How To Price Your Digital Signage Ad Space (Part 3): Another Answer from an Expert

We are getting really solid expert feedback triggered by the discussion and by the following questions from Darin Gilstrap posted last week:

“Since there are several media math formulas currently being used to calculate digital signage media buys, I truly wonder which formulas are really apples-to-apples. Can you charge a national advertiser a flat ad-spot rate/per month/per location across 500, 1000, 2000+ locations? As a network grows do advertisers hesitate to pay more based on network growth? What about niche audiences for example women-only, Hispanics, African American networks, do they garner higher rates based on tighter targeting.”

Rob Gorrie of ADCENTRICITY sells digital signage advertising to major media buyers. Here are his insights from the frontline trenches:

RG: Love this question – right in line with the type of mature answer buyers need.  Here’s the long answers:

Media formulae – there’s no one size fits all…and that’s part of the secret…our medium is NOT a commodity, nor is it a “rate card”.  A bunch of Omnicom clients (execs) I deal with relate this space to TV/Broadcast and feel it’s a trailer buy to a TV spend, which is measured against a quasi GRP.  On the other hand,  some of the guys I deal with in the WPP camp throw it in to outdoor, as a subset, which is measured on……..something (perceived passerby traffic)…

Others think it’s a subcomponent of online digital advertising, especially with the rise of online video.

One of my advisors probably had the best comment when he said: “your medium is everything BUT TV.  It has the dynamic nature of the Internet, the recency/FMOT of point of purchase, the localism of newspaper, the frequency of outdoor, the POTENTIAL relevance of magazines, the qualitative measurement capability of none of them with none of the problems of TV”….FYI, he was one of the instrumental characters in launching a large number of specialty channels on TV. This, of course, brings us to our industry identity crisis problem..if we’re something of every medium, but none of them at the same time, what are we? (this is another discussion and part of why media buyers have such a hard time understanding what we are/can provide – and we don’t explain it well).

End of the day, everything in our space can be boiled back down to 2 baseline common denominators:

1.) CPM Audience (cost per thousand “impressions” on gross audience)
which is a 30+ year old metric.  Regardless of how old or irrelevant
this number is, it’s STILL the baseline for COST comparison across media
- TV = $17-$27/CPM on survivor (40 million gross on monthly =
$500K+/spot). Magazine = $15 CPM on readership of 10 mil’ish. Digital
Signage = $5/CPM at C-Store….makes it easy to compare COST but not ROI
or performance or impact.

2.) CPM Ads Served (Cost per thousand ads served) – New School
Internet ratings.  Works as an ROI comparative but means little on media
evaluation/effectiveness.  Great for quantitative analysis on media
impact or “pseudo-efficiency” on spend.  Using the above mentality; TV =
$500,000,000/thousand (1 ad = $500K), Magazine = $50,000,000/’000 (1 ad
= $50K). Digital Signage $50/’000 (1 ad = 0.05) – we’ve run campaigns
that serve 5 million ads in 4 weeks for very little…it gets a little silly.

EVERY other metric can be boiled down to one of these two.  What we should be striving for is a pseudo comparative metric close to GRP, which every other traditional, measured medium tries to emulate.  This will take a couple of years and, quite frankly, can’t be accomplished by 1 network on its own or one category of network (e.g. just pharmacies) – it’s completely dependent on the needs of the campaign.

Once you know this, you can reverse-engineer everything else.  We don’t really care what people need to evaluate on so we provide them everything….down to cost per ad served per gross audience reached. It’s a little overboard, but it means a buyer can evaluate a $ figure immediately based on what they need to evaluate it on to prove a good
buy to their client.

So what does that mean to your network, taking learning from above?  As I’ve said before, Media buyers care about 3 things; Efficiency, Effectiveness and Reach.  I won’t go into all of them but the big one is TARGETED reach.

So to the questions:

“Can you charge a national advertiser a flat ad-spot rate/per month/per
location?”

Yes.

It boils down to CPM Viewers, whether you like it or not. Let’s take  $200/venue/month/spot.  And let’s pretend we’re talking about a Convenience store chain that sees 2000 ppl per day/venue on average. (60,000 gross audience per month/venue).  If you’re charging the above $200/venue, you’ve effectively saying to the advertiser that your media is worth $3.33/’000. Now let’s say that you’ve got 500 Convenience stores on that average (30,000,000 gross audience).  You’re still charging $3.33 at $200 a month per spot at 500 locations.

Realistically, 30,000,000 is worth a hell of a lot more than 60,000, especially if you want to start competing with the measured mediums, but Digital Signage isn’t mature enough as a holistic base to command that yet, nor do buyers trust it as a viable mass alternative or placeholder.

What’s more valuable?…a single, 1 day, $30,000 full page ad in the financial section of a newspaper that has a full paper “readership” of 1.2 million or a $60,000 Digital signage spend that serves 800,000 ads in 2 weeks in urban financial targets on various networks with a gross audience of 4,000,000 (targeted/net audience of 740,000)?

Give it 2 years and price inflation will occur naturally based on demand and finite inventory.  Now, to top this off, you have to remember that the real value is in the actual TARGETED reach that an advertiser can get through the access achieved with your network.  You should always really be selling on audience access as opposed to venues because that’s all a buyer really cares about…the more targeted your network is to their needs, the more likely they are to buy on it.

Where the REAL power comes in is with frequency.  How many times can we make that audience on average see that ad without media fatigue? Does your audience come to your venue once a day or once a month?  It’s a bit of a science and it gets really complex when you decide to merge 10 different categories together in one campaign (C-Stores, pharmacies, grocery, bar, etc).

Q: “As a network grows do advertisers hesitate to pay more based on network growth?”

No. actually, agencies and brands WANT more growth. 500 locations means nothing to them in the grand scheme of things.  They can moan as much as they want (and trust me they will) but if you follow the above and your demo is what they want, you end up holding the cards.  As above, if 30% of those 30 million gross audience are EXACTLY who they need to reach, you’re in the driver’s seat.  Don’t fall for the “I reach X on TV” argument either…realistically, if you know the stats, less than 46% of people even stay in the room (or change channel or start chatting or look at their laptop) during a TV commercial and of those 46%, the recall is 21% versus a 35%+ recall on Digital Signage. 

In addition, TV’s “ad acceptance rating” is very low whereas I have studies that show acceptance on Digital Signage up to 60%.  And of that TV audience, that’s GROSS…not really even targeted based on the GRPs they’re buying.  End of the day, each brand only has so much dough, however….you need to make sure your content is relevant and up to date, otherwise the impact of your ads is zero because there’s nothing for the audience to look at or be entertained by. 

Lastly, the media agencies aren’t buying because of scale.  If they’re making 15% on this and you’re trying to sell them a 50K program, they make $7500 for a ton more effort than buying a newspaper spot (which is a phone call away). The media agencies want the networks to grow too to buy on 10,000 locations because it means the buy gets into the millions and they start making some real money based on their efforts.  As hard as they push you down on price, the harder they push the less they make for their efforts
(we sell on gross not net).

Q:”What about niche audiences for example women-only, Hispanics, African-American networks, do they garner higher rates based on tighter targeting”

RG: This is my favorite question. Yes and No is the best answer I can give, however.  North American brands and media companies are disasters when it comes to targeting minorities or economic subsets.  There’s been some great articles on ad age about this recently.  They (we) aren’t very good at understanding how to effectively speak a different language other than “BRAND”.  And a brand means something different to each targeted group.  We’re learning, slowly, as the population changes and there are certain brands and agencies that have learned to capitalize on this trend. 

Reality is, however, that you have to be smart about your sales efforts on this question. Despite the fact that they’ll deny it left, right and center, “Coke’s” media company will not see value in paying more for your “targeted” network of 500 locations versus someone else’s based on profiling of that nature.  They’re VERY smart statisticians and very good at what they do, but it’s too small to be on their radar to have impact if they decide to target a particular group.

On the other hand, there are other brands who are second tier who LOVE the ability to get to this level, based on their product, service or campaign that no one pays attention to but are so perfect for Digital Signage (e.g. a inner city doctor’s network). 

They also will realize more out of advertising with you than “Coke” will so….  Longer term, you can charge them more and, if you get enough of them, you get to turn down the “Coke’s” of the world on cheaper pricing, as attractive as they are, because your network is more effective for others and you don’t have to cater to their needs….the “A” list clients aren’t always what they’re cracked up to be. The old saying that “beauty is in the eye of the beholder” still holds true.  If you have a niche that is attractive to a particular advertiser, they’ll chase you if you can prove value and effective returns.

2 comments October 15th, 2007

What License Do You Need To Start a Digital Signage Network: Expert Answer

Andrey Kazakov asked this question last week: “Is there some special license that needs to be obtained to operate Plasma screen network in Canada (and particulary in BC)? I intersted in contacts with small scaled Digital Signage network operators in British Columbia
Cheers,
Andrey”

Rob Gorrie of ADCENTRICITY provided the following substantial answer:
Let’s separate out the 3 types of screen networks that reside under the caption “OOH” (Out Of Home):

1.) Outdoor Digital (roadside (rural/urban) digital signage “LED” type boards)

2.) Place-based (LCD/Plasma screens in Doctors offices, Restaurants, Health Clubs, etc)

3.) Retail (Digital LCD/Plasma in Convenience Stores, Grocery, Pharma, etc)

Retail and Place-based are pretty green field right now.  There aren’t a lot (if any) “Government”/”CRTC”/”FCC” rules governing the operations of these networks because, fundamentally, these are closed networks, operated privately….so no one in the regulation business really has a foothold here. It’s also too small for their scope and it’s too new so the regulatory business hasn’t caught up to it yet.  If we are all responsible about how we operate these networks, they never will have to get involved in our industry.

The only areas you have to be aware of is on the content/advertising side.  E.g. you can’t “rebroadcast” someone else’s signal or program without getting permission or paying for it.  In addition, there are industries that are very governed, such as pharmaceutical advertising, that have very stringent rules as to what you can/can’t say on the screens.

The “Outdoor” side of Digital Signage is a different game (Big Outdoor LED signs).  Not only are these subject to their own “laws” as to how they can operate, those “laws” change from province/state to province/state and city to city.  You don’t necessarily need a “license” in all areas but you do need permission from municipal, provincial/state and federal regulatory bodies, depending on where your signage is located.  The US also seems to be more amenable to this form of advertising than Canada.

Different provinces/states also have different concepts of what Digital Signage is.  Some only allow still image transitions on the digital boards and others allow motion.  You have to operate each accordingly.

As for Digital Signage Network operators in BC, I know a couple and would be happy to introduce you if you want to send me an email at rob {at} adcentricity.com.  I’m very interested in meeting some more Networks there as well Andrey as it seems that most of BC lags behind the rest of the country in Digital Signage Network implementations and I’d love some more coverage past the rockies.

Regards”Rob 

Thank you Rob!

Add comment October 15th, 2007

Emergency Messaging for Digital Signage: an Asset or a Liability?

There is a lot of talk in the industry around whether or not digital signage networks should participate in the Emergency Alert System. Although digital signage networks are not yet obliged to do so (they are not included in the list of media that are required by law to participate in the EAS), this looks like a temporary situation that may soon be legislated, given the growing reach of digital signage.

Even in the absence of the legislation many networks have recognized the need to incorporate the EAS or other types of emergency alert systems. Often the nature of the venue demands this functionality (for instance, student campuses, hospitals, arenas, etc.)

Today the proactive network owners are approaching this “need” in a way that makes them responsible for gathering the information, putting the information in a content format and then wanting to push this information to the screen, thus disrupting the current program. There is definitely a tremendous value in providing this service, when it’s done right, but at what cost?

My concern is that on occasions the network owners will not be able to implement the alerts within acceptable time-frames. How long will it take to get the information? What should be the response time limit? What format should it be displayed in? What content needs to be associated with it? Who should approve the message and the final output? After all this is sorted out and the Send button is pressed – the emergency could be over and who is now liable?

Common Alerting Protocol (CAP) is an ‘XML-based data format for exchanging’ messages between alerting technologies. It ‘allows a warning message to be consistently disseminated simultaneously over many warning systems to many applications’ (definition by Wikipedia). We should evaluate this process as an option to our industry as it may be a more reliable and appropriate technology, and create a standard process for delivering emergency alerts to Out-of-Home Video Networks.

1 comment October 15th, 2007

LG takes show on the road

Most of the big flat panel guys are in the game now when it comes to digital signage, though only a handful appear to be going at it hard — LG being one of them.

They had a big presence at the DSE show this spring in Chicago, and now they are doing a three-city road show focused very specifically onese kinds of opportunities.

Called TransVolve, the shows are set for tomorrow in New York and then the following week in LA. BroadSign will have people who will be hanging out and staring longingly at the free open bar at the show in LA.

LG’s description:

Learn from LG and other industry leading digital signage hardware, software and services companies how to maximize the use of digital signage to drive customer loyalty, increase profitability and drive sales. Grab the attention of your customer and don’t be left behind as you “Transvolve” your message to the public. 

You have to register to attend and for all you freeloaders out there, it will greatly enhance your chances of getting in if you are actually IN this industry and might buy something.  You could win a flat screen just by showing up, so bring you sister’s mini-van.

More details and registration here … 

Eric Kanagy, who blogs about his journey with his start-up RedPost, went to the Chicago show last week. He noted attendance was not all that great, so hopefully time and a little publicity will jump up the numbers.

Add comment October 15th, 2007