates into a battle of hyped feature bloat and intentionally misleading customer announcements. Neither practice advances the industry or the common interests of the vendors. Competition is great: it drives innovation. I’m all for it. But in this case, the technology sector of the industry needs to lead and bring the networks and agencies along the path to standards that legitimize our industry. Frankly, it is the software providers who pay the heaviest price for a lack of technical standards, as they must meet the divergent needs of customers, their content providers and agencies. Getting standards in place can redirect technical resources toward true innovation. So it is in their best interests to lead. Advice from the rock ‘n roll world comes from The Who:

You don’t have to play,
You can follow or lead the way,
I want you to join together with the band,
We don’t know where we’re going,
But the season’s right for knowing,
I want you to join together with the band.

Join together

The path to the next level for digital signage is littered with divergent perspectives, conflicting priorities, and competitive pressures. That is nothing new. But the path is going to get cleared, because it has to. Traffic is backing up behind us. All those British bands knew what they were saying.

Why use tomatoes? (Photo credit: fallout.wikia.com)

Back in February at the very well attended Digital Signage Expo in Las Vegas, a couple of level headed members of DSA’s Advisory Board spoke to me and a fellow DSF Board member, suggesting that we “end the madness” and “have a lunch”. The clear message was that everyone had bought in to the concept that a single industry association could better marshal resources and galvanize support for our growing industry, which does not require MENSA-like abilities to figure out. I eagerly reported the overtures to Bob Stowe, the new Chair of the DSF, and the Executive Committee. The news was well received, albeit with guarded optimism. We discussed the topic at our next Board meeting, and agreed to reach out at the executive level to the DSA to understand their intent. We developed a clear set of principles from which we would potentially negotiate.

A couple of weeks later, the conversation was apparently had. I was not a party to the actual call, but it seems that the DSA’s old regime was operating under the impression that they were doing the DSF a favor to have the call, and that DSF was struggling financially. It was implied that they would gladly subsume the DSF, deign to allow a few folks onto the exclusive, 71-member Advisory Board, and send out invoices for dues. When that parry was not warmly received, the response was essentially a comment that unless DSF was coming on bended knee, there was no basis for further discussion. In addition to basing their arrogance upon a completely false assumption, the DSA executives betrayed the intentions of their members who made the initial overtures. The call did not last long, and there are no further calls on the schedule to my knowledge. That is too bad for the DSA and their members. The chance to unite both an industry and their own fragmented member base around a common cause was lost due to an unwarranted haughty attitude. It is a sad fact that the same attitude drove the actual formation of the DSF when the same DSA leadership tried to strong-arm Exponation, the owners of the Digital Signage Expo, some 18-plus months ago. Rather than submit to the over-the-top demands of an association funded and controlled by Networld Alliance, a for-profit media company, Exponation provided seed money for an independent DSF and subsequently signed an agreement to become the exclusive trade show sponsor of the Federation. No one from Exponation ever did or ever will have a seat on the DSF Board, or a vote on any business matter. Independent means independent. The same can not be said of DSA, unfortunately. Despite their bravado about “independence” around their 2011-2012 board elections, we still see Dick Good of Networld Alliance remaining on the Executive Board, along with Executive Director (and all around good guy) David Drain, who came to DSA as a Networld employee. I have been told in the past by people in the know that Networld isn’t going anywhere until their cumulative investment carried on the books of DSA is recovered, and it is no small amount. I suppose all of those banner ads that obscure some good editorial work on Digital Signage Today have not generated enough ROI. In any event, DSA is certainly a long way from being independent, and the seemingly permanent existence of a media company on the association board raises more questions than answers for many people.

As a result of strong and ongoing membership sign-ups, an incredible and diverse working Board and the agreement negotiated with Exponation, the DSF is healthy, vibrant and growing. There is an uncommon spirit of working for the common good and a real lack of personal/company agendas in the affairs of the Federation. I can report that it is an honor and a pleasure to work with the fine people who give unselfishly of their time there.  The only evidence of desperation is a desperate desire to achieve the goals of the industry faster. The DSF recently joined the DPAA as an associate member, in recognition of the perspective and body of work that DPAA brings to the table. We felt that playing even a small role there would be beneficial to our membership and increase awareness and communication between the associations. I encourage all industry advocates to join DSF and work with us as the only independent voice of a growing industry.

Had DSA and its masters shown genuine intention of doing the right thing for its members and the industry earlier this year, the silly tomato fight that no one understands might well be over by now. But that was not the case, and it is a pity. I sincerely hope that new DSA President and good guy Brian Ardinger can steer the Good Ship Screenmedia into calmer waters. I know members there who capture the selfless spirit that I witness every week at DSF, so nothing is impossible. If they get frustrated, that “join” link above will be working for a long time.

Few people were shocked that an EnQii deal went down, as it was fairly common knowledge that the company (or perhaps its North American business) was being actively shopped in recent months. The reasons for that are not known to outsiders, a group of which I am certainly a member, but one can guess that the VC backers were getting itchy about getting some money off the table. Whether that reflects a bullish or bearish outlook is also unknowable. But the fact remains, the Board wanted a deal done. MDS, whose business is aptly described by DailyDOOH’s Adrian Cotterill as “having a very high profile in the industry and a global reach but bottom line doing little more than selling some cable adaptors and switching equipment,” needed to expand its portfolio in order to truly have the “DS” in its name have some meaning. A software solution would seem to fit that bill. Whether EnQii will bring new deals to their MDS brethren or vice versa remains to be seen. Personal experience would tell me that a software company can certainly provide leads and referrals for a hardware supplier, but it seldom works the other way around. That is just the way the decision cycle works: companies don’t lock in on connectors and then search for software. Some of that can be solved by adapting the way one goes to market, and I assume the capable people at both firms will figure it out.

While the deal is presented as a “merger of equals”, the outward signs indicate that the MDS folks are driving the bus. Jerusalem Venture Partners, who were key investors in MDS, led the round that sealed the deal. Another MDS VC investor and EnQii’s two primary VC investors were characterized as “participating” in the new round. From the outside, that sounds like a merger and a recapitalization, with new money invested proportionately to ensure that the desired post-deal ownership shares came out a certain way. Given JVP’s lead role, the Board chair going to Shlomo Nimrodi and  the CFO role staying in Israel, it sure sounds like the shots are being called from Jerusalem based upon ownership leverage.

Is it a match made in heaven?  Dave Haynes of Sixteen:Nine opined that he’d “rather see complementary skills put together than two rival software development teams“. That is one view. I take a somewhat different view, which is that a combination of solution providers and their customer bases might have been more meaningful in the larger picture. Yes, the rationalization of the technology stacks and development teams can be a long process, but it has been done before in the software business, and as long as there is a clear plan it can be done again. Those deals are dicey as well, but when done, they can be very dynamic. I witnessed it many times in the retail solution space. A chance to radically alter the balance of power on the solution side by way of acquisition appears to have passed for EnQii, even if temporarily. It may be that there were no viable software partners for them to merge with for a variety of reasons, and I don’t take the existence of the ongoing acquisition fund as a sign that it will be used horizontally. Rather, the words in the press release seem to indicate a more vertical bias to the strategy. There are some good folks on both sides of this deal, and I wish them well.

It is always exciting when deals get done inside the industry. It means progress is being made, strategies are being formed, and new money is being invested. Sometimes it means that investors are antsy. EnQii was a fairly high profile player in the solution space and the merger seems to reflect a willingness by their Board to let their destiny be determined in large part by folks with a vertical view. In the grand scheme, the software side will be sufficiently funded to go after whatever strategy they get approved, and will likely go about their business after the dust settles. This was not a consolidation as much as it was a merger and recapitalization. I don’t think it will alter competitive strategies very much (if at all), or kick off a round of “me too” deals. The industry-altering deals will happen when the big money steps up to the table and places some bets.

Those limos may be pulling up to the casino soon. The night is young.

The past several days have been a storm of wall-to-wall meetings. All were productive, all were important and all were very instructive. It began with our User Group meeting ten days ago, which saw 16 customers from all types of networks come together for a day and a half of planning, brainstorming and networking. Last week saw four key partners make the trip to our global headquarters in Sarasota. I came away from the five straight days of meetings invigorated, motivated and very optimistic.

The User Group meeting was designed to be the catalyst for the design and build phase of our next major release. We have learned over the years that the most used and most useful functions within our application have been customer-driven. Our job is to design and deliver them in a manner that is flexible enough and abstracted enough to provide value to all users. This ensures the single image, multiple-tenant value proposition of the SaaS model that we employ, and of course minimizes (eliminates, hopefully) forks in the application itself. The User Group is the natural venue for taking the temperature of our expert customers and for setting priorities going forward.

The key sessions were ones in which we presented a laundry list of things we’ve heard, both vicariously and through direct communication, that customers want, followed by our roadmap for the key features of the next release. Amazingly, items that we thought were contentious were not, and new capabilities that we thought would unsettle some people due to new concepts within the application were received rather calmly. We had long discussions on tactical enhancements versus strategic shifts, allocation of time and resources, and emerging trends in the industry.

Here’s what I learned. Our customers, large and small, old and new, and across vertical markets make up a real community. We must make it our job to support and enhance that community in order to optimize every single customer experience. You would think that would be intuitive, but until you see how effective that community can be, it does not really hit home. But now it has, for sure. If customers want to interact with each other, we have the responsibility to make it easy and effective. And we will. It is often easy to become cynical when you are on the receiving end of a fire hose of development requests. But when we brought everyone together, we learned that customers are willing to be patient if we communicate well. Essentially, we seem to have earned their trust. We don’t take that lightly or with even a hint of cynicism. It is the Holy Grail in our business: trusted first with powering their networks, and then with taking them to the next levels in a consistently excellent way. We can’t breach that trust and hope to succeed.

Following the User Group meeting, which included a great dinner, two long nights and one hit-and-run accident, we welcomed four key partners to our offices over a three day period. Naming names wouldn’t be prudent, but I can say that for me, the meetings were a sure signal that our quiet company is being appreciated beyond the loyal customers we had entertained only days earlier. We were able to communicate our plans, prospects and strategies and match them up with those of some impressive partners. We gained a number of very helpful insights into the industry and the world outside of our insular solution space. Three things were clear:

1. There is no single company large enough to dominate this space today, even as consolidation has begun. The imperative of creating a partner ecosystem is obvious.
2. Despite rumors of one large company leaving the space altogether, all signs point toward some very large players organizing to leverage what they see as a wide open, growth business. The lure of big game is what will bring the big players to the table. In many ways it is a self-fulfilling prophecy, as the increasing presence of everyday names legitimizes the industry and removes barriers.
3. Like the customers, the partners thrive on communication. A little trust also goes a long way.

Change is in the air, and established players in the space crave it as much as potential new entrants. After a week of active listening, we’ve learned that proactive communication will be an important part of the path to the next level, both for individual companies and the industry as a whole. Since we are all in the communication game at some level, we’ll hope the shoemaker’s children are not barefoot.

The challenge of accelerating the flow of advertising dollars into DOOH from other channels pales in comparison to that faced by the Japanese nation. The need to find the equilibrium between DOOH and mobile is pressing, yet hardly as pressing as rebuilding in Alabama. You can be sure that Japan will rebuild, no longer how long it takes. So will Alabama. Despots and cowardly mass murderers will meet their fate as they always seem to. The common thread of recovery, rebuilding and redemption is the selfless and dedicated work of many otherwise unconnected people toward a common goal. Politicians call it “unity” or “coming together”, hoping to take credit for it. In reality, it is the human spirit that can not be repressed and that rises to any challenge when the going gets tough. We may need some of that in DOOH.

In the world of digital signage , we have lots of important work to do in order to optimize the amazing potential of our young industry. Sadly, the short history of DOOH is littered with shameless self-promoters, opportunists, liars, backstabbers and people who will say anything yet do nothing. Cynical, or all too true? Perhaps it is thus in the frontier phase of any emerging industry. However, I see signs that the human spirit will emerge here as well. The community response to the Japanese disaster was impressive, and from that was born DOOHgood, led by Dave Haynes. Bravo to all who participated! Both efforts are evidence that a community of good, and a spirit of cooperation exists in our midst.

I have heard the saying that “a rising tide floats all boats” used in the context of digital signage for nearly eight years now. Until recently, I was not sure that anyone really meant it when they said it, and that their own boat, be it dinghy or yacht, was the only vessel that mattered. I have had many conversations with customers, competitors, vendors and partners over the past several months that lead me to believe that folks are starting to buy into the rising tide and to look at partnerships, ventures and opportunities in a more holistic manner. There are examples of this in the more mature media channels. From such thinking comes innovation, and it is innovation that we need to realize our potential. In a marketplace that craves leadership and something big, the winners will break through the barriers of conventional thinking.

Despite the slew of industry awards given out recently, I’d suggest that the best awards will come from the marketplace, in recognition of creativity, innovation and a burning desire to advance the industry. When we work together, we can overcome virtually any obstacle. It isn’t like we have to rebuild a town. Or a country.

Relevant content: Analog signage at Grand Central.

Despite my good intentions I only had time to watch Patrick Quinn’s insightful keynote and one session. I was attracted to the session titled “Assessing DOOH Technology“, as I thought it would have some crossover with my world of digital signage platforms.  The panel included Peter Bowen of SeeSaw, Rob Gorrie of Adcentricity, Jason Kates of rVue and Graeme Spicer of NEC/VUKUNET/DOmedia/EIEIO. Based upon the panel, it sure looked like we were going to hear about ad planning and buying and execution, and not so much digital signage platforms, which people still annoyingly and incorrectly call CMS. That was OK, as I consider Rob and Jason good friends; I remember speaking with SeeSaw founder Monte Zweben in 2005 about the idea of aggregating digital signage networks; and while my opinions never seem to generate goodwill in Itasca, IL, Graeme and I remain friendly. If nothing else, I’d enjoy watching the byplay as the panelists positioned their firms.

From where I sit, the two companies represented that have the most similar business models were SeeSaw and Adcentricity. My quick description would be that they represent a number of networks and actively sell in to them utilizing a number of proprietary tools to ad value to that process. Interestingly, when introducing himself and SeeSaw, Peter Bowen started down that path and then swerved a bit, announcing that SeeSaw “has a Demand Side Platform (DSP)”. That was puzzling on three counts: first, SeeSaw Ads is not a DSP, it is a fine planning tool; second, a cursory look at their web site does not turn up the words Demand Side Platform; and third, that he felt the need to juxtapose SeeSaw with rVue (a DSP) rather than Adcentricity. Hmmmmm. The camera did not show the reactions of the other panelists, but Rob quickly and joyfully described Adcentricity as an ad network with the requisite planning tools and focus, and Jason crisply described what a DSP does. Graeme deferred to all three on the planning side and threw his chips down on ad delivery. OK, then… this was shaping up to be fun.

The session took a thought-provoking turn when an audience member brought up the fact that at other media events focused upon social media and internet, he has never observed the lack of trust in the numbers as he does in DOOH. He correctly asserted that this poses a real hurdle for the industry and applauded the efforts of the panelists as agnostic middlemen who bring a sense of believability to the process. Mr. Mandese postulated that a single industry voice was going to be required. (Uh oh, standards and leadership rear their beautiful heads!) A discussion of DPAA Audience Metrics standards ensued. Then came an exchange in which Jason suggested that digital signage software “has never been better”, which Rob disagreed with, saying that while there is some good stuff out there, there is still lots of software out there that simply can’t do what agencies demand, and even more that do them in non-standard ways.  I think they are both right. I fundamentally agree that there isn’t much “voodoo” left for digital signage platforms, as Jason put it, and I said so here. But I also agree that the fragmentation of the software market has created an equally fragmented market in the network world. That has to drive all four panelists crazy, and it is also an impediment to the flow of advertising dollars, both to the members of the country club, and quite a few scratch golfers who don’t care to join. Looking at the networks on the DPAA roster, the dominant platform is clearly “homegrown”, which doesn’t inspire confidence per se. Until there is a way for agencies to trust networks based upon their platform, the challenge will not go away. You may see some independent efforts to help that along in coming months, but from a market perspective it is going to take a rising tide of concern with standards and what agencies want in order to cull the herd down to a manageable number. And at some point, industry leadership has to materialize and coalesce in a similar way. Neither can happen soon enough for the nervous agencies. Or for those who really care about accelerating the growth of the industry.

Thanks for a lively panel go to MediaPost and the panelists. While the session title may have been a bit misleading, that’s OK. Their discussion brought up important points worth thinking about. A few New York minutes can be time well spent. (Note: A tip of the hat to Dave Haynes for having a faster WordPress trigger finger than me with his take on the same session.)

What We Think We Know

In decoupling and organizationally re-assigning the digital signage tool formerly known as VUKUNET, now renamed NEC CMS, NEC has stepped out of the mainstream fray with respect to digital signage software platforms. Mr. Haynes suggests that they will be content to compete with lightweight products from display foes Samsung and LG in an attempt to mend channel fences with providers of more heavy duty software platforms, who have access to larger deals. Most have cut NEC out of any customer discussions. Bravo to NEC for retrenching after figuring out what was obvious to just about everyone from the start. The first step of the twelve-step program is admitting that you have a problem, so I am supportive. But they still have work to do. The VUKUNET approach and overhead required to make the system work is still a no-go for many third party systems, including any that run under Linux or that are managed by this writer.

DOmedia, a venture-backed firm, very much needed to make a splash to enhance its profile and increase the speed and value of a potential flip. Presumably, they also needed to gain some functionality that agencies clamor for, most notably ad inventory management. I have not seen the VUKUNET inventory management software, but I assume that proper diligence was performed.

Both companies have proclaimed their respective pieces and the combined offering to be a new standard. Hyperbole like that is exactly what we don’t need: it is the digital signage equivalent of the “Mission Accomplished” fiasco aboard the aircraft carrier. Win market share, establish new relationships, move the needle to the right… then maybe you have fodder for chest pounding. This game won’t be won in the press.

It might be a tad early to proclaim victory. Again.

What We Need To Know

How will this be monetized? Is the VUKUNET functionality simply given away free to DOmedia users, or will there be fees involved? Inquiring minds want to know.

How will it really work with someone else’s solution? NEC has decoupled inventory management, reporting and proof of performance from the rest of the legacy CMS. By doing this, they have kept the functions with potential monetary value on the DOmedia side, and minimized the capabilities that they will continue to offer for free through the display side. Probably reasonable logic. In my opinion, most network owners will want to have a single delivery and reporting system for all content, be it advertising or non-advertising content. As important as the basic proof of playout is, the context and timing of the playout are also critical, something that would be missing if you had two separate reporting systems. Those pieces need to run through the resident digital signage platform. I understand that it would be seamless if that resident platform was NEC CMS, but that will be the rare exception. The partners need to entice network owners to demand this functionality and software providers to interoperate.

Where does ad inventory management belong? Ad inventory management administers data that is needed by both the network and the agency/buyer.  Because some ads will be trafficked through DOmedia, and others will be sold directly or via other platforms, that data management task may become messy. I’d suggest that ad inventory management might best be deployed as a standalone (perhaps cloud-based) application, with reads and feeds as needed enabled for the network owner, agencies and trading platforms. Going proprietary may limit the audience.

What is the official standard of DPAA? On Wednesday, the release announcing DPAA’s place-based advertising study results dedicated a third of its editorial space to promoting its “search and discovery planning tool, InfoCenter“, a product of DPAA heavyweight Francois de Gaspe Beaubien’s Ayuda, which by the way launched without a geo search capability. On Thursday, in DOmedia’s release, DPAA’s Susan Danaher provided a quote to endorse two other members offering a model competing with InfoCenter/Ayuda. Let’s just say the carefully worded quote for the DOmedia/VUKUNET venture exhibited the minimum amount of enthusiasm required. The infighting at the country club is only just starting. A review of the membership roster also includes SeeSaw Networks and rVue, both knee-deep in ad planning, buying and execution, and BroadSign, which markets an ad inventory module of its own. Ought to make for some fun meetings of DPAA’s Operations Committee, charged with establishing standards… standards that have already been proclaimed by several entities. Have fun with that.

What will be the next shoe to drop? On the heels of the DOmedia announcement came an announcement from Key Systems throwing their hat into the same ring with signagelive as its first partner. Call me crazy (many do), but I am thinking that deals like this create momentum of their own. The concepts of media planning, ad inventory management, ad serving, trafficking, analytics and reporting are swirling around each other. Other parties will be heard from. The good news is that this is a sure sign that the ad world wants to buy DOOH in a familiar way, and companies are moving to accommodate them. That is very good news, and it is early in the ballgame.

Scan it if you dare!

QR Codes

Dan tweeted about an eMarketer article that indicated that about two-thirds of smartphone users have seen QR codes, and about half of that number had used one. The article acknowledged that this would seem to be a pretty good indicator of awareness, if nothing else. I wonder how many of the users have done it multiple times, but regardless, people know what these crazy patchworks of black and white dots are. Couponing and getting additional product information were by far the two largest motivators to using a QR code. As you may know, QR codes require a user to launch a special app and then use their smartphone camera to snap a pic of the two-dimensional square. The application interprets the code and launches the phone’s browser, directing it to a specific landing page with a specific purpose. It works pretty well. But it has drawbacks. The fact that a user must grab their smartphone, launch an application and then frame a code in the camera requires intent and reward to overcome the process. In that light, the popularity of couponing is easy to understand, especially if the reward (the coupon) can be stored on the smartphone for later use.

The application of QR codes to digital signage content still feels problematic. I first learned this during the Super Bowl in January, when Sears ran ads with QR codes at the end. Try as I might, and motivated by the urge to tweet and write about it, I failed on three attempts. The code was too small and did not stay on the screen long enough. A noble attempt by Sears, but still a #FAIL. To try to use a QR code within digital signage, therefore, it seems that the code must be fairly large and stay on the screen long enough to complete the process of recognition-decision-app launch-frame-click. Anything less than 20 seconds may be too short. Anything longer may exceed the length of a typical ad. Alternatively, the QR code could exist in a sidebar or be overlaid in a corner during an entire ad or clip. It might detract from the content itself. Finally, imagine yourself among five viewers of a digital signage screen. Which one of you gets to stand in front of the screen and get a shot at the code? In the end, QR codes will find their highest and best use in static signs, perhaps even signs adjacent to digital screens. I think they require too much consumer effort to drive convergence.

Just wave.

NFC

The continuing surge of NFC-related news items seems to be encouraging, especially from the perspective of NFC as a wave-and-pay technology. Just yesterday, Amazon announced that it was entering the NFC payment derby, and Sprint decided to go it alone, bucking the Isis axis of AT&T, T-Mobile and Verizon. Good luck with that Dan, we’ll look forward to your ads. It seems obvious that NFC is coming to mobile handsets, despite the “will they/won’t they” intrigue around the intent of Apple with iPhone5 (they will).  I am excited about the potential for NFC-based mobile payment systems, but even more excited about how NFC might become a driver of DOOH-mobile convergence.

I believe that good DOOH content includes some kind of location-specific relevance, a call to action or both. As such, using NFC as the pivot point from passive viewing to active engagement makes a lot of sense. In the call to action scenario, such as obtaining a digital coupon, compare the required action of waving a smartphone at an NFC hotspot near a screen to the clumsy process of snapping a picture of a QR code described above. I compare it to going from a keyless ignition scenario back to an analog car key, something I recently experienced. It feels strangely 20th century to take my keys out of my pocket to start the car. So will it be to use QR codes when NFC is deployed alongside digital signage displays. NFC will also be able to pass stored data on topics relevant to the displayed content with a wave of the phone: the collateral rack will go digital, and the engagement will extend beyond the screen, beyond the location and beyond the sacred dwell time. I say bring it on.

While we seem to get excited by all new technologies as they appear on the scene, their benefits always come down to application. Because of this, good old SMS (text messaging) is still the dominant mobile technology in terms of integration with DOOH campaigns. Virtually anyone with a cell phone can respond to an SMS campaign call to action, and it is reliable and relatively cheap. No add-on hardware is required at the location level, no add-on software is required at user (phone) level. It is not going to go away quickly. However, the rise of NFC as a data transfer technology, fueled by the payment application will vault NFC to the head of the class in one generation of smartphone hardware. By the way, those who were scoffing recently at the idea of direct response advertising on DOOH screens: will it still seem silly to you when viewers can buy with a wave of the phone, and have credit for the sale go to the network? Stand by, because NFC has the potential to make DOOH displays dispensers of data and collectors of cash. Both of which are quite measurable. Won’t that be nice?

Innovation is defined by Merriam-Webster as “the introduction of something new; a new idea, method or device”. By any interpretation of that definition, the iPhone was a true innovation. In many ways, it transformed the the generally accepted notion of a cell phone. Apple’s real stroke of genius was to wrap the touchscreen and user interface into a platform for applications. That of course spawned the App Store, an innovation in and of itself that in turn unleashed the creative energy of thousands of application developers. The work of those developers is where innovation is now occurring in the smartphone world. It is reasonable to say that the progression of iPhone models since the original iPhone have brought enhancements and features to the table, but not a whole lot of true innovation. Transformation was followed by refinement end enhancement. It has unfolded much like the evolution of the personal computer. The PC was certainly a transformational innovation. But the subsequent innovation in personal computing has come from the work done in operating systems and application development. The innovative hardware platform spawned innovations in its usage. Ongoing advances in personal computing, such as laptops and tablets, have really been form factor adaptations of the core platform to emerging use cases.

Here is where the gravelly soil of Geyserville comes in: relating this thought to digital signage. Stretch as we might, there is not an innovative hardware platform that spawned an industry in digital signage. Media players, whether PCs or appliances, are merely software-enabled instances of PC boards in one guise or another. The argument that flat screen displays were an enabling innovation also seems weak. Software that facilitates the management of networked digital signs cropped up to take advantage of the falling prices of displays, increasingly ubiquitous bandwidth and a fragmentation of traditional mass media. To a certain extent, the enabling conditions were the “platform” that spawned the development of what at the time were innovative applications. There is some great software out there, but there will be no emergent killer app: no Lotus 1-2-3, no Google, no Twitter. That is because the core problem of managing the distribution, playout, and reporting for a network of digital displays has been solved for quite some time. While it may seem like heresy for someone in the software business to say it, the innovation of the early years has inevitably given way to the cycle of enhancement and refinement.  Yet all is not lost: we have addressed the central problem, and the current cycle must now take things to the next level, adapting to new use cases as the personal computer has. A redefinition of innovation is required, and how engineers take today’s solutions into tomorrow will be critical. Innovation in this enhancement and refinement stage will mean advances in design, architecture, business models and execution. With the shakeout of the sector quietly underway, no one is going to innovate their way to the top of the heap in the traditional sense, because the dragon was slain long ago. Winners will continuously improve, respond to customer needs, exploit defensible niches, identify the right partners and integrate with other strategic applications.

Dragon vanquished; next quest may require different weapons. (photo: sucs.org)

There may be those who will take issue with the assertion that innovation has run its course in digital signage software. I would guess the four-inch screen crowd will be the loudest. So let’s make it clear: mobile innovation is taking place at very high speed in the mobile market. Mobile integration is what needs to take place in the digital signage market: digital signage platforms can and should integrate and otherwise partner with the best of breed.

In a lifecycle that tracks those of the personal computer and the iPhone, the platform that is digital signage began life as innovative and transformational. Once established, innovation has given way to enhancement, refinement and adaptation to the external forces it enabled. The meaning and nature of innovation changes as the cycle marches on. The dragon representing the core business challenge has been slain, but that hardly means that the job is done. It just means that the job has been redefined.

Some of the magic behind search engine results is a methodology for ranking pages.  According to Google, they use “over 200 signals, including PageRank, to order websites, and (they) update these algorithms on a weekly basis”. PageRank essentially assigns a score to web pages based on many parameters, including how many other pages link to it. It is part of the Google competitive advantage, and is undoubtedly refined on an ongoing basis. Over at Microsoft, Bing reports that “the Bing ranking algorithm analyzes factors such as web page content, the number and quality of websites that link to your pages, and the relevance of your website’s content to keywords. Site ranks change as we review the factors that make up the ranking.” And at Yahoo! Search, results are ranked “according to their relevance to a particular query by analyzing the web page text, title, and description as well as its source, associated links, and other unique document characteristics.” Each has their way of ranking results to provide the best possible user experience, and it is critical to their mission.

Now turn you imagination to a media buyer preparing to make a DOOH ad buy for a product that will appeal to a targeted mix of geographic and demographic segments. Like the web searcher, you are skilled in defining what you are seeking, but not completely aware of all the potentially attractive destinations for your ad buy. How do we ensure that the ad buyer comes up with relevant results? We must be mindful of the fact that incomplete or irrelevant results will result in a no-buy or an ineffective buy scenario, both horrific for the industry. The answer will be an evolution toward a DOOH analog of web search page ranking algorithms. It has to happen, because there are too many networks to understand, and too many variables within those networks to analyze. We must make it easy for the buyer to be satisfied, just as search engines do for web users. It amounts to relevance or death.

At DSE 2011, we may have gotten a clue as to how that is going to come about. In the innocuously-titled session, “Top 10 Ways to Attract Advertisers to Your Network”, rVue CEO Jason Kates laid out a list of network quality indicators that might influence advertisers. (Full disclosure: our software integrates with the rVue demand side platform.) At face value, the top 10 list alone would be valuable to attendees and food for thought, but Kates decided to reveal a little secret: they also form the foundation of a network ranking algorithm for rVue. A murmur went through the audience, and pencils went to work. This might be important.

Consider the challenge inherent in rVue’s business strategy.  They have well over 100 networks represented on their platform and a similar number of agencies using the tool to plan DOOH buys.  When a buyer does a network search across any number of potential parameters, the tool must provide search results. Remember the principle of relevance or death: in these early days of automated DOOH planning, the results matter, as do the results of the results. They really have to get it right to retain buyers. So network search results must be ranked, lest they rely upon a random walk theory. But how?

The presentation document is available from rVue, but here are the top 10:

1. Location: Targeted vertical niches are enhanced by the horizontal reach of quality locations.
2. Quality: We are talking displays, media players, digital signage platform software and operations. They all matter, don’t skimp.
3. 3rd Party Research: Independent validation of your traffic, impressions and even compliance.
4. Content: Important enough not to get lumped under quality.  It is either relevant and engaging or it isn’t.
5. Audio & Video: Having both means a higher value than just having one.
6. Full Screen vs. “L-Box”: Full screen is more valuable to advertisers. Hallelujah. Eventually, people will figure this out.
7. Internet Connected: Amazingly, there are still sneaker-net networks out there. Go to the bottom of the results, please.
8. Audience Linked to Transactions: Networks that exist in proximity to advertised products and services provide measurable results.
9. Daily Analytics: Sounds basic to me, but apparently not everyone gets it or can deliver it. See item #2/software.
10. Reputation: You are who you say you are, you deliver on promises, you act ethically. Not to be taken for granted.

Quality is going to drive rank and reputation

How they score networks and come up with a ranking is rVue’s secret sauce, but clearly an important part of their value proposition to ad buyers. On the network side, just as webmasters have learned to explore and exploit page rank algorithms, operators can take it upon themselves to proactively enhance their ranking, and the exercise will help their positioning with advertisers whether or not the networks are engaged with rVue. Often times, that may require new investment in infrastructure, operations, content or outside services. Possibly a painful thought, but I think at this point we’ve all learned that if you just build it, they may not come. Networks must build and operate with quality, and they must demand quality from their vendors, service providers and staff. Today, I imagine it is relatively easy to rank networks using the 10 factors as a starting point. As advertiser demand for quality drives standards of operation higher, it may become more difficult. That will be a good problem for rVue and others to have to tackle.

Writer’s block: pathetic.

A falling Klout score, and a faster-falling desire to track it: apathetic.

So many interesting topics to cover, many that I can’t write about for one reason or another: frustrating.

A growing need to write something, anything, to break the block: daunting.

A new low-carb diet that leaves me craving bread, pizza and ice cream: difficult.

So I’ll clear out some threads and see if that helps.  Thanks for bearing with me.

I was amazed by the sense of community at the recently completed Digital Signage Expo. I missed the DSF Golf Tourney on Monday, so the event kicked off for me and many others at the now institutional Preset Mixer Tuesday evening. Dave Haynes, his able partners and their sponsors are to be commended for creating a venue for real networking, community and relaxed fun. Quite a bit got done that night, and from people that I have talked to since, there was more to be done. There was a sense of camaraderie as people settled into the event. It wasn’t a night to be competitive. It was a night to be part of something and to bask for a few moments in how much we have grown up together in the past few years. Yes, there is a great deal more to accomplish as a community, but there are enough people who genuinely care about the industry as a whole that I am confident that we’ll get there. We’ll look different, but we’ll get there.

The irrepressible Phil Cohen was working the exhibit hall like a bearded Larry King. Followed by a camera crew, Phil spoke with a whole lot of people from all walks of digital signage life, creating a backlog of CohenOnContent pieces. Phil’s work has allowed many people in the DOOH business to meet the other people in the business, hear their thoughts and feel their pain and passion. He’s created a community resource, and he has fun doing it. It just makes sense that people who a living directly or indirectly from dynamic, rich media ought to express themselves beyond the written word. I’ll eventually get around to doing a “Kenny On Caffeine” parody, but it will be a homage to Phil. He has enhanced the community and literally opened a new channel.

The educational content at the show was immense, perhaps too much so.  I moderated a session on Wednesday morning on standards with a terrific panel. I thought it went really well, and I personally learned quite a bit. Unfortunately, only about 16 people were in the audience. Perhaps we were victims of nine concurrent sessions, and had the driest session description. Richard Lebovitz of DSE posited that “thought leadership” can’t compete effectively for eyes and ears with tactical session topics. Maybe he is right, but I am more convinced than ever after sharing the podium with folks representing DPAA, OVAB Europe and POPAI that the need to embrace standards has never been more urgent and the opportunity for organizations to work together to accelerate the process has never been clearer. It is really, really hard to get volunteer committees to work cohesively. Everyone has a day job. But the advancement of this industry requires not only the committees get their work done, but that they get it done together. Until we make agencies, investors and consumers comfortable with how we define ourselves and how we do business, we are going to be a bunch of garage bands hoping for a hit single. That’s no way to build an industry. So volunteer, push for cooperation, demand attention to standards from yourself, your vendors and your partners.

A final post-DSE thought. I continue to be amazed by the level of engagement and energy of the Digital Signage Federation Board members. These are a diverse group of high level people who for the most part don’t just show up: they work. New Chair Bob Stowe of Wendy’s has picked up where the past Chair Rich Cooley left off, with the same level of intensity, energy and optimism. The DSF booth at the show was a sight to behold and reflected a level of collaboration between members that was extremely effective. Particular kudos go to Alan Brawn of Brawn Consulting, Kim Sarubbi of Saddle Ranch Productions, Pierre Richer of NEC, and Executive Director Brian Gorg. Well done, everyone.

Now it is back to the salt mines. Hopefully the writer’s block is dealt with, even if I don’t get any ice cream out of the deal.

The End of Features

With a major trade show coming up, the pace of press releases has stepped up considerably. As unoffical confirmation of the trend, Dave Haynes reports that his PressDOOH business is keeping him very busy. We are seeing lots of product announcements, and words like “new”, “improved” and “enhanced” dot the pages. Close your eyes and you see toothpaste. My email inbox fills with hardware vendors wanting to partner with us (a euphemism if ever there was one) after extensive research amounting to a review of the DSE exhibitor list. The product press releases and the product email pitches are invariably feature-based. Yes, it is very important to advance products and continuously improve, but that’s the price of poker, not a differentiator. Here’s the dirty little secret: the buyers really couldn’t care less about features. They care about outcomes. Desired outcomes can vary, and often do across functional areas of a company. To seal a deal, a product needs to stretch one person’s budget, reduce another’s headcount, make a key person more productive, mesh with another’s strategic plan, integrate with another’s strategic application, and make the nervous person comfortable. Whether we are talking about hardware, software or services, features are hammers looking for nails. Outcomes are problems solved.  A smart friend of mine hit it on the head the other day when he said, “there is no killer app out there, and there isn’t one coming, either.” Cynical? Perhaps, but feature-based selling and differentiation is a loser’s game. The overarching problem of how to manage a digital signage network has already been solved. Figure out how to impact outcomes, or relegate yourself the playing the price game. Features are dead: long live features!

The End of Fragmentation

This one is easy. There are too many ad supported networks for the ad buying world to make sense of, so the buyers are either paying someone else to make sense of it, or just staying away. Those networks, the equivalent of hundreds of UHF TV stations trying to compete for national dollars, are driven by a huge number of software platforms delivering information in a non-standard way, a technical Tower of Babel that causes many on the buy side to wonder why they bother. Together, it is a formula for disaster. This will shake out when networks achieve scale, insist upon technical standards and deliver to ad buyers what they want: large, segment-able and target-able audiences with standardized, verifiable data to back up their contractual obligations. Give yourself a gold star if you identified that as an outcome. So here is what has to happen on the ad-supported network side: networks must grow organically or through acquisitions to a scale that ad buyers can wrap their brains around. And they must (and will) determine which software platforms and technical architectures will enable them to achieve scale and drive results. When the process is over, there will be fewer, but generally larger networks and many fewer software platforms.

You remember pressing this one before, don't you?

The End of the Middle

When defragmentation is achieved, there won’t just be a few giant networks fighting it out for their share of the pie. It is more likely to look like cable television, where the bigs do well and the focused, differentiated small networks also prosper. There won’t be much in between, because once a small network achieves a certain level of scale,  it must invest in additional resources to support that level of business and beyond. To properly leverage its investment, it must actually proceed down the growth path. Some will make it and others will not. Those who choose to stay at a certain size can remain lean and profitable. Those who find themselves outgrowing their resource base will have to become big or potentially die. The middle is going to be a layover for those on the journey to become big, and a dead end for those about to be swallowed up or left to die. Management of growth will separate the truly great business professionals from the opportunists. For digital signage to achieve its potential as a legitimate communications channel and as an industry, the middle has to shrink while both large and small prosper. Then we’ll have something that outsiders can truly understand.

The End of the Post

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Bill Gerba, CEO of Wirespring, is the Chair of the POPAI Standards Committee. Bill is a tireless advocate of standards and readers of his popular blog know that he’ll be both informative and entertaining.

Mike Nickerson, VP of Advertising for AMI Entertainment Network, is the Chair of DPAA’s Media Operations Committee. He’ll keep you up to date on what DPPA has published and what is in the works.

Dirk Huelsermann, European Manager of DOOH SOlutions for VUKUNET, is also Founder and President of OVAB Europe, who have also been actively working on standards.

Most experts and industry watchers agree that the development of standards is a necessary gateway to sustainable growth and acceptance of digital signage as a whole.  Lots of work has been done, and lots more needs to be done. Most of all, the discussion needs to get some daylight, and this session is an attempt to shed some of that light. Each of the organizations, and DSF’s Standards Committee which I Chair, has done work on different elements of the industry. There will be lots of food for thought and discussion. So come listen to Shelley Palmer describe how the opportunity for DOOH growth is upon us, then have a second cup of coffee and join us for some tactical ways to make it happen faster. Bill promises to do the Macarena if we get more than 75 people. That alone may set a new standard. I may have to buy a FlipCam.

My demo session (the product in question appears here at about the 2:00 mark) included a discussion of “grabbing your shopping list from your smartphone”, suggesting recipes based on planned purchases, tailoring offerings based upon video analytics, and offering free samples. By the way, the irony of offering Oreo samples after a session on “Healthy Meals” was not lost on me, but this was a trade show, and for many people those Oreos were a yummy lunch. The person conducting the demo talked about grabbing information off my smartphone as if it was no big deal, which technically is isn’t. He seemed to think that tailoring the menu offerings based on what the Cognovision app assessed me to be was not a big deal, either. Presumably, if we had gone through the whole nine yards, it would have accessed the Sarcastic Middle Aged Male database table for suggestions. At least I hope so. At the end of the demo, he asked me to smile, and pointed out the camera at the top of the screen. It turned me into a football bobblehead, and provided a link to a web site where I could access the picture. OK, I get it. Cute, and packaged nicely for the local 6 PM news feature. But I was disturbed.

You see, I can now understand the issues that all of this brings up. Extracting my shopping list, even with my permission, makes me wonder. What else could or might be extracted? Do I want my shopping list displayed on a 50 inch screen? What if there are items on the list I consider private or potentially embarrassing? And the picture: is it being stored? Is it being associated with personally identifiable information extracted from my phone or frequent shopper card? Do I want Kraft or the retailer to know that much about me? Proponents of the technologies involved will be quick to say that the shoppers will benefit from a more relevant and enriching experience based on better information about them. And it is reasonable to think that there is some kind of express or implied opt-in involved. I am all for relevance and reasonable assumptions. But now I am also all for making it clear to consumers what is and is not being collected, acted upon and stored, and what their options are regarding each. It is called building trust.

If you don’t think consumers care about privacy, ask Janet Napolitano about body scanners in airports. Only when travelers were “assured” that images were not stored and that only TSA employees isolated from the scanner itself were viewing the images did the furor die down. Sort of. Travelers were permitted to opt for a very intimate pat down if they wanted to refuse the scanner. It did not play well in Peoria, even after there was a degree of transparency. If you need further evidence, read the comments from retail experts on a write-up on the Kraft demo at RetailWire.  Folks, privacy is a real issue.

Transparency refers to more than backscatter scanners.

Digital signage desperately needs to make its case to advertisers regarding the legitimacy of traffic counts, impressions, dwell time and demographics. This is the basis for charging premium rates for advertising on a network. Anonymous Video Analytics (AVA) technology like the Cognovision application used in the Intel demo is one of many approaches to this problem, and certainly has the potential to drive customized content based on video analytics, which is a good thing. But just as much as the industry needs to build trust with advertisers, it must foster acceptance with consumers. One way to do that is to make it clear what types of data are being collected, and to adopt the concepts of transparency, individual participation, purpose specification, data minimization, use limitation, data quality and integrity, security and accountability. The DSF’s Digital Signage Privacy Standards released last week (download link available here) describe all of that in great detail. It is not light reading, but I’d suggest it as important reading. Harley Geiger, a committee member, provides an excellent Q&A on the Standards on Dave Haynes’ Sixteen:Nine blog. Harley taught us a great deal as we tackled this sensitive issue, and I think he learned a lot from the other members of the committee along the way. It was a good exercise, and we all hope that the output will spark more discussion across the industry. The Privacy Standards are completely voluntary, and of course are not policed. If network operators don’t think need any stinkin’ privacy standards, they are free to ignore them. But being transparent about camera usage, data collection and consumer options will turn out to be a good business practice. It will not slow the use of properly utilized AVA and other technologies: it may actually have the reverse effect, driving consumer acceptance of something they will now understand. Good business practices are optional however, and because people take different paths, not all businesses are the same.

One industry veteran recently tweeted after seeing the Intel demo that “the industry needs to get on top of this stuff” before it gets out of hand. The industry now has. Let’s keep talking about it.

In the Spring of 1998, NetFlix (changed to Netflix in 2002 prior to its IPO) opened its virtual doors and began renting DVDs through the mail. Like most successful businesses, Netflix was solving a problem.  In fact, it was solving three problems: the sparse availability of DVDs in video rental stores at the time; the annoying and often costly late fee experience; and the need to “go out” in order to “stay in”. Response was tremendous and has made Netflix a smashing success. The company has been able to adapt to the advent of ubiquitous broadband, and grabbed the streaming video bull by the horns before others could fill that void. Without doubt they will move steadily toward a 100% streaming service, eliminating the use of hard media, the U.S. Postal Service, and lots of touch labor. When you see that there will be a branded Netflix button on television remotes, you know that a company has disrupted more than one industry. It is becoming part of infrastructure.

Oh yeah, this beats a DVD in the mail.

The Facebook.com domain was registered in August of 2005, Facebook itself having been born a year earlier at Harvard.  Its rise to a position of dominance as a social force and as a marketing engine is the stuff of legends, and of screenplays. It recently raised a billion dollars in a private equity round that will actually force it to go public in the near future. Prepare for astronomical valuation. Facebook gives users an opportunity to create an online persona and presence, to associate with (“friend”) other users of their choice, and to share thoughts, likes, dislikes, pictures and rants with their own network. Businesses have jumped on the bandwagon to create Facebook pages for brands, products and companies, using them as secondary web sites that allow them to identify their friends. The company, which reportedly crossed the billion dollar revenue threshold in 2010, with net margins greater than 25%, continues to make acquisitions to extend the breadth of its offering and to move toward the web-dominant position enjoyed today by Google. Disruptive, multi-platform, multi-channel, well protected from competition. That is Facebook.

In March of 2006, the first tweet ever was posted by Jack Dorsey, “just setting up my twttr”. Since then, there have been a few billion more tweets. It is more than a way to let the world know that you are bored, motivated or simply finishing a salami sandwich.  Twitter holds an important place in the business and media worlds, and Twitter has played a role in the Egyptian uprising, and before that in Iran. Approaching 200 million worldwide users, it is the backbone of what is now known as social media. Twitter somehow bridged the worlds of text messaging, blogging and instant messaging to create a self-perpetuating, self-filtering community of communicators. That is has spawned dozens of Twitter-related companies trying to capitalize on its power without any serious competition speaks loudly of the disruptive nature of Twitter.

Foursquare burst onto the scene in 2009 with a location based mobile service that is designed to allow users to “check in” to locations, earning points, badges and mayorships for frequent visits. They can even tweet their location, annoying their Twitter followers to no end. Ostensibly, Foursquare proposes to monetize its base by selling ads and becoming the de facto loyalty program for thousands of large and small businesses. Unlike the businesses described above, while Foursquare was first to its space, it was not really disruptive, and attracted competitors like flies. Among them: Gowalla, Booyah!, SCVNGR and most notably, Facebook. Foursquare does not have the traction, barriers to entry and raison d’etre that the big and disruptive winners do. Call me the Mayor of Skeptic Cafe, but I don’t think that Foursquare or its imitators have solved a problem. Businesses of any scale can easily create their own mobile apps to capture users and reward loyalty. LBS is cool, but Foursquare is a hammer looking for nails, proving that being first doesn’t guarantee anything.

Groupon was born in late 2008, providing deeply discounted, localized, daily deals that members can avail themselves of. They employ a major call center to reach out to prospective businesses to pitch their participation in a Groupon deal.  The business partners enjoy a spike in traffic and sales based on the discounted offer, and hope to see a lift in post-promotion business in the aftermath of introducing themselves to new customers. On one level, a win-win. On another level, Google’s $6 billion offer for Groupon, which Groupon turned down, a mammoth home run. But there is already some serious competition in LivingSocial, backed by Amazon. That site recently became widely visible by offering (surprise!) a 50% discount on a credit for Amazon.com. It seems clear that these services will become an important factor in the promotion cycle of small and medium businesses. Whether they break through to larger retail businesses remains to be seen, but there is little doubt that they will have the time and resources to morph, branch out and cement consumer relationships. They filled a void, and they got big enough, fast enough to leverage the first mover advantage.

Unlike the five Internet businesses above, digital signage is really an industry powered by an Internet-enabled business application. Within that industry there are hundreds of players: software vendors, hardware vendors, service providers, ad sales businesses, implementors and network operators. There are still some lessons to be learned by the high profile stories above, and some common threads to look for.

Digital signage solves a problem. The problem is the lack of a timely and dynamic alternative to static signs. Most digital signage offerings can provide the solution to that problem fairly gracefully. Unfortunately, where they part ways with the disruptive winners above is that the solution itself is extremely costly for the end user, making the decision to engage or switch an exercise in cost-benefit analysis and ROI calculations. This has been the single largest impediment to truly explosive growth in the industry. Some vendors have tried to solve that puzzle with “free” or “freemium” offerings on the software side, but have learned (or will) that the most attractive customers are a tad more sophisticated than they are given credit for. The price of software is but a small piece of the puzzle, and pales in comparison to hardware and organizational costs in operating a network professionally. What software does is more important than what it costs, within reason of course.

The Internet winners leverage the pseudo-free networking of the Internet itself to connect a consumer or business to a desired outcome.  Digital signage fundamentally uses the Internet as data transport. The most disruptive and successful Internet-based companies were able to build a huge customer base quickly, stemming competitive responses. That has not been the case in any aspect of digital signage to date. One company, RMG, has attempted to buy market share on the network side. The jury is still out as to whether their top heavy model can be sustained or whether they bought the best pieces to stitch together. No such attempt has been made on the software or services side. We are an industry of fragments. That can not be our destiny, because for the most part it is unsustainable. The market will not allow it to continue for long.

The opportunity to disrupt, to build barriers, to acquire customer/network bases of significance is out there, perhaps uniquely in time, right now. Whether anyone is inclined to or able to act upon that opportunity is not clear. The digital signage space may not create a Netflix or a Facebook any time soon, but in the next year or two, market forces may produce a dozen really impressive companies focused upon the space where none exist today. It seems inevitable.

Retail has long been thought to be the Holy Grail of digital signage. Where else is there access to customers, proximity to product and direct relationships with potential advertisers?  Certainly WalMart has been a poster child for the potential of digital signage in retail, despite the fact that no other retailer wields the same kind of power over its vendors. Other retailer-based networks have met with mixed success. Prior to CES in January of 2011, Best Buy announced that it has officially launched its own media network, Best Buy On. The digital signage community perked up and started talking because the core component of Best Buy On is the in-store network. It is worth examining how the in-store network has evolved to become the last mile of a carefully conceived path to purchase at Best Buy, and a network with clear upside and potential challenges for the retailer.

The majority of the products that Best Buy sells are easily researched, priced and purchased online. Often customers will use Best Buy’s resources for research then purchase at different locations. Best Buy knows this. They cannot compete with Walmart or Amazon on price or inventory. So Best Buy must engage consumers in deeper relationships through multi-channel marketing in order to effectively take on all of its competitors. That is the motivation behind Best Buy On. The goal is to partner with a customer from the time he’s thinking about a new TV until after it’s installed in his home, and then nurture an ongoing relationship so that the customer never thinks of going anywhere else in the future. Like all companies, Best Buy knows that maintaining mindshare is a key to survival. Best Buy’s CEO Brian Dunn is quoted as saying, “We know that 60% of our U.S. store sales are influenced by our customers’ experience on bestbuy.com and 40% of the products we sell online are picked up.” The network is now in a position to complement those experiences at almost every stage of the retailer-customer relationship.

It is encouraging to see that digital signage at Best Buy has become a strategic component of an overall customer engagement initiative, and not an island unto itself. The ability to create a consistent theme that can be honed for each communication channel and each stage of the path to purchase is invaluable. The in-store digital signage network is the last mile, the finisher. How well it closes the deal with a customer can have significant impact on the bottom line. That in turn can have impact on the stock price.

So where does this network fit in? Let’s take a step back.

Best Buy’s in-store network has been in existence for over a decade. During that time, Best Buy has tried unique methods to engage customers. The in-store network, in all its various formats, was integral to that strategy. At one time or another, the network comprised all of the screens in the store – the Home Theater Department and the Computer Department were the big kids on campus. There was also Best Buy Radio, an audio program that aired in the music section, and all the vendor-provided displays found around the store. All of these were part of the network, yet all were disparate. The single reason: Technology. Best Buy was well ahead of its time in understanding that optimal consumer engagement could be achieved through technology. Yet while Best Buy was always able to find great content to put in front of customers to enhance the brand value, the challenge was making sure it was hitting the target. Until capabilities advanced with a network refresh that took place in 2009, there was no ability to handle several channels of content, dayparting, and geo-location of content in order to optimize content for the customer. Now Best Buy’s media can be much more targeted, nimble, and relevant with its execution at the store level.

Best Buy also realized that it must become something completely new: A media network that leveraged its brand strength to create customized content in every location imaginable. More channels of engagement, including dedicated screens in every store (instead of just display models playing content) and online portals like BestBuy.com and BestBuyOn.com comprise the network and broaden the brand’s reach across channels.

The network had a soft launch in 2009 while Best Buy was working out the kinks, and the wraps came off in November of 2010 when upfronts with major advertisers were conducted. Prior to the just-completed CES in Las Vegas, Best Buy announced the official launch of the network.  This will change how Best Buy relates with customers, vendors and competitors.

This is a potential boon for advertisers, brands, and manufacturers. The network enables them to partner more closely with Best Buy in customer engagement. Today’s retailer, whether click-and-order or brick-and-mortar, is predominantly a middleman. The better retailers are creating multiple points of engagement with the consumer, and the closer the partnership is between a brand and a retailer in that engagement, the better off both will be. John Swift, President of Integrated Communications at Omnicom Group’s OMD was quoted in a January 3 AdAge article about Best Buy’s network launch saying, ”Strategically, it makes a lot of sense to me. We need to find different ways to connect our messages with consumers in different places.”

It should not be lost on anyone that this is indeed an ad-supported network. Any thoughts to the contrary, or doubts about the effectiveness of an ad-supported network of scale, are about to be put to the test. It may not seem this way because the noise about this network is coming from the retailer, not the brand. But, when non-endemic advertisers like Procter & Gamble buy time on Best Buy’s network, they are openly betting that they’ll get more bang for their ad buck by living on Best Buy’s network rather than other outlets. This calls to mind the 2009 Super Bowl, where Pepsi dropped out of advertising on the biggest TV event of the year to instead focus on other channels with higher returns on investment.

If Best Buy leverages their network to cater to the locality of the store, that may open a new market for regional and local advertisers. It is easy to see that Best Buy could quickly and effectively move into a national broadcast network model with affiliates (stores/regions) around the country. Each of those affiliates might, in turn, have a dedicated sales force to sell time on the network for the local and regional businesses – bringing Best Buy even closer to the customer on an individual level, and generating a substantial amount of revenue from advertising.

The goal of any non-traditional video network, whether it’s one screen in a golf course clubhouse or 200,000 screens across six continents, should be to behave as a media network – creating an experience that patrons cannot get anywhere else, an experience that keeps them coming back for more, an engagement mechanism that builds brand strength for the company, and differentiates the company from competitors. Best Buy has been moving toward this for years. But now they are getting it all together. And that’s a step forward. The potential benefits to both the customer and the brand are not measurable (at least at this point) in terms of hard dollars, but the aesthetic impact is already apparent. Utilizing offline and online channels, Best Buy can be a brand-of-choice for a mobile and busy lifestyle.

But there are deep challenges.

Simply calling Best Buy On a media network does not automatically make it one. By acting like a multi-channel media network Best Buy has officially decided to take on every single media network on the planet: MTV, NBC, CNN, CNET, YouTube, you name it. They are trying to leverage cultural behavior with a consumer mindset: trying to get Russell Crowe or Tom Cruise to help them sell TVs and movies, trying to get Justin Bieber or Kanye West to sell MP3 players and music. In a sense, Best Buy is primed to act less like an electronics retailer with cool videos and more like Access Hollywood with merchandise. When Best Buy puts a camera crew on the red carpet, they’ll be right next to all the other networks.

Best Buy wants to be the brand of choice for individuals, not segments. This is apparent with their shift from segmented customer centricity. In the past, every Best Buy customer was grouped into segments, and marketing efforts focused on those segments. Now, Best Buy wants to treat every customer as an individual. This strategic shift is enabled in part by the targetable nature of the network. But by conceiving a network that caters to consumers on an individual level, Best Buy may be challenged to develop local content consistently enough to keep visitors engaged. In other words, they’ll need to “feed the beast.”

It’s relatively easy to show content that the whole country can enjoy – a new movie or a great event. But will Best Buy be able to provide content and engagement at local levels? Will a customer in Casper, Wyoming get to see what’s going on in Wyoming, or will he have to see what’s happening in Montana? (Currently there is only one store in each state.) Will Green Bay get to see Packers football highlights or be subjected to Minnesota Vikings or Chicago Bears football (the two closest top 20 ad markets)? What about user generated content? Will Best Buy allow local stores to add content to their own store channel for their own customers? The ability to be locally relevant and nationally followed turns the old paradigm of “great content is easy, technology is hard” on its head. Now it will be incumbent upon the Best Buy On producers to figure out how to mix in enough local content with national content to make customers feel that they are shopping in or browsing the web site of “their” Best Buy while still reinforcing the national brand. Content, content management and network traffic will all become more critical if the “buy local, sell local” meme is to be successful for Best Buy. Since advertisers are becoming savvy about quality of impressions versus quantity of impressions, Best Buy On’s ability to create relevance will have a tremendous impact on advertisers’ perception of quality.

Research and data will determine the success of Best Buy On. The decision to leverage dedicated displays in targeted departments within the store indicates an investment that will require strong ROI to be justified. Intuitively and empirically, we know that well-executed digital signage provides lift at retail. At issue is whether it will also provide stickiness and loyalty. That is truly the end game here. Once Best Buy begins to partner with advertisers and brands, there is a tremendous opportunity to research and capitalize on customer behavior. In the past, Best Buy partnered with Nielsen to understand the behavior of the customer with regard to the in-store network. It is not clear whether Best Buy has invested in any in-store audience measurement technologies for Best Buy On. The resulting insights can have great impact on content decisions, promotion strategies and of course, pricing for ad slots. Will Best Buy’s partners have access to data on customers and engagement, giving advertisers the ability to compare POS data with traffic to understand conversion rates and ROI? Will audience metrics drive the placement of displays as the network evolves? Retailers are notorious for not sharing data due to competitive fears. If Best Buy wants to play the network game, they will be forced to share data in order to justify their advertising rates. Once advertisers get to see the value of their content in one retailer versus another, that will shift the power of placement into the hands of the brand, not the retailer.

One channel seems to be missing from a lot of the press around Best Buy’s network: Mobile. Will Best Buy leverage the mobile channel as part of the strategy? (To clarify, we mean phones and wireless, not screens in the store’s mobile department.) Will they develop a Best Buy On smartphone app? Tablet devices are fast emerging as a vital employee tool to assist customers. On the retail sales floor, it may make more sense for the “blue shirts” to carry tablets to assist them in assisting customers, bringing the network to them instead of vice versa. Will tablets be a channel, or part of the network? This will be critical to Best Buy’s network strategy, but it is easier said than done. The mobile industry is fragmented, with several options for consumer engagement across carriers and technologies. It will almost certainly require a series of tests, pilots and focus groups before the right approach to the mobile channel of Best Buy On is determined, but it will need to be addressed.

Based on the past few months, Best Buy is facing incredible and unrelenting competition from online retailers. This affects Best Buy’s business model and marketing strategy. They need to get people in the door (or online) and product in the customer’s hands. This affects the stock price, of course, as well. In a BrandWeek article describing Best Buy heading into upfronts in 2010, Keith Bryan, Senior Director, Media Strategy, in describing the goals of the network said, “The objective isn’t promotional, it’s around engagement with the product category or entertainment…our quid pro quo with advertisers isn’t about [point-of-sale] lift. It’s a media placement.” In the article, retail analyst Joe Feldman was a bit baffled by that, which is understandable. Regardless of the strategy for execution, the goal for a retailer is to sell merchandise. Best Buy is a retailer, after all, and the more they sell, the more money they make. To pin hopes on monetizing the network solely on media placement may be a fool’s errand, so using the network to generate merchandise sales must be a strategic driver.

Customers will decide whether Best Buy gives them a better experience than all the other available channels. Loyalty aside, everyone surfs. Perhaps the single biggest factor the network will bring to the market is its ability to differentiate Best Buy from brick-and-mortar competitors like Target, HH Gregg, Radio Shack, and Walmart. Already they have taken a strong position by backing their media offerings with, well, media offerings. But now, whether by design or as an unintended consequence, they’re taking on the media outlets. That shift has both high risk and potentially handsome rewards. It is early in the evolution of the new approach, but Best Buy will need to learn and adapt quickly if Best Buy On is to make a meaningful impact. In short, will an engaging multi-channel approach enable Best Buy to leverage its physical presence and dial up incremental sales?

That’s the billion, yes BILLION, dollar question.

HP: “Has Partners”? HP had, by my count, four digital signage companies represented in its booth. I spent some time talking with good guy Matt Schmitt, CEO of Reflect, while Jeff Porter of Scala stood four feet away managing his space. They were separated by a giant color plotter that was spewing out a map of the US on what looked like expensive paper stock. YCD was demonstrating its RAMP product in an outpost on one corner of the booth. I believe there were BroadSign displays somewhere in there as well. Their pre-show release also mentioned C-nario, Omnivex and Four Winds. I am sure there is a really simple process for HP salespeople to go through to determine which partner to include in any given deal.  Somehow I didn’t feel left out, although I must applaud HP for clearly seeing digital signage as a strategic application. An aisle away, the Dell booth featured Nanonation. I have to believe that the sales process is simpler there. The contrast in approaches was interesting.

QR code tattoo on the wrist of a digital signage exec. It links to the elevator pitch.

Pavilion Oblivion: The Digital & Outdoor Signage Pavilion was certainly well marked on the exhibit hall floor.  There was a giant banner overhead announcing DSA’s sponsorship for the space. Inside, Omnivex had a nice sized booth and Stratacache had an in-line 20-foot space. DT Research, Christie and Planar had 10-foot spaces, and that was pretty much it for software and hardware crowd. In the actions speak louder than words department, missing in action were any vendor members of the DSA Board of Directors. I think the take away here is that digital signage vendors see more value in being inside the booth of a giant partner company than in having their own space in a digital signage ghetto. POS companies don’t cluster on the floor, and neither to merchandising companies or hardware companies. The partner piggybacking is simply a precursor to digital signage vendors staking out their own space, and that day is coming.

Flexible and Cool: I had a chance to meet up with Kyle Porter (@KyleGPort) and Will Amos of NanoLumens. Really bright young guys who know their stuff.  I had heard about NanoLumens, but wanted the details. Their customizable, lightweight, flexible LED displays are constructed from wallet-sized bricks without visible seams or bezels. They are managed by a controller that can take input from any standard media player. These are large format displays, clearly for high traffic venues that can provide proper sight lines to optimize LED viewing. Kyle’s iPad was loaded with install pictures and videos, and it is clear that in the proper venue, these displays could be a game changer. Given their low weight and flexibility, it is not a stretch to see those exhibit hall signs that dangle from the ceiling becoming NanoLumens displays with killer video. They’ll be at DSE next month, check them out.

Intel Throws Down: The Intel booth was huge and very busy. They are just brilliant at demonstrating what you can do with their primary product, a product that very few people actually ever see. Lots of retail of the future conceptual stuff. I did not get a chance to experience the whole thing, but did sample the interactive displays that incorporated Cognovision into the app. The app was all about meal ideas, and offered to detect and extract your shopping list and suggest menus and even offer you samples. At the end the embedded cameras took your picture and presented you as a football bobblehead, complete with eye black. The app was just a conglomeration of capability that was stitched together to show off for the show, but it was executed fairly well. The booth person sort of glossed over the Cognovision stats that I really wanted to see, but it seems clear that Intel is going to push it, almost certainly at the embedded level. I think it was a wise purchase by Intel.

Lights, Camera, Action!: Another technology utilizing cameras and intelligent software was on display across the aisle in the Verizon booth.  BVI Networks‘ RetailNext product utilizes video, video analytics and transaction data to provide valuable insights to retailers. It is typically driven by high mounted cameras that can scan entire sections of a store. It is not a stretch to see it analyzing foot traffic and dwell time for digital signs and measuring effectiveness of the content. Worth watching.

The Buzz: The general temperature of the retail folks was pretty warm, in contrast to the frigid avenues of New York. Vendors reported pretty brisk activity, certainly up from last year. Retailers who would talk seemed funded for various projects. It may bode well for a busy year. The 101st Big Show next year promises to build on the momentum.

Obviously, this coin flip came up "heads".

I did beat one resolution from last year, which was to come up with 52 posts in 2010. Beat it by one (not counting this one). There will be no measured resolutions for 2011. Instead I will try to be wiser, to learn more, and to listen more. Big tasks all.

To everyone who takes the time to read this blog, my best wishes for a happy, healthy and prosperous New Year. And Janus, we’ll see you next year, rested and ready.

There is a glide path to maximum valuation

As start-ups mature and gain defensible market positions, growth and profitability, and ultimately achieve significant market share milestones, the factors that go into valuation become more measurable and the art of early stage investing gives way to the science of enterprise valuation. The three stages that follow start-up can be captured with alliteration: viability, visibility and validation. When a software company is able to drop the anything-for-money strategy and carve out a market space for itself, it crosses the chasm from start up to viable entity. That market space may be based upon a particular feature, function or technical capability, or it may be based on a market segment or vertical that offers great growth prospects. In both cases, if the niche can be both exploited and defended, then an important foundation for future growth has been laid. Valuation at that point might be based on a multiple of reasonably forecastable revenue numbers for the current year and one to two years out. What that multiple would be would largely depend upon an assessment of the size of the niche that has been established, the level of competition, and its attractiveness to both potential competitors (risk) and suitors (reward). Certainly the universal intangibles of management and team skill sets come in to play, but at this stage there are actual numbers and real performance that can enter into a discussion of value.

As a company enters a stage where growth accelerates and profits are realized, it becomes not just viable, but visible. By dint of achieving sustained and substantial growth, a company moves up the important ladder of perception to become a factor to be reckoned with in attracting new deals, new partners, new people and new investors. This visibility adds value as it serves to mitigate some competitive risk while creating exit options that drive valuation higher. An emerging and visible company has options that include organic growth fueled by internally-generated cash flow; hyper growth, typified by infusion of institutional capital; and M&A activity from either side of the table, depending upon the deal. Valuation at this stage may depend upon which glide path the company appears to be on. If it is playing the organic growth, self-funded game, then value would tend to be based on a multiple of EBITDA, factored for the growth rate of same. In the hyper growth model, where valuation is obtained for the purpose of a large infusion of new capital, discussions may begin around the post-money value of previous rounds, EBITDA and revenue growth, the amount of money being raised, and the ownership objectives (and sometimes limitations) of the investors. It is at this stage where prospective values, those determined upon an exit or liquidity event, come in to play. Set a pre-money value too high, and targeted exit values start to get unrealistically high, which tends to scare off institutional investors.

The digital signage software industry faces two challenges right at this stage.  First, because there have very relatively few transactions in which terms were made public, benchmark multiples or the “market rate” if you will, are not well established in this sector, which creates some uncertainty. Second, no pure play digital signage software company has scaled to the size where an exit valuation, whether by acquisition or IPO, would be high enough to meet IRR goals of institutional investors who invest at the growth stage. This might lead to a conclusion that smart capital invested at this stage would be earmarked for consolidation activities to achieve scale, or for diversification efforts to become less reliant upon pure digital signage growth. In fact, it may be difficult to get to the fourth stage, validation, without one or the other.

Validation entails the achievement of significant financial and market share metrics. As an example, the $10 million revenue metric (and not one that is artificially pumped up by low/no margin hardware sales) is generally considered an important milestone. A profitable company at that level of sales has started to mature, and has the need and the ability to add and deploy resources to open new markets, develop and market new products and consider new business segments. While share metrics will be more difficult to determine in a fragmented market, it will be apparent to most objective observers when a company becomes a market leader and a go-to option for customers. This type of validation opens the door to growth, innovation and ongoing profitability. It also creates more options for an exit from private ownership. Valuation at this stage becomes a financial exercise. Investors can go through complicated calculations of discounted cash flows, price to earnings ratios, and revenue and earnings multiples based upon values of other (non-digital signage) software companies at a similar stage.

Without doubt, this is where valuations will be most generous, and the temptation to go the IPO route will be high. While there is a publicly traded company from the sector, its market capitalization (net of cash) is probably lower than many private competitors would value themselves today, yet higher than the private firms could realistically expect to achieve in a transaction. To achieve maximum valuation, whether in a capital raise, a transaction or an IPO, a digital signage company would have to find a way to achieve the milestones of validation. Failing that, market realities will keep a lid on value. Don’t be surprised if there are dramatic attempts to force the issue as 2011 unfolds.

As a young retail consultant at Touche Ross in the late 80′s, I was involved in two engagements to measure the effectiveness and ROI of a new technology that was going to revolutionize price management in grocery stores: the electronic shelf label, or ESL. These devices, which were only slightly larger in form factor than the devices that Dave reviewed, were going to allow retailers to comply with shelf pricing laws, mitigate the printing and labor costs of applying new labels when prices and products changed, and allow retailers to change prices dynamically with near-instant compliance at the shelf edge.

NRT's Telepanel today

The pioneer in the field was a Toronto-based company called Telepanel, which is now owned by NRT Technology Corp. I was involved in a study for Telepanel and later in one for a competing offering called PriceLink, now long gone. The major challenges for this concept in the late 90′s were form factor, power, connectivity and of course price. One pesky issue was always protecting ESLs on the lower shelves from the inquiring minds and hands of 3 year olds, and the unsteady shopping carts of harried shoppers. As you can imagine, the ability to address most of these issues has improved in the past 20 years.  Battery technology, device engineering and chip prices have all gone in the right direction. In the 90′s, the devices depended upon something called spread spectrum technology to sync up with the price files at the front end. At the time, it required what would today be looked at as a virtual broadcast station to cover a store, but it worked. Spread spectrum is apparently still an option, but according to the NRT site, they also offer to utilize the “store’s existing radio frequency network” as an option. I am pretty sure that does not mean WiFi, but the RF technology long used for shelf edge ordering and more in grocery.  Having 10,000 nodes on a WiFi network may present issues, but I am guessing that they are solvable. Here we are twenty years later, and ESLs have survived, yet they are still not pervasive. Hmmm… what might be missing?

Since TCO and ROI have always been the alphabet soup barrier to ESL penetration, perhaps a marriage with DOOH would provide the impetus needed to get to the next level. Even using a combination of electronic ink technology and tiny displays may increase appeal and visibility. The Foustland blog site posted a piece in November that has nice pics of both traditional ESLs and e-paper style labels they came across. Take a peek. Now just take it one step further and marry e-paper and small form LCD or OLED for shopper-initiated promotions, and you get the drift. If just 50 ESLs in a grocery were capable of delivering a digital message in addition to the normal pricing information, it could provide a clearer path to ROI for the whole system. The issue of reliable power to the shelf may still need work, but the thought of measurable ad clicks at the shelf combined with POS data would be of great interest to retailers and brands.

As always, the value of point solutions increase exponentially when they are integrated with other applications. It is probably true at the micro level of ESL, and certainly true at the macro level of large format digital signage. At this stage of digital signage development, integration points may be of equal or greater value than feature points.

The short, cynical answers to Dirk’s question might be “a lot less than what the owners think” or “only what someone will pay for it”. A more thoughtful answer would start with an assessment of the space, the market and the purpose of the valuation. There is precious little generally available information related to digital signage software company valuations, even though there have been a few transactions and a number of companies openly on the market for some time. The reason for this dearth of information is that with one notable exception, all of the pure software companies are privately held.  As such, most of the sales that have occurred have been private, and terms of public company acquisitions have not been detailed. We’ll return to the notable exception in a separate post. But first, an examination of the factors involved in valuing a privately held company in a fragmented space. In this post, we will focus on the early stage process. In subsequent posts, later stage valuation and public valuation will be examined.

It makes sense that valuations are lowest at the startup phase, and ramp higher as a defensible market position is defined, again when rapid growth and profitability are achieved, and then again as financial and market share milestones are achieved. A graph depicting the number of companies at each phase might look something like this (numbers made up, but most would say reasonable):

As a company progresses through these stages, valuation becomes an easier task. In fact, the enterprise value of the company increases as it becomes easier to evaluate; more sophisticated and larger investors become interested; and the path to a liquidity event becomes clearer.

To the extent that the graph is in any way related to reality, then the takeaway is that the wide majority of players in the field have both low valuations and limited access to capital. There are few institutional investors left with a taste for startups in a crowded field, preferring instead to invest later at higher valuations when the winners begin to emerge. The blood-letting among those who tried to pick winners 3 to 7 years ago is an ongoing case study in the risk of early stage investing.

Friends, family and angels are the go-to investors for startups, and those investors have little to go on beyond an understanding of the business plan, belief and/or trust in the management team, and their own instincts. Smart startup investors focus less on the current value of the enterprise than its relationship to their ownership position and the path to the next rounds of capital. They know (or should know) that angel rounds are rarely, if ever, sufficient to get a company to the next stages. A seed round may provide enough capital to get through six months and provide the investor with a fairly large stake. The next round generally involves a larger capital raise at valuations and share prices that must reflect the progress of the company and properly manage the demand curve for the company’s equity so that enough is raised from known investors to take it to the next stage (Positioned). Failures in calculating how much is needed, in raising enough, or in getting to that stage soon enough may lead to the dreaded “down round”, in which share prices must be discounted to attract additional capital.

The reality of early stage investing is that investors must ponder dilution in both an “up” and a “down” scenario. If initial valuation was too rich and more capital is required before key milestones are achieved, early investors must either re-invest pro rata in order to maintain their ownership positions, or stand by as others dilute them and establish ownership at a lower basis. If the company was able to hit positive milestones before new capital is required, then the valuation (and share prices) may well go up. Again, early investors must either pony up additional capital or be diluted by new investors. In some cases, a new round may introduce new classes of stock, liquidation preferences and/or warrants, all of which have negative impact on the ownership position of early investors who stand pat, although not necessarily on the value of their investment. Making that first “pass or play” call is seldom easy for the early investors, regardless of whether prices have gone up, down or remained stable, as there may not be enough information to assess risk accurately.

Valuation becomes more tactical in subsequent rounds and stages, when there is more data to consider and key questions have more concrete answers. Did the company meet key product and sales goals? Has the company established a differentiated position? Were they right about the market size, sales cycle and competition? Do they have the right team? What else is happening in the sector? How much tweaking does the business plan require now that it is being executed?  In an upcoming post, we’ll look at factors that drive valuation as a company progresses past the startup phase, and also examine public valuations.

What is your experience or perspective on valuing a digital signage software company? Chime in with a comment.

Stephen is right: industry cognoscenti have been crying wolf over consolidation and the arrival of truckloads of ad dollars for years. It always seems to be imminent, and investors, network owners and vendors have all had to extend the blade of their hockey stick charts much further than planned. In some cases, that has caused businesses to fail, and more will follow. Why should we believe it now?

Feel free to weigh in

Bill is right: the vast majority of networks and the industry infrastructure itself is still in flux, and not “ready” to make ad buyers feel safe just yet. There are a bazillion digital signage platforms in play, and now an emerging food fight on the media planning/ad buying side. Not exactly the stability buyers crave. I heard a story yesterday of an ad campaign being offered to a network based upon a media kit that claimed 100 locations. The network operator informed the ad buyer that the 100 represented how many locations they could roll out if enough ads were guaranteed. C’mon, man!

Adrian is right: there is a method to Garry McGuire’s madness. RMG is the most heavily funded network operator out there at this time. They have what is reported to be a 9-figure war chest for doing acquisitions. Their investors, Kleiner Perkins and DAG Ventures, make big bets and plan for big exits. As CEO, McGuire does not have to spend any time worrying about capital formation, although to be fair, the care and feeding of VC Board members is a non-trivial task in itself. He is focused on business development and execution of the strategy 24/7. He has assembled a strong team to deal with tactics and operations. His job is to position RMG as a great vehicle for ad budget dollars, as an assembler of network assets, and eventually as an IPO offering (the big exit). His well-reasoned arguments for seeing a tipping point in 2011 serve all three purposes very well. The Investor Conference venue was a great place to test the ideas in front of DOOH insiders and a few investors. The iMedia Connection article was aimed squarely at marketers and agency types. While it is evangelical for the industry itself, it is of course consistent with RMG’s message.

And Garry is right: despite the ongoing fragmentation in the business and some hard work that remains to be done, the industry is showing fundamental signs of growth and maturity, and has improved in terms of attraction to advertising professionals. His arguments relate to the readiness of certain networks to take on ad dollars and meet the targeting, delivery and reporting needs of the buyers. He is accurate in reporting all of the major points he makes. In some cases, it is a matter of degree, but on balance he is not wrong in making the observations. At question is whether these observations set the stage for a true tipping point for digital signage, or just one he expects for RMG. Only time will tell. I agree that 2011 will be a landmark year for our industry across the board, for the reasons McGuire details and several more.

Technically, I am not sure you can identify a tipping point without the luxury of looking backward. But I know we can all agree that it would be nice to look back a year from now and say we saw one. What’s your take?

As Thanksgiving approaches, it is always a good time to reflect upon what you have to be thankful for. My personal list is long and varied, but from a business perspective it is more focused.  So with your indulgence, I am thankful for:

The great people I work with, who amaze and inspire me with their dedication and spirit. We have been through a lot together, and are now at a stage and a point in time that feels very familiar to me in a good way. Wouldn’t want to take on the next phase without these folks.

Customers who understand that partnership and personal integrity is a two-way street well worth paving. They make us want to work harder to help them succeed.

Great partners who understand that a win-win does not mean one party wins twice. You know who you are. Thank you.

My peers and competitors in this space who truly care about being a force for industry growth, and not just soldiers of fortune. We all want to win and create returns for our stakeholders, but in a nascent industry like ours it is easy to see and respect those who take a big picture view. Maybe I am naive, but I believe that customers see it as well.

The DOOH community of press, bloggers and educators. The level of discourse in digital signage has gone up several notches in the past year. It has improved across the board online, in print and at industry conferences. The number of perspectives and points of view indicate a healthy discussion, even if one doesn’t agree with everything that is written or said. It makes us better. So, in alphabetical order and with apologies to anyone I may have overlooked, thanks to Adrian, Alan, Angelo, Ben, Bill, Byron, Chris, Christopher, Dave, David, James, Jason, Joel, Lawrence, Lionel, Mike, Paul, Phil, Rob, Steve, Steven, Stephen. You raise the DOOH tide every day.

The people who read my posts here, most of whom I have never met. I was surprised and flattered by people who made it a point to stop by at the recent CETW show to tell me that they are readers. I didn’t know anyone would care when this started, and thanks again to those that do.

A happy and healthy start to the holiday season to everyone. And to my friends in retail, good luck on Friday!

I'll trade bad traffic for freedom any day. Thanks, vets.

Making a pitch with or for a network operator is not new territory. In the course of building our own business, we’ve been involved at the business planning, capital raise and launch stages on a variety of network deals through the years. To be sure, some worked out better than others, but each experience provides some insight into how our industry is viewed by those in the capital markets. Here is what I learned or confirmed last week:

• They are starting to embrace our business. There are standard, rote questions you hear in these meetings, and then there are questions that demonstrate understanding. These folks, who will remain nameless, were savvy thinkers. When the questions sound like a checklist from a textbook, it is the sign of someone who either hasn’t thought through the opportunity or is looking for a reason to pass. The questions last week were deep and sparked conversation. They reflected preparation and interest, and more importantly, a real sense of where the upside and dangers lay in the plan. Not many folks in the institutional money game could have had that type of conversation two or three years ago. It was refreshing.

• Field of Dreams was a movie. Nobody really wants to talk about raising or investing money on a bet that scale will attract advertising dollars. Where discussions used to focus on the cost of site acquisition and deployment, they have turned quickly to monetization. I have seen less sophisticated financiers demand letters of intent from advertisers and ad sellers, which of course are completely worthless in reality. Now the savvy folks are digging into the value proposition to brands and agencies of the proposed network, the uniqueness of the target audience, the potential pricing, the relevance of the content, and then vetting all of that directly with people on the buy side. Only that way can a reasonable risk assessment be made, short of having a pre-launch sponsor or two in pocket, which is rare. Nobody buys into the hockey stick revenue chart, but a compelling offer can be tested as it scales. Smart money sees a potentially huge network as an end point that is attained only after 2 or 3 milestones are successfully reached along the way. Incremental deployment of capital, incremental learnings and adjustments, followed by aggressive expansion in size and scope after the model is proven.

• Digital signage may finally look less risky than alternatives. In an environment where money is coming off the sidelines in a near-hysterical rush to identify the next big thing, digital signage offers a tangible, if less buzz-worthy way to play in new media. The rush to social media and mobile start-ups is nearing the level of tulip bulb mania, while a growing, maturing and disruptive industry, digital signage, remains undercapitalized across the board. The temptation to roll-up, aggregate or otherwise create something of scale from our fragmented network and vendor marketplaces may be too tempting for some investors to pass on for much longer. It is now an easier task to identify winning models, winning companies and winning leaders than it was just two years ago. From all the chaos we witness daily will come order, and it will come from investors and corporations placing large, informed bets.

So it seems that on Veteran’s Day, I got some signals that perhaps our industry is becoming better understood by the guardians of institutional money. Despite the cacophony of hype, too many combatants and the fog of battle, we may be entering a phase of clarity… at least in the minds of investors. That would only be a good thing.

My comments take issue with Intel’s use of the OPS announcement to promote their higher end Core™ i5 and i7 products and a futuristic prototype, not with the OPS itself. In fact, their press release devotes more space to the prototype that they have been lugging around to trade shows all year than the nuts and bolts of the specification, which is actually about plugs and connectors. A reasonable person reading the Intel release and listening to the embedded video from Pierre Richer could conclude that the prototype was presented as the standard. My beef with their PR tactics need not be revisited here. I stand by my opinions exactly as they were written.

The explanation of the OPS in the DST article is far more complete than in the Intel press release. Some of that added perspective may have been useful to readers of the press release. I have no issue with the specification itself, as I support standards in the industry, and dedicate time to that end with the DSF Standards Committee. I took issue with the implied conclusion that higher end products are the path to being future proof. The original blog post points out, correctly, that mainstream network operators are far more concerned with the cost/performance ratio of hardware than with specific features. I know this because I talk to them every day. I am guessing Intel knows this as well. As the well-documented cost curve of Intel chipsets applies itself to the Core™ i5 and i7 products over time, they will be integrated into more products, replacing their lower cost brethren as the go-to chipsets for mass market media players. OPS is a good start, as detailed by media player maker IAdea, who would have a much greater vested interest (and capability) to evaluate it than I. Intel is great. But implying that a costly prototype is now some sort of standard is misleading.

Mr. Hall incorrectly asserts that my post “called the announcement from Intel pure marketing hooey”. Had he read it carefully, he would have seen that what I said was that the implication that “…you will only be successful in digital signage if you run media players with Intel’s highest-priced (Core™) processors, Microsoft’s newest embedded OS, and NEC displays” was hooey. And it is. I did not say that OPS was hooey.

As for context, I had to wonder where the motivation for the article itself came from, as four weeks have passed since the original post. Did I tug on Superman’s cape? The late, great Jim Croce advised against such behavior. I think that Superman in this case uses his powers for good, and I am certainly not his kryptonite. But I can do without The Daily Planet.