Yesterday, I sent a tweet saying that markets fix broken business models, not government dollars. I was reacting to pieces I had seen related to newpaper and (of all things) VC bailouts. Today, two pieces of news arrive that restore my faith in capitalism and the power of the marketplace.
First, related to the newspaper business, I read (courtesy of the eagle eyes at DailyDOOH) of the Knight News Challenge. The John S. and James L. Knight Foundation, the legacy of the Knight brothers of Knight Ridder fame, will award $5M in a contest seeking “innovations that use new or available technology to distribute content in local communities”. The contest dictates the use of digital (and open source) technology, among other requirements. This is a great example of how innovation and market forces can work together to reshape a chronically ill newspaper business. And it is being funded by a fortune made when newspapers were innovative and highly relevant. Kudos to the Knight Foundation, and good luck to the participants. Somehow I think out of home digital screens may be part of a winning formula.
Second, and even closer to home in the digital signage-sphere, is the revelation of a poorly kept secret: TargetCast Networks has purchased Ripple TV. We had speculated that the plug would be pulled back in July. Yesterday the rumor went from coast to coast that the consideration was one dollar. I am not sure I am buying into that idea, since the deal effectively has one VC (Claremont Creek) offering a lifeline of sorts to a failed deal of others (DFJ and Trinity), which would imply a deal more complex than a cup of coffee. There is probably some equity, contingent payments or earnouts that can bring some value to the VC investors at Ripple down the line. You can bet that the Ripple employees and early investors are out of work and out of luck, respectively, as the Grim Reaper removes human redundancy and his step brother, Liquidation Preference, ensures that any of the limited dollars coming back go to the preferred (VC) investors. So it goes: execute or prepare for execution.
The Ripple TV model was broken for a number of reasons. Their famously busy screens were difficult to view at times, and their placement in the venues that I have been in have left much to be desired. Clearly, the concept was not resonating with advertisers, despite the roster of highly visible venues, which is a mixture of coffee shops, bagel places, and Borders. I am not aware of what kind of arrangements they had with their venue owners, but it is reasonable to assume that some kind of revenue sharing was in place. They are left with lots of flat screen displays in high traffic, low dwell time locations, some sort of technology base, and a bunch of content partners. A diamond in the rough? Probably not, but at the right price, a great footprint and an opportunity to utilize a different approach to monetize it.
The press release indicates that TargetCast plans to “rebrand existing Ripple TVs in fast casual locations, integrate the content and advertising delivery into a single format and use its patented TargetCaster hardware and software products to scale growth into new locations”. Given TargetCast’s model, and the fact that they are the surviving entity here, it is a good bet that the Ripple screens will now show live TV framed with the TargetCast “L-bar”, and powered by TargetCast’s box and software. This makes sense because part of the power of TargetCast’s model is that it uses TVs that are already in place (the bar TVs at Chili’s, TGI Friday’s, Applebee’s and others) and leverages the free content from broadcast TV, leaving the only content investment to be made for paid advertisers. Whether you believe in the model or not, it has quite a bit more leverage than models that require the acquisition of compelling, relevant and targeted content on dedicated displays (a/k/a digital signage or narrowcasting). So, it’s a big buh-bye for the content partners of Ripple as well.
And then there is Borders. The press release refers to rebranding casual dining locations, which would not seem to include Borders. I never understood why Borders wanted Ripple or vice versa. The guess here is that TCN will support the Borders locations as is until the contract term runs out, and/or try to sell it. Borders is not a candidate for the broadcast TV/L-bar content strategy, and TCN won’t want the expense of running the Ripple technology platform for any longer than they have to.
So some of the takeaways here are as follows:
1. The market works, and good business models trump bad business models
2. VCs are not afraid to cut their losses when more cash is not the answer
3. There is usually a buyer out there when there is value to be salvaged
Our industry marches on. As it should be, the market decides who wins and who loses.
Great take on the acquisition. Would agree that Ripple's VCs are taking a wash. It will be interesting to see how TargetCast brings the Ripple screens into its portfolio. I agree that we'll see more L-frame displays, but this may give TargetCast the opportunity to experiment with alternate advertising/content models.
The other thing to consider in this transaction is the recently announced strategic partnership between PRN and TargetCast, in which the former will be providing ad sales for TCN. TargetCast's expanded footprint extends PRN's reach as the dominant DOOH ad sales organization in the States. This also very well marks the end of On The Go Media Network's (local ad sales) relationship with Ripple.
I would love to hear more of your thoughts on TargetCast's growth. All signs point to the company being a major player in the DOOH sector.