In an excellent post on ZDNet, Dion Hinchcliffe explores the rapid movement of social business startups as they are consumed by larger entities. Both an examination of what appears to be consolidation and a critique of what happens when entrepreneurial startups are assimilated by The Borgs of Industry, it made me think about how digital signage deals have tracked. The conclusion is straightforward: not in a similar way either in terms of speed or results. That easy observation leads to a more difficult question: Why?
The digital signage industry has seen large corporate entities step in and take a position via M&A activity on a number of occasions over the years. Each time, the deals were reviewed (or were self-proclaimed) as transformational, game changing or otherwise signaling imminent consolidation. But in reality, that has never been the case. In some instances, the lackluster results of corporate forays into the space have stemmed from bad timing. In others, culture and priorities were not well aligned to nurture the acquisition. (Hinchcliffe does a particularly good job at dissecting how big companies “metabolize” their prized acquisitions.) In others, it may have simply been a consequence of targeting the wrong entity. Some of the largest companies to invest in the digital signage software space to date have been, in no particular order, Cisco, 3M, Harris and NCR. A look at each may shed some light on what direction the “bigs” might take going forward.
Cisco acquired Tivella in early 2007. The opening paragraph of the associated press release said, “Tivella is a leading provider of digital signage software and systems. Cisco sees enormous potential for digital signage to be integrated into its existing enterprise streaming and live video broadcasting platform.” The first sentence had to be typed with one hand, as the fingers of the other were clearly crossed. The most common reaction to the deal was “Cisco bought WHO?”. Tivella had a platform that made an early bet on streaming content, which no doubt made the folks at Cisco slobber as they saw the need for more switches and router everywhere. Hence the second sentence in the release. In reality, the Cisco product has done much better only in venues where streaming makes sense, like ballparks and arenas. The rest of the world of geographically diverse networks (and painfully inconsistent broadband) is still not ready for streaming everything five years later. Given the size of Cisco’s sales force and its incumbent status in so many large organizations, there is little doubt that the enormous potential they forecast has yet to be realized. They consistently get beat outside their sweet spot by better architecture, better software and better value. My take: bad timing.
3M bought Mercury Online Solutions and their FRED digital signage product two years earlier, in 2005. They hailed it as a perfect fit for their large commercial graphics and services businesses. Bill Collins did a nice review of the deal at the time, noting that impending sales at Cingular and SunTrust made it attractive for both sides of the transaction to get it done. Since then, Cingular became AT&T Wireless, and FRED is not involved. I am not sure what happened at SunTrust, but 3M has certainly not gained a dominant position in banking in any case. One may assume that the interactive part of the Mercury business was equally attractive to 3M, the makers of MicroTouch screens. I have no insight as to whether that toolset has proved to be beneficial, but I am pretty sure that from a digital signage perspective, 3M is simply not a factor. My take: wrong product (notwithstanding the kiosk angle), too early.
In 2004, Leitch Technology purchased Inscriber for $18 million. Inscriber’s core business was broadcast graphics systems, and while it offered a digital signage product, it did not get any focus in the deal announcement. Harris Corporation acquired Leitch several months later for the princely sum of $450 million, the largest of several purchases that formed the core of Harris’ Broadcast Communications division. In Harris’ announcement, digital signage was at best an afterthought. That said, the acquired software, InfoCaster, was nurtured and invested in over the years, and some significant deals were won. Then came Harris’ recent decision to divest the entire Broadcast Communications division, including the financial and technical engine behind the DDN/7-Eleven digital signage network. Harris had done fairly well in large venues as well, providing a well-financed competitor to Cisco. However, In the grand scheme of things, the InfoCaster business is a pimple on the rather large posterior of the Broadcast Communications business, and in all likelihood will have to be sold off separately from core broadcasting assets. While Harris spokespeople have put on a brave face, claiming it is business as usual, it is going to be tough to convince most corporate buyers that Daddy Warbucks is in it for the long haul. Every week that passes without a sale puts them further behind the 8-ball in terms of competitive positioning. It may have been the closest thing to a successful acquisition by a big company, but it never seemed to matter to the powers that be at Harris from the beginning. It was simply not going to move the dial on a billion dollar business any time soon, if ever. My take: a victim of priorities and culture.
NCR has made two digital signage acquisitions, which in both cases amounted to serendipitous add-ons. In 2009, it purchased the assets of Netkey, which had in turn acquired Webpavement two years earlier. Netkey’s most valuable asset was its development environment for kiosk applications, which was clearly NCR’s target. And while they did manage to secure a large digital signage deal with Healthy Advice, the Webpavement product was never a world beater (“leader”) in the pantheon of digital signage software. About a year ago, NCR paid $1.2 billion to acquire Radiant Systems and their strong position in POS and other systems in the retail, entertainment and food service verticals. It was a perfect fit for a company once known as National Cash Register. As it turns out, two weeks earlier Radiant had closed a deal to buy Texas Digital, who had a nice business in order management and digital signage, especially in food service venues. It may be too early to tell what the fate of f Texas Digital will be as part of NCR. The order confirmation piece has some obvious strategic value to NCR in general. The QSR and fast casual channels are fast becoming the battleground of a major digital signage turf war. Time will tell if Texas Digital has the chops to compete or whether NCR intends to invest in that piece of the business. The jury is out on the first question, and I’d guess yes on the second. Neither Netkey nor Radiant were acquired for their digital signage businesses, yet NCR finds itself with two technology stacks and a few nice customers. They may continue to play the role of consolidator, or they may find the upside too small or too far out to care, as Harris did. My take: not a priority… yet.
The dizzying M&A activity in the social business as described by Hinchcliffe is marked by pinpoint targeting, high prices and yet-to-be-determined results. All of this has occurred very early in the life cycle of the social business itself, with three suns (Facebook, Twitter and LinkedIn) around which the start-ups orbit creating urgency and competition for all. In digital signage, early deals by big buyers have met with very mixed results, and in some cases were afterthoughts of larger deals. The hoped-for momentum has yet to appear. However, given the passage of time, the big companies still on the sidelines have had the luxury of watching the market develop, seeing the technology approaches differentiate, and learning from the actions of the early movers. None are going to innovate in our space from within. There are many companies within the rapidly growing Software Holocron that would love to have their phone ring with a prospective buyer on the other end. Yet very few will have that experience. Unless the technology, positioning and customer base become strategic for someone, most will be left to their own devices. Based upon the general experience of small companies acquired by large ones, culture, identity and strategy are often left behind at the closing table. On that basis, not being assimilated by The Borg would be fine for some, even preferable. For others, it is a harrowing prospect. The buyers might do well to impose their will on the former.
Note: I wrote this post on Father’s Day, and while I lost my father 16 years ago, he inspires me still. I certainly have a long way to go as a businessman, as a writer and as a person, but he taught me that it is what I do as a father that will have the longest lasting impact. Thanks, Dad.
Very insightful…and well thought on how the “big boys” have been trying to take over this industry. After spending 17+ years at Cisco, the last ~5 in digital signage, a bit of additional insight on them.
Their problem is with changing the customer buying entity to IT (ie, the “Cisco guys”).
Cisco’s success in new markets has been predicated on this; and thus your correct statement “…to be integrated into its existing…”. This worked with IBM/SNA networking, LANs, Y2K, Security, Telephony…but has not worked for digital signage, which still is the domain of advertising, marketing or other entity.
Cisco’s inability to move this brings about your statement on why “..they consistently get beat outside their sweet spot”. This looks like a timing issue, but it really is Cisco giving the IT guys the right reason and information to take this on (fight the battle for Cisco) and whoever is currently controlling the decision to give it up.
Cisco is not good at partnering (they are an acquisition company), and is so big they don’t depend on other companies to build the market, so the timing issue is all on them.
Thanks for the comment and the insight on Cisco. I found myself nodding my head when you describe their need to make IT the decision maker to win. It turns out that IT is more of a facilitator or gatekeeper in most of the projects out there, rather than an owner.