As I mentioned above, vJive chose not to focus on measuring traffic, footfall, or "opportunities to see" -- the types of metrics that other companies have been tracking -- but they knew that this data would be important to advertisers who typically price things using a CPM-like metric. Instead, they decided that the retailers hosting the screens could supply a reasonable proxy via their register receipts. While this isn't too unusual in the digital signage world, what makes vJive Networks unique is the way advertising on the screens is valued. Rather than price ad slots the same across every screen in the network, vJive developed the SCQ by tabulating an overall location value score. This score is based 70% on Household Potential Index data published by the Media Research User's Council (a market research group), and 30% on the revenue and/or footfall data supplied by store managers. By design, SCQ values customer "quality" over quantity, using aggregate socioeconomic data like household income, education level, and literacy as well as lifestyle data like frequency of dining out and mobile phone ownership to estimate how good of a potential customer a viewer is likely to be, and thus how valuable he or she is to potential advertisers on the network. Highly desirable scores are given an overall SCQ of "A," with less desirable scores translating to grades of "B" through "E." The grades are then used to calculate prices for the ad slots available on each screen in the area. Thus, advertisers have a clear understanding of the screen's perceived value. If they agree with the value assessment for a given venue, purchasing screen time becomes an obvious decision. Here's an example based on three of vJive's venues in Bangalore, India:
|Household Potential Index (HPI)
As you can see, the pricing for screens with different SCQ grades can vary considerably. Shoppers that frequent Venue 3 are more than half again as financially well-off as shoppers at Venue 1, and they drive more than three times the foot traffic and store revenue. Because of this, advertising slots on the company's screens in Venue 3 are nearly twice as expensive as slots in Venue 1. If we expand the scale to include all five possible SCQ scores, we get the following rate card:
The SCQ metric accomplishes several things. First, it justifies vJive's decision to charge premium prices in venues where advertising is most likely to be effective in increasing product sales. Second, it provides a quantitative benchmark that advertisers can use to measure ad effectiveness for target demographics. And finally, by using a simple formula and readily-available information like Household Potential Index and store footfall data, they have established a standard pricing model for digital signage that other networks can adopt at their choosing. This last point is particularly noteworthy in a young market with significant fragmentation and no clear leader: by settling on an open metric, vJive's local competitors will either have to adopt their methods and mimic their rate structure, or else come up with a new metric that can be used to cost-justify screen time for potential advertisers.
Whether other network owners will follow vJive's lead remains to be seen. But in light of the recent activity by the big networks here in the US, I'm eager to see what new sales models will get publicized by other networks fighting for their share of the out-of-home advertising pot. I'd love to see some smaller networks create real competition for the big guys by agreeing on an open pricing standard, derived from readily available data and non-proprietary calculations. Something as simple as an SCQ-like metric has the potential to level the playing field by providing a "standard" value for screen time while emphasizing the benefits of digital signage over other forms of advertising. Unfortunately, that's probably my too-naive-and-optimistic view of things, since I've yet to see many papers, articles or press releases about how to price digital ads. But smaller players will have to do something interesting if they want to remain competitive, especially when media companies with decades of experience, strong advertiser relationships, and very deep pockets are entering the marketplace. Perhaps the increased competition will stimulate more innovation in out-of-home advertising, although it's equally possible that the big players will drive things towards the pricing models that have typified TV for decades.
Can an open pricing model be successful in markets like the US and Europe, or are we doomed to some form of CPM? Do you know of anyone else pricing their screen time like this? Leave a comment and let me know!