While chatting with Adrian about a week after the post surfaced, I lamented that while some of the people mentioned in the comment thread could be pretty irritating, none really had the ability to bring considerable damage to the industry, and hence qualify as "dangerous." To do that, I suggested, you'd have to talk a big game, go out and make a go of it, and then get shot down hard enough that nobody with money would want to touch the industry after that. Digital signage technology is so pervasive these days (heck, we've seen screens mounted on everything from automatic defibrillators to milkshake machines) that it's unlikely that anything could take the whole industry down. However, the highest-visibility sector -- digital, out-of-home advertising networks -- is still pretty fragile, so I focused my attention there. My comment to Adrian (which he then anonymously posted on my behalf since I'm generally too lazy and/or forgetful to do it myself) was that if we had a few more high-profile failures of DOOH networks, it could reset that side of the industry again by driving away potential investors and entrepreneurs. My argument looks something like this:
The bigger they are...
Image credit: Ben Crowe on Flickr
So consider what would happen if one or both of these companies were to founder. PRN has been a stalwart of the digital signage community for... well, basically forever. They've gone from being a minion of Walmart (who at one point accounted for something like 90% of their revenues) to today's more diversified company with a larger and more comprehensive suite of offerings. While I doubt they're throwing off as much cash as parent company Technicolor would like, they're a good team of smart people with a good business model, and we more or less expect them to do the right thing when it comes to digital signage. If they were to suddenly change direction, go into receivership or experience some other life-altering event, I'd be pretty worried for other DOOH networks.
RMG is in a similar position. With a pedigreed CEO and VC money from some of the darlings of Silicon Valley, RMG has made no secret of their intent to become the premier supplier of DOOH inventory in the US. Add in a big line of credit and plans for an IPO, and the firm ought to be able to back up their big talk with big actions. While they don't have the same track record as PRN, their resources and growth so far are such that any serious missteps would almost certainly make other DOOH network owners pause and consider their growth options.
Who will be the next NGN?
Over a decade ago, Next Generation Network became the poster child for how not to run a digital signage network. Having raised nearly $100M in private equity financing, they deployed thousands of screens across the United States, only to find that they had no way to monetize them. In hindsight, their lack of a suitable ad sales model and ridiculous capex requirements is obvious. But at the time, people were astonished to find them disappear just scant months before preparing an IPO filing. Their high-profile exit slapped a giant "DO NOT TOUCH" sign on ad-funded digital signage networks everywhere. This hindered the growth of companies like RMS Networks and the early PRN (which I think was called Pics Retail Networks), and surely prevented the formation of other startups that would have shared a similar vision (for better or worse).
Long story short, there are only a handful of DOOH companies that big businesses bother to pay attention to. If these guys can't prove out the model, it's going to hurt short-term investments in other DOOH companies and make expansion and exit more difficult -- even for those companies who are successful in their own niches. Unfortunately, the reverse isn't necessarily true. The ongoing success of a company like PRN or RMG probably won't translate to increased access to funds or improved growth prospects for other advertising-based networks. So for the small guys (and that's virtually EVERYONE aside from the top 10 or 20 DOOH networks), there's little to gain, but much to lose.
How much impact does the performance of large DOOH networks have on smaller DOOH companies and newly-minted startups? Leave a comment and let us know.