In light of NBC's digital signage upfront and CBS's aggressive moves in the space (first acquiring SignStorey to form CBS Outernet and then announcing a partnership with Ripple TV and others to gain access to thousands of out-of-home venues across the US), the article I wrote for this month's MEDIA magazine seems particularly applicable to digital signage firms who are now struggling to figure out where their advertising-driven networks fit in. Looking outside of the US and "big corporate" for inspiration, I recently had the opportunity to learn more about vJive Networks, an Indian firm with more than 1,000 screens spread across the top 25 demographic regions in India. Facing the same problem as many US firms -- namely, how to price their ads so they can turn a profit while still providing a good value to advertisers -- the company decided to eschew more established metrics like CPM in favor of their own measure called the Screen Consumption Quotient, or SCQ. I'll give a basic explanation of how the metric works below, but if you want more detail I encourage you to read the Media Metrics article at MediaPost.

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:

Location Venue 1 Venue 2 Venue 3
Consumption cluster 1 2 3
Household Potential Index (HPI) 22 28 39
Avg. revenue/footfall 76 90 250
SCQ value 38 47 102
Rate (location/month) $469 $586 $916

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:

SCQ Value SCQ Rate (location/month)
0-25 E $375
26-45 D $469
46-65 C $586
66-85 B $732
>85 A $916

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!


+1 # Jeremy 2008-01-23 13:13
Bill, do you know what sort of response vJive has gotten from advertisers on this pricing model? On the one hand, it seems like experienced media buyers might ask for everything to be re-stated in terms of CPM. But on the other hand, I can see them appreciating the transparency in the pricing and using that as a way to better gauge performance, i.e. ad buys with a higher SCQ should deliver a measurably higher return than those with a lower SCQ.
0 # Bill Gerba 2008-01-23 15:02
Unfortunately the only information I have is anecdotal - I know they raised a lot of VC money, and I know they've had at least some success selling advertising (I saw some of their screens while in India late last year). I'll see if I can get some additional details, or perhaps even reply to this comment themselves.
0 # Matthew Olivieri 2008-01-24 21:43
Bill, With the recent announcement of CBS Outernet partnering with RippleTV and just last week the announcement of SeeSaw Networks partnering with RippleTV-Value Added Resellers seem to be on the riseObviously these guys are trying to make life easier for Ad Agencies with huge marketing budgets, but how much potential is there really for them as VARTMs? How big is the Market for Digital Signage Resellers like SeeSaw Networks and RippleTV? $20M, $50M, $100M? Thanks, Matthew
0 # Bill Gerba 2008-01-26 21:35
Matthew, I'm pretty sure that none of the companies you mentioned will ever think of themselves as "VARs." CBS Outernet and RippleTV are both network owners. They put networks in, pay for them, and are then responsible for monetizing them. SeeSaw is a step even further removed - they don't get their hands dirty with capitalization or installation at all, they just manage available inventory and help networks to book more ad sales. If you're asking about how much money these firms might be willing to put into the creation and management of ad-supported networks, my guess would be in the hundreds of millions of dollars. CBS's purchase of SignStorey goes $70M towards the first $100M, and there's certainly a lot more where that came from. If you're asking about the total aggregate value of the space on all of these networks, that's a much tougher question, and I wouldn't even know where to begin guessing. But say there were a total of 50,000 screens in the "big" networks, each sold 10 advertising slots per month, and each had a 40% subscription rate (so 50,000 screens x 4 ads/month x 12 months/year). That would mean that the total size of the inventory was 2.4 million slots. Sell each slot for $10 and you're at a measly $24M. Sell each for $100 and you're at a pretty significant $240M. The truth probably lies somewhere in between.
0 # Gil 2008-01-27 05:13
Bill, Thanks for the interesting information. I am assuming the $24-240M sum is just the reselling part? Can you please share your view on what is the breakdown per slot split between the reselling, network operator and network owner? Thanks Gil
0 # Matthew Olivieri 2008-01-27 21:23
Bill, Thanks for the great feedback, and you are absolutely right, my VAR reference is far outside the scope of what these companies do. My apologies for the mis-interpretation. Nonetheless, I was trying to ballpark how much money could be up-for-grabs in SeeSaw's model specifically. Anyone who helps other companies sell their ad space must take a little off the top for their efforts, so I am wondering how big SeeSaw sees this space to be and what potentially they forecast their revenues to be after kicking back most to the provider. -Matthew
0 # Bill Gerba 2008-01-27 22:58
Gil: Yes, my totally fabricated, make-believe $24-$240M range was for the value of the ad inventory only (including the service of running the spots, of course). To your question, it would be **very** difficult to come up with accurate estimates for a split between advertisers, venues and others as I've seen them divided up every which way to Sunday. Sometimes the venues and network companies split 50-50, sometimes 60-40, sometimes they involve other third parties that each take their percentage... there's no widely-accepted model that I know of. Matthew: if you're a network owner, you could probably just ask them what they charge :) I'm not sure if they use a retainer model or a pure cost-per-placement, but I agree, they obviously intend to make money on every connection between advertiser and network owner.
0 # Gonzalo 2008-09-28 07:38
Hi Bill, I would like to know if you can direct me to information that can help me to create my own Price List for Digital Signage Content Management. I am putting together my business plan to start my own Company but I have so much trouble trying to find the competitors pricing and or business model for Price structure for the Content Creation and Management. I appreciate your help. Best regards

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