Our industry has been showing some serious signs of maturity lately. Breathless press releases touting 20 location deals have been supplanted by news of consolidations on the network side, thinning of the ranks on the vendor side, and even initial attacks from privacy advocates that signal acceptance of the technology just as much as fear of its reach. Business activity during a deep global recession has been surprisingly brisk. If there is one missing piece from the puzzle that would transform the industry in a permanent and significant way, it would be the meaningful acceptance of digital signage by media planners and buyers.

To be sure, there have been signs of movement and nice tests from very big brands, perhaps most notably Schering-Plough. And make no mistake, some networks are consistently selling advertising, although there is no doubt each would benefit from higher CPMs that increased demand might lead to for them. But one does not get the sense (yet) that digital signage as a media is a part of the plan for most media buyers and brands. Anyone who navigates through the web will intuitively know that the major automobile companies have internet advertising as a budgeted part of their media plan. There are certain sites that are more or less permanent parts of their Internet buy, probably signaling measurable ROI. And it is clear that buyers will test new and ostensibly attractive sites in hope of finding a winner. In any case, there is little doubt that Chevrolet, for example, has a certain number of millions earmarked for web-based advertising. That same clear evidence of an earmarked budget for digital signage has just not become obvious. It is fair to say that certain networks have developed relationships with some brands that are mutually beneficial, but there is a long way to go. When we get there, the better networks will realize higher rates, and the developing networks will get more chances to prove their value.

There are many signs that it is not just wishful thinking to imagine digital signage having a visible slice of the pie chart at the quarterly budget meetings. Inside our industry, more and more ad-selling businesses are popping up to compete with the leading DS aggregators, Adcentricity and SeeSaw. While their models and value propositions may differ, the emergence of offerings like rVue and Entourage certainly indicate that investors and entrepreneurs see opportunity, and there will be others. Alliances of networks in related businesses have also cropped up, in an effort to cross sell advertising and to gain expanded reach. These will work, where the quality of the networks working together is uniformly high. We have already seen alliances of the nearly dead that will not fool anyone.

Externally, there also appear to be signs that there is more than hope. In an excellent, must-read blog post, MediaPost editor-at-large Diane Mermigas examines the apparent movement from traditional TV upfront buying to a strategy of “scatter” buying. Indeed TV ad buying seems to be moving to a just-in-time mentality, even if spot costs in the scatter market are higher than upfront costs. The logic would appear to be that buying the right spots as needed (with the luxury of determining need dynamically) is worth a premium. The fragmentation of TV audiences, universally referenced in digital signage pitches, is finally resonating as well. Mermigas observes:

“The ever-dwindling ratings and audience shares continue to be a drag on advertiser enthusiasm. More advertisers are feeling comfortable with more targeted, quantifiable ad placement online and a collective multimedia strategy that includes TV.”

Hmmmm. That sure is music to my ears, coming from someone who lives in traditional media. Ms. Mermigas quotes OMD’s CEO Alan Cohen from an interview in AdAge this week, "This situation has made us look at some alternatives that will give clients the ability to reach broad audiences in a different way." Somebody buy that man a drink! This is a tidal movement. While digital signage may be hidden behind words like “alternatives” and “multimedia”, we appear to be on the radar where it matters.

TV advertising has absorbed billions of dollars annually for decades. That industry is clearly undergoing fundamental changes, driven by advertisers’ desire and ability to target ever more efficiently. You can bet the TV networks will respond with better deals upfront, and probably punitive rates for high demand scatter spots. But the die seems to be cast, and advertisers and their media buyers are looking our way. Mermigas ends her post by saying, “…advertisers, agencies and media companies are embracing alternatives that will hold long after the recovery is underway.”

As digital signage networks position themselves to receive that embrace with quality offerings, standard metrics and tangible results, the last piece of the maturity puzzle will fall into place. When it does, things just won’t be the same, in a very good way.

Deployment agreements define the legal relationship between a supplier of self-service equipment and the owner of the site where the equipment is deployed. Deployment agreements are deceptively simple. After all, most people believe that it cannot be difficult to prepare an agreement to place a machine in a specific location. Furthermore, every equipment supplier uses some version of a deployment agreement and most suppliers have never had a problem with their agreement. However, on those occasions where a problem arises, the terms of the deployment agreement will define the legal responsibilities of the participants and problems arise more frequently than most people would believe.

Every deployment agreement should cover four basic areas. They are: (1) the business relationship between the parties; (2) the obligations, if any, of the supplier subsequent to deployment; (3) the presence of electronic transaction processing; and (4) the allocation of risk between the supplier and the owner of the site.

Initially, the deployment agreement should detail the business relationship between the parties. The agreement must spell out whether the equipment is being purchased, leased, or merely deployed at the site and the payment arrangements. Obviously, it is the financial terms that make the arrangement profitable for the parties. Of course, in cash purchase situations, the payment terms are fairly straight forward. However, in installment purchase, lease, and simple deployment situations, the financial terms are not always as carefully spelled out. Furthermore, in the case of small entity site owners, the identity of the entity's principals is determined and if possible, the principals provide suitable guarantees. There is nothing worse than trying to collect monies from an insolvent deployment site owner. If there is to be a division of revenue between the supplier and the site owner, the terms of such division must be carefully spelled out. This is especially true where the deployed equipment is owned by a third party who is paying the site owner to deploy the equipment at the site.

In a non-purchase situation, the term of the agreement must also be clearly thought out. I recently saw an agreement in which the term was "forever." Apparently, millions of years from now, the ATM machine will still be deployed at the site. The type of merchandise being dispensed, the nature of the area in which the machine is to be located, and the ownership of the site should contribute to the determination of the deployment term. There also should be consideration to circumstances under which deployed equipment can be moved before the end of the term. Occasionally, disputes arise when a site is closed for remodeling or the business being run at the site is changed (such as a drug store to a pool hall). This also is important where the neighborhood changes such as when the Lakers stopped playing at the forum in Inglewood.

Furthermore, many deployment agreements do not contain certain "boilerplate" provisions which are contained in most contracts. These include: (1) a choice of law provision which sets forth the state whose law will govern the interpretation of the agreement. The law of every state is not the same and many states have specific provisions applicable to deployment agreements. Also, in certain circumstances, the Uniform Commercial Code may apply and as adopted, the Code varies from state to state; (2) an entirety provision which states that the entire agreement between the parties is contained in the written agreement. This provision is designed to prevent one party from claiming that oral promises were made which are not contained in the agreement. Several years ago, a dispute arose relating to a CAT Scan Machine where the entirety provision was not included in the agreement. Its absence led to six years of litigation over claims that oral commitments had been made relating to the payment of the lease; (3) a choice of venue provision which sets forth the state in which any dispute between the parties under the agreement is to be resolved. An equipment supplier should pick a convenient state and county forum in order to avoid having potentially to defend suits in many different forums, including small forums where the supplier may be home-towned. Several years ago, I served as an expert in a dispute where a large merchant filed suit in his hometown in rural Colorado. At the trial, the judge admittedly ignored Colorado law in order to help the local resident merchant. Likewise, a decision should be made as to whether the prevailing party should be allowed to recover its attorney's fees in any such dispute. This should be determined based upon the relative economic strengths of the parties and who is likely to commence suit; and (4) a provision stating that the waiver of one breach shall not constitute a waiver of subsequent breaches.

Likewise, the agreement should set forth any specific requirements for the deployed equipment such as telephone or electrical requirements, any exclusivity requirement in connection with the deployed equipment, the times and hours that the access to the equipment should be available (in non-purchase situations), and the like.

Second, any post-deployment obligations of the supplier should be carefully spelled out. This relates to maintenance and repair of the equipment, stocking machine with cash or merchandise, and removing cash or merchandise. If such obligations exist, the responsibility of the site owner to cooperate with the supplier should also be spelled out. Finally, if the site owner is to pay for such services, the site owner's payment obligation must also be carefully spelled out.

Third, many self-service machines (including ATM machines) provide electronic transaction processing (credit card) services. Unfortunately, the deployment agreements generally do not deal with this issue. Electronic transaction processing is big business which generates substantial revenue in residuals to those involved. Generally, deployment agreements fail to spell out who is entitled to receive residual revenue, responsibility for chargebacks, processing rates, and the like. Processing is done by many different banks and different independent sales organizations. The level of customer service, processing rates, add-on fees, and the like varies from processor to processor. Many sites already have credit card processing relationships and they continue with that relationship for the site. Significant revenue can be earned by specifying an appropriate processing relationship in those situations where the deployed equipment is not owned directly by the merchant. Furthermore, if the obligations of the supplier to the site include maintenance or risk management, it is especially important that the processing relationship contains online monitoring capabilities. Also, the owner of the site must make certain that the processing relationship proceeds smoothly since any significant failure or chargeback history could cause the owner of the site to lose its own ability to process credit cards.

Fourth, risk allocation should be a significant issue in any deployment agreement, as follows:

1. Limitations on liability. Most agreements contain a disclaimer limiting the types of damages that can be collected in the event the equipment malfunctions or the equipment is not properly maintained. Such disclaimers normally limit damages to direct losses incurred and exclude lost profits, indirect damages, consequential damages, and the like. Such clauses also normally state that there are no warranties which are not included in the actual agreement. Such provisions can also operate to prevent litigation by limiting the amount and type of imaginative damages that a lawyer can concoct.

2. Damage to equipment and operating losses. The agreement should spell out who is responsible for damage to the equipment. This is especially relevant where the equipment is damaged by a site customer, by a fire or similar natural disaster, or abuse. Likewise, responsibility for operating losses due to vandals or other causes should be defined. Some years ago, an armored car company lost in excess of $70,000 collected on its rounds, including funds for stocking ATM machines. The agreement did not specify responsibility for the loss between the site which owned the machine and the supplier which performed maintenance services. When the funds could not be recovered from the armored car company, the machine supplier had to absorb the loss.

3. Products liability and injury claims. The ingenuity of the human race knows no bounds. No matter how carefully designed equipment, users will manage to catch their hand in the machine, cut themselves on the machine, have the item dispensed drop on them causing injury, or suffer some other misfortune. The deployment agreement should allocate responsibility for such claimed injuries. (See insurance below.)

Also, depending upon the item being dispensed, such items may cause injury to a purchaser. Such injuries run the gamut of a child cutting himself on a plush toy to a adult eating a bad piece of beef jerky. Under most state laws, both the site owner and the equipment supplier are deemed to be in the chain of distribution except in an outright purchase agreement. This means that both may be held responsible under the theory of strict liability. Depending on the products being dispensed, the agreement should specify who has primary responsibility for any such injury and make arrangements for appropriate insurance coverage.

4. Insurance. Relatively inexpensive insurance can be obtained to cover personal injury and products liability. Generally, personal injury claims are covered by existing insurance carried by the site owner. Adding the supplier to the insurance as an additional insured should be relatively simple. Likewise, where the equipment supplier provides post-deployment services, the supplier should have insurance covering same. Obviously, it is in the suppliers interest to makes its own coverage secondary to that of the site owner. As to products claims, the costs of such insurance will vary depending upon the product being dispensed. As with the insurance for personal injury, existing insurance may cover any such claims. This should be explored and resolved as part of the deployment agreement.

Danoo announced last week that it acquired IdeaCast, a provider of advertising in the rapidly expanding captive television category. As part of the deal, National CineMedia, LLC (NCM), operator of the largest digital cinema network in North America for cinema advertising, and Kleiner Perkins Caufield & Byers (KPCB), a venture capital firm, will each hold a minority interest in the new company.

This deal breaks new ground because, to date, National CineMedia has been the most profitable large-scale innovator in the U.S. Digital out-of-home (Digital OOH) sector. With this deal, NCM has found in Danoo a smaller, well-funded and innovative partner that can help the cinema-advertising giant expand outside of its very strong base inside movie multiplexes.

NCM has scale, growing revenues, a big market cap, and a strong sales force with six to seven years of experience successfully selling Digital OOH advertising in the U.S. market. According to the terms of the sale, both NCM and Danoo’s leading investor, the Silicon Valley-based venture-capital firm Kleiner Perkins Caufield & Byers (KPCB), will hold minority interests in the new combined company. Both the venture capital (VC) firm and Denver-based NCM will have seats on the merged company’s board of directors.  Mediaweek’s Katy Bachman reports that  “Conveniently, Danoo’s new New York City office will be across the hall from NCM.”  Danoo’s corporate office is located in San Francisco. IdeaCast is based in Chicago.

National CineMedia: Bringing cinema ads into mainstream advertising

During the last 6-7 years, NCM has leveraged digital-projection technology, satellite communications and the Internet to completely transform and rationalize the cinema advertising business in the USA. Prior to this digital transformation, cinema advertising was a stepchild in the U.S. advertising family. Now cinema advertising is growing rapidly, delivering a highly desirable leisure-time demographic to advertisers much more easily than was done with old-style movie-house advertising which was comprised of slide advertising and 60-second Coca-Cola ads on scratchy, 35mm reel-to-reel prints.
 
By leveraging these new digital technologies, NCM created a Digital out-of-home network that counts annual advertising revenues in the hundreds of millions of dollars.

For example, in its most recent quarter, NCM reported quarterly advertising revenue of $60.1 million, compared to $53.7 million in revenue for the comparable 1st quarter of 2008. NCM's national theater network includes approximately 16,800 screens in more than 1,325 theatres in 46 of the 50 states, reaching more than 660 million moviegoers in 2008. A publicly held company (NASDAQ), NCM has a market capitalization of $543 million. This market heft dwarfs the size of any other U.S. Digital OOH network.

For the overall U.S. digital-cinema industry (which includes NCM’s chief competitor, Screenvision) total advertising revenue reached more than $571 million during 2008, according to the Cinema Advertising Council (CAC). The CAC reported last month that total revenues from U.S. cinema advertising has grown an average of 21.5 percent per year since 2002, with 2008 revenues reaching a level that is almost triple that of 2002.

This means that in 2008, this $571 million in U.S. cinema-based advertising revenue was greater than the total ad revenue generated by all of the other U.S. screen-media networks at retail and out-of-home which operate outside the multiplexes.

Although for many years NCM has been seen by many industry observers as part of the emerging Digital OOH sector, up to now it has largely defined itself as a cinema-advertising firm. For example, although NCM was a founding member of the CAC in 2003, it has thus far declined to join the Out-of-Home Video Advertising Bureau (OVAB), the leading U.S. industry body which promotes Digital OOH as an advertising medium.  [Danoo is a member of OVAB.]
With NCM’s minority investment in the Danoo/IdeaCast merger, and its green light to cross-sell ads on both its network and the Danoo/IdeaCast networks, NCM is clearly stepping up its involvement with the larger Digital out-of-home or advertising-based “Digital Signage” media sector. This shift started two years ago, in June 2007 when NCM invested a few million dollars in IdeaCast. In May of this year, NCM announced in its Q1 2009 conference call that it had acquired 100 percent of IdeaCast’s secured debt.
 
During that May 12 call with investors and analyst, NCM’s chairman and president, CEO Kurt C. Hall, explained how the company hopes to leverage the larger Digital out-of-home industry into what he called a “new growth engine for NCM in the future.” In an interview with Mediaweek’s Katy Bachman published July 6, Hall added, “Cinema is ahead in the Digital OOH space, but clearly two to four years down the road, we’ll be looking to add growth. We see [NCM’s interest in merged Danoo/IdeaCast enterprise] as an incubation platform for NCM.”
 
National CineMedia grew out of Regal CineMedia, which was founded in 2002 as a subsidiary of Regal Entertainment Group, part of Denver billionaire Philip Anschutz’s vast holdings. Anschutz, with an estimated net worth of $8 billion, ranked 36th on Fortune Magazine’s 2008 list of the richest people in the USA.
 
Danoo CEO: “We’re getting to real scale.”

In the Mediaweek article cited above, it reports, “Aileen Lee, a partner with Kleiner Perkins [Danoo’s VC investor] who has served as CEO of Danoo for two years, will head up the combined company until a new CEO is named. Jason Brown, president of sales and marketing for IdeaCast, will manage sales for the combined company. ‘It’s an amazingly complementary fit,’” Mediaweek quotes Lee as saying. 
The article says that Danoo began discussions with NCM about one year ago. ‘We’re getting to real scale,’ Lee said.
 
That “scale,” as the Danoo CEO describes it, would include the following:

    * IdeaCast’s Health Club TV network which is installed in approximately1,000 health clubs across more than 100 local markets, 
    * IdeaCast’s Airline TV network, which in-flight airline passengers travelling on JetBlue, Frontier and Continental airlines can view on 7,800 seatbacks,
    * Danoo’s City Network, which is currently located in about 850 coffeehouses in Boston, New York City, Chicago, Los Angeles and the San Francisco Bay area, and
    * Danoo’s new Traveler network, which it is currently rolling out to newsstands and gift shops at about 25 major U.S. airports such as Atlanta, Los Angeles and San Francisco.
    * Danoo will have what the company calls “synergies with NCM’s network in terms of technical infrastructure, operational support and sales staff.

NCM scale + Danoo innovation + VC cash + smartphone interactivity = a game changer

To understand how and why this deal is a watershed, it first must be pointed out that Danoo, with less than 1,000 screens prior to this deal, still is not a particularly large network. Currently many Digital OOH networks in the USA and around the world beam content to audiences that are much bigger than Danoo’s reach.

However, when one takes a closer look at Danoo – its innovative use of user-contributed and interactive content, its 30-person team (both technical and creative) based in China, along with its very deep pockets and management expertise from its Silicon Valley-based VC firm – it’s clear that the Danoo/NCM collaboration is an emerging game-changer for the U.S. Digital out-of-home media sector. Consider the following about National CineMedia and Danoo:

Last year National CineMedia (NCM) created a new consumer website, www.ncm.com, which engages movie-goers about the movies shown in theaters where NCM offers its “First Look” content block of programming and advertising that is shown before the start of the feature films.  This new website includes a list of movie show times, a chance to view special interviews and features about current movie releases, and a social-media component a la Facebook.com that allows movie fans to interact and socialize.

On July 3, NCM launched an interactive polling promotion called “r8 it” where movie-goers are invited to use their mobile phones to rate some aspect of the movie that they just viewed. This invitation to “r8 it” is issued during NCM’s First Look pre-feature programming, on digital screens in the lobbies and also via print handouts which movie-goers receive at the box office when they buy their movie tickets. The results of the “r8 it” ratings are posted on the new NCM website and on a new “r8 it” smart-phone application. Winners receive free movie tickets for one year.

More than any other Digital out-of-home network operator, NCM has developed significant expertise in simulcasting concerts and entertainment events, as well as in event management and sampling. As Digital OOH networks start to take more seriously the notion of “enhancing the customer experience,” these extra competencies that NCM brings to the table should play a more important role in the Digital OOH medium.
 
Although many Digital out-of-home media companies talk a good game about creating localized content, Danoo actually employs local editors who are based in the cities where the network is deployed (San Francisco/Oakland, Los Angeles, Chicago, NYC and Boston). According to Danoo CEO Aileen Lee, these editors “curate” local news, events and culture, harvesting local information to publish on the Danoo screens. Lee said that these local editors compile this information from user-generated content and via direct data feeds from local published sources which are cited on the Danoo screens.
 
Danoo leads the Digital OOH sector in attracting user-generated content.  This content, which Lee calls “user-contributed content,” is now ubiquitous on the web but still rare in Digital OOH. Danoo recruits these contributions by inviting its local audiences to post photos, videos and information about local events via the www.danoo.com/participate tab on the Danoo home page. According to the Danoo web site, contributions to its “Photo Gallery” are published in five-photo sets. User-contributed videos which “work without sound” are limited to no more than two minutes in length. Danoo says that up to 25 percent of its on-screen content in what it calls “relevant categories” is user-contributed.

Danoo – perhaps more than any other Digital OOH network serving U.S. audiences – is leveraging talent outside the USA. This talent based in Beijing, China – both technical and creative – is helping Danoo control costs and produce quality content with the localization and in the volume that the medium requires. Danoo employs 30 staff people in Beijing. According to Aileen Lee, five of those people are full-time creative people, working largely with 2D, FLASH and motion graphics. Three people in Beijing are program managers, with the remaining staff doing software development work (Danoo’s network is controlled by its own home-grown software). In order to facilitate communication between the Beijing-based staff and the San Francisco-based staff, the Danoo CEO said that at least three people from Danoo’s technical/creative team on both sides of the Pacific are bilingual and have experience living in both cultures. Lee herself is an Asian American who spent time at Fudan University in Shanghai.

Danoo’s venture-capital backer, Kleiner Perkins, has a very strong track record in bankrolling successful companies going back more than 35 years. According to Lee, the VC firm vetted many investment proposals submitted by advertising-based Digital out-of-home networks before it decided to give its imprimatur to Danoo. Since its founding in 1972, Kleiner Perkins has provided early-stage financing and management assistance for well-known firms such as Amazon.com, AOL, Compaq, Drugstore.com, Genentech, Google, Lotus Development, Macromedia, Sun Microsystems Verifone and Zagat. 

Today, Kleiner Perkins (KPCB) is leading the financial sector in the funding of Apple iPhone-related technologies which potentially could speed the development of interactive features to enhance Digital out-of-home networks.  This year Danoo announced some significant initiatives -- which Aileen Lee said are producing “great results” – to encourage Danoo viewers to use their smartphones to interact with and download content from the Danoo screens. Recently KCPB created the “KPCB iFund,” which the VC firm calls “a $100M investment initiative that will fund market-changing ideas and products that extend the revolutionary new iPhone and iPod touch platform.” According to the venture-capital firm, the new $100M investment fund will target “location-based services, social networking, mCommerce (including advertising and payments), communication, and entertainment,” which sounds like a snug fit for Danoo.

Danoo does not express much interest in developing networks where the viewing experience is more ambient (for example inside clothing stores). According to Aileen Lee, Danoo likes venues such as airports, coffee shops, movie theaters, and other places because viewers are clearly captive, and thus “have the ability to engage” with screen networks. Danoo, Lee said, prefers to serve what it calls a “consistent and high-quality audience” which targets “hard-to-reach mobile, urban professionals and frequent fliers.”

For any corporate merger, the devil often emerges in the difficult details of corporate governance, geography and cultural differences. This new merger, too, will struggle with those issues. It could fail like many other mergers that we’ve seen in the media business (think AOL and Time Warner). However, because of the money, talent and experience that Danoo and National CineMedia bring to the table, this deal among Danoo, IdeaCast and NCM should be one of the best seen to date in the U.S. Digital out-of-home media sector. This new collaboration may spur the entire Digital OOH sector to innovate and serve its audiences and advertisers in some very exciting new ways.
 

Bill Collins is principal of DecisionPoint Media Insights (www.decisionpointmedia.com). DecisionPoint produces custom audience research for Digital Signage networks. It also provides B2B go-to-market strategy consulting for companies that market B2B products and  services to the Digital Signage industry. Bill Collins can be reached at .

Danoo announced last week that it acquired IdeaCast, a provider of advertising in the rapidly expanding captive television category. As part of the deal, National CineMedia, LLC (NCM), operator of the largest digital cinema network in North America for cinema advertising, and Kleiner Perkins Caufield & Byers (KPCB), a venture capital firm, will each hold a minority interest in the new company.

This deal breaks new ground because, to date, National CineMedia has been the most profitable large-scale innovator in the U.S. Digital out-of-home (Digital OOH) sector. With this deal, NCM has found in Danoo a smaller, well-funded and innovative partner that can help the cinema-advertising giant expand outside of its very strong base inside movie multiplexes.

NCM has scale, growing revenues, a big market cap, and a strong sales force with six to seven years of experience successfully selling Digital OOH advertising in the U.S. market. According to the terms of the sale, both NCM and Danoo’s leading investor, the Silicon Valley-based venture-capital firm Kleiner Perkins Caufield & Byers (KPCB), will hold minority interests in the new combined company. Both the venture capital (VC) firm and Denver-based NCM will have seats on the merged company’s board of directors.  Mediaweek’s Katy Bachman reports that  “Conveniently, Danoo’s new New York City office will be across the hall from NCM.”  Danoo’s corporate office is located in San Francisco. IdeaCast is based in Chicago.

National CineMedia: Bringing cinema ads into mainstream advertising

For example, in its most recent quarter, NCM reported quarterly advertising revenue of $60.1 million, compared to $53.7 million in revenue for the comparable 1st quarter of 2008. NCM's national theater network includes approximately 16,800 screens in more than 1,325 theatres in 46 of the 50 states, reaching more than 660 million moviegoers in 2008. A publicly held company (NASDAQ), NCM has a market capitalization of $543 million. This market heft dwarfs the size of any other U.S. Digital OOH network.

For the overall U.S. digital-cinema industry (which includes NCM’s chief competitor, Screenvision) total advertising revenue reached more than $571 million during 2008, according to the Cinema Advertising Council (CAC). The CAC reported last month that total revenues from U.S. cinema advertising has grown an average of 21.5 percent per year since 2002, with 2008 revenues reaching a level that is almost triple that of 2002.

This means that in 2008, this $571 million in U.S. cinema-based advertising revenue was greater than the total ad revenue generated by all of the other U.S. screen-media networks at retail and out-of-home which operate outside the multiplexes.

Although for many years NCM has been seen by many industry observers as part of the emerging Digital OOH sector, up to now it has largely defined itself as a cinema-advertising firm. For example, although NCM was a founding member of the CAC in 2003, it has thus far declined to join the Out-of-Home Video Advertising Bureau (OVAB), the leading U.S. industry body which promotes Digital OOH as an advertising medium.  [Danoo is a member of OVAB.]

In the Mediaweek article cited above, it reports, “Aileen Lee, a partner with Kleiner Perkins [Danoo’s VC investor] who has served as CEO of Danoo for two years, will head up the combined company until a new CEO is named. Jason Brown, president of sales and marketing for IdeaCast, will manage sales for the combined company. ‘It’s an amazingly complementary fit,’” Mediaweek quotes Lee as saying.  

• IdeaCast’s Health Club TV network which is installed in approximately1,000 health clubs across more than 100 local markets,  
• IdeaCast’s Airline TV network, which in-flight airline passengers travelling on JetBlue, Frontier and Continental airlines can view on 7,800 seatbacks,
• Danoo’s City Network, which is currently located in about 850 coffeehouses in Boston, New York City, Chicago, Los Angeles and the San Francisco Bay area, and
• Danoo’s new Traveler network, which it is currently rolling out to newsstands and gift shops at about 25 major U.S. airports such as Atlanta, Los Angeles and San Francisco. 
• Danoo will have what the company calls “synergies with NCM’s network in terms of technical infrastructure, operational support and sales staff.

To understand how and why this deal is a watershed, it first must be pointed out that Danoo, with less than 1,000 screens prior to this deal, still is not a particularly large network. Currently many Digital OOH networks in the USA and around the world beam content to audiences that are much bigger than Danoo’s reach.

However, when one takes a closer look at Danoo – its innovative use of user-contributed and interactive content, its 30-person team (both technical and creative) based in China, along with its very deep pockets and management expertise from its Silicon Valley-based VC firm – it’s clear that the Danoo/NCM collaboration is an emerging game-changer for the U.S. Digital out-of-home media sector. Consider the following about National CineMedia and Danoo:

Last year National CineMedia (NCM) created a new consumer website, www.ncm.com, which engages movie-goers about the movies shown in theaters where NCM offers its “First Look” content block of programming and advertising that is shown before the start of the feature films.  This new website includes a list of movie show times, a chance to view special interviews and features about current movie releases, and a social-media component a la Facebook.com that allows movie fans to interact and socialize.

On July 3, NCM launched an interactive polling promotion called “r8 it” where movie-goers are invited to use their mobile phones to rate some aspect of the movie that they just viewed. This invitation to “r8 it” is issued during NCM’s First Look pre-feature programming, on digital screens in the lobbies and also via print handouts which movie-goers receive at the box office when they buy their movie tickets. The results of the “r8 it” ratings are posted on the new NCM website and on a new “r8 it” smart-phone application. Winners receive free movie tickets for one year.

More than any other Digital out-of-home network operator, NCM has developed significant expertise in simulcasting concerts and entertainment events, as well as in event management and sampling. As Digital OOH networks start to take more seriously the notion of “enhancing the customer experience,” these extra competencies that NCM brings to the table should play a more important role in the Digital OOH medium.

Although many Digital out-of-home media companies talk a good game about creating localized content, Danoo actually employs local editors who are based in the cities where the network is deployed (San Francisco/Oakland, Los Angeles, Chicago, NYC and Boston). According to Danoo CEO Aileen Lee, these editors “curate” local news, events and culture, harvesting local information to publish on the Danoo screens. Lee said that these local editors compile this information from user-generated content and via direct data feeds from local published sources which are cited on the Danoo screens.

Danoo leads the Digital OOH sector in attracting user-generated content.  This content, which Lee calls “user-contributed content,” is now ubiquitous on the web but still rare in Digital OOH. Danoo recruits these contributions by inviting its local audiences to post photos, videos and information about local events via the www.danoo.com/participate tab on the Danoo home page. According to the Danoo web site, contributions to its “Photo Gallery” are published in five-photo sets. User-contributed videos which “work without sound” are limited to no more than two minutes in length. Danoo says that up to 25 percent of its on-screen content in what it calls “relevant categories” is user-contributed.

Danoo – perhaps more than any other Digital OOH network serving U.S. audiences – is leveraging talent outside the USA. This talent based in Beijing, China – both technical and creative – is helping Danoo control costs and produce quality content with the localization and in the volume that the medium requires. Danoo employs 30 staff people in Beijing. According to Aileen Lee, five of those people are full-time creative people, working largely with 2D, FLASH and motion graphics. Three people in Beijing are program managers, with the remaining staff doing software development work (Danoo’s network is controlled by its own home-grown software). In order to facilitate communication between the Beijing-based staff and the San Francisco-based staff, the Danoo CEO said that at least three people from Danoo’s technical/creative team on both sides of the Pacific are bilingual and have experience living in both cultures. Lee herself is an Asian American who spent time at Fudan University in Shanghai.

Danoo’s venture-capital backer, Kleiner Perkins, has a very strong track record in bankrolling successful companies going back more than 35 years. According to Lee, the VC firm vetted many investment proposals submitted by advertising-based Digital out-of-home networks before it decided to give its imprimatur to Danoo. Since its founding in 1972, Kleiner Perkins has provided early-stage financing and management assistance for well-known firms such as Amazon.com, AOL, Compaq, Drugstore.com, Genentech, Google, Lotus Development, Macromedia, Sun Microsystems Verifone and Zagat.  

Today, Kleiner Perkins (KPCB) is leading the financial sector in the funding of Apple iPhone-related technologies which potentially could speed the development of interactive features to enhance Digital out-of-home networks.  This year Danoo announced some significant initiatives -- which Aileen Lee said are producing “great results” – to encourage Danoo viewers to use their smartphones to interact with and download content from the Danoo screens. Recently KCPB created the “KPCB iFund,” which the VC firm calls “a $100M investment initiative that will fund market-changing ideas and products that extend the revolutionary new iPhone and iPod touch platform.” According to the venture-capital firm, the new $100M investment fund will target “location-based services, social networking, mCommerce (including advertising and payments), communication, and entertainment,” which sounds like a snug fit for Danoo.

Danoo does not express much interest in developing networks where the viewing experience is more ambient (for example inside clothing stores). According to Aileen Lee, Danoo likes venues such as airports, coffee shops, movie theaters, and other places because viewers are clearly captive, and thus “have the ability to engage” with screen networks. Danoo, Lee said, prefers to serve what it calls a “consistent and high-quality audience” which targets “hard-to-reach mobile, urban professionals and frequent fliers.”

Bill Collins is principal of DecisionPoint Media Insights of Cincinnati, Ohio, USA. The company produces custom research and consulting on digital media networks that are deployed at retail and out of home.