Strategy Institute follows the money

Strategy Institute's 2nd annual Digital Out-of-Home Media Investor Conference, dedicated to bringing digital signage investors and entrepreneurs together to discuss their respective views of the industry, was held at the Bridgewaters conference facility in New York last week. More than 100 attendees and nearly two dozen speakers met for two full days of presentations, panel discussions and networking opportunities concerning topics of interest to these constituencies.

Topics ranged from new digital signage business models to new financing concepts, business valuations to CPM comparisons, growth projections to strategy analyses. If you were a network operator looking for funding or investment banker fishing for the next new media start-up, the conference was billed as something like the Match.com of digital signage and new media.

The audience and agenda offered a small, but seemingly broad swath of the participants you'd hope to meet at such a conference: Media buyers, investment bankers, industry analysts, the recently acquired, the soon-to-be-funded, industry gadflies, and the perennial start-ups on the brink of positive cash flow. The Strategy Institute had the great fortune to schedule the event mere weeks after the announcement of the acquisition of SignStorey by CBS forming the new CBS Outernet grocery store media business.

story continues below... advertisement     This story and all of our great free content is supported by:     ITSENCLOSURES ITSENCLOSURES innovative enclosures allow digital signage to be placed in areas in which you thought you could only imagine.  Displays can now be placed outdoors, and have all the protection to keep them safe from the environment, theft and vandals.

The CBS/SignStorey deal was a recurring theme of the conference, both in the formal presentations and panels and during the frequent networking breaks. The sentiment ran between fledgling media/signage networks ecstatic about the $70 million-plus valuation to skeptics proclaiming that they didn't get it and that CBS's 30-second spots promoting their television content made no sense. From my perspective, I haven't looked at any pro forma or terminal valuation calculations that might support the generally accepted valuation models based on low-single-digit revenue multiples to low-two-digit multiples of EBITDA, so I won't weigh in on the price.

But it doesn't take a Wharton MBA to figure out that TV is losing its core audience, viewers are Facebooking and PVRing network TV's business model into oblivion, and consumers still haven't made the leap to ordering their groceries over the Internet. Shoppers don't go to the supermarket to watch TV, true; but they do go there to buy the stuff network TV execs advertise, and they sometimes go there more than once a week. Kinda makes sense to me.

In terms of the presentations, I thought the agenda was quite balanced, and that the speakers were, for the most part, both knowledgeable and insightful. I don't know about you, but I don't go to these conferences to hear speakers tell me what digital signage is and why it will succeed anymore. I want speakers that bring something new to the party and perhaps even something that causes me to re-evaluate my assumptions and paradigms around this new media and fledgling industry.

One of the presentations from this conference that stood out for me was the presentation by Greg Smith, COO of Neo@Ogilvy, entitled "Reinvention of Madison Avenue and How Ad Dollars are being Spent." Greg was a very entertaining speaker and gave a refreshing view of how execs from the more progressive ad firms view "alternative media" like digital out-of-home (or DOH!). The take-away from his presentation was that, yes, Madison Avenue does realize that the old media model that built ad-supported traditional media industries like print, radio and TV is in fact broken, but nobody has a new model to replace it yet, so the world keeps operating according to the old rules and metrics. The new media options are so complex and fractured — think social networking, interactive, blogs, mobile media, etc. — that nobody knows how all of these will come together to form the future media fabric. Greg proposed that whatever happens, this future media will be less like "advertising" and more like "messaging" where content will be chosen and engaging rather than broadcast and intrusive.

Presentations by Michael Hudes of Clear Channel and Cliff Marks of National CineMedia did a great job of highlighting how these two publicly-traded companies are managing to incorporate innovative and risky digital initiatives into their business models. In the case of Clear Channel, technical advancement in LED billboards makes building this kind of network something of a no-brainer, but adding things like NYTEN in-Taxi TV, airport LED displays and digital street furniture shows that Clear Channel isn't content simply updating its core business. The National CineMedia story is something of a case study in how to transition wasted time and space in front of a captive audience into a powerful and accepted new media outlet. If only we could come up with more places where consumers sit huddled in the dark for 20 minutes with nothing else to look at.

But to me, the most interesting discussions of the event were clearly the panels and presentations from the money guys and gals who have either invested in various digital signage and new media start-ups, raised money or managed transactions to get them sold, or who analyze the performance of the public companies for Wall Street. The old adage is "follow the money" and these are the people blazing the trail with their support of digital signage/media start-ups and spin-outs.

The interesting themes I heard from this group were that, at least at this conference — "The Digital Out-of-Home Media Investor Conference" — it's all about ad-supported networks. Nobody was talking much about corporate communications networks or branded retail networks or any of that soft ROI stuff. We're selling ads here! This is what is interesting to investors and Wall Street types, because we know how this works, we know where the money is coming from, we know how much there is available and we know Madison Avenue and the brands need to find ways to reach audiences.

The other interesting element to this was the focus on local advertising and what the ad guys refer to as "the long tail." These are the small-time, low-budget local advertisers who traditionally might rely on yellow pages and local newspapers. There's a gazillion of them and digital out-of-home media is ideal for these folks because the displays are "place-based" and you can buy in small chunks at low cost — think Craig's List meets "The Laundromat Network."

And of course, there were several digital signage network companies presenting their approaches and successes to these investors and bankers. I was impressed by Ali Diab and RippleTV for their success at what has been a difficult business model for the industry so far — the concept of putting the network in at no cost to the real estate owner on the premise that if you build it the advertisers will support it. They have done a good job, it seems, at creating particularly engaging content and focusing on "the long tail." I just wonder how scalable it is — LCDs and computers have come down in cost, but they're not free and managing a large diffuse network down to this level of granularity sounds like an expensive, complex task to me.

Similar presentations by the folks at Captive Media, Mediaplace and Impart Media — okay, it's all about the media, I get it — also left me scratching my head a bit. At least for Captive Media, the concept of serving the health club market as their core vertical and also offering traditional media and campaigns alongside their digital offerings made sense to me.

Want to ask Brad and our other digital signage experts a question? Visit theAsk the Expertsresearch center and submit your question there!