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An Open Metric For Pricing Digital Signage Ads
1. An open metric for pricing digital signage ads: vJive's SCQ | WireSpring Page 1 of 5
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An open metric for pricing digital signage ads: vJive's SCQ
Author: Bill Gerba on 2008-01-21 08:40:41
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 quot;big corporatequot; 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 quot;opportunities to seequot; -- 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 quot;qualityquot; 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 quot;A,quot; with less desirable scores translating to grades of quot;Bquot; through quot;E.quot; 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
SCQ D C A
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:
http://www.wirespring.com/dynamic_digital_signage_and_interactive_kiosks_journal/arti... 28-Feb-08
2. An open metric for pricing digital signage ads: vJive's SCQ | WireSpring Page 2 of 5
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 quot;standardquot; 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!
Comments (7)
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2008-01-23 Jeremy writes:
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.
2008-01-23 Bill Gerba writes:
http://www.wirespring.com/dynamic_digital_signage_and_interactive_kiosks_journal/arti... 28-Feb-08
3. An open metric for pricing digital signage ads: vJive's SCQ | WireSpring Page 3 of 5
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.
2008-01-24 Matthew Olivieri writes:
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
rise…Obviously 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 VAR’s?
How big is the Market for Digital Signage Resellers like SeeSaw
Networks and RippleTV? $20M, $50M, $100M?
Thanks,
Matthew
2008-01-26 Bill Gerba writes:
Matthew,
I'm pretty sure that none of the companies you mentioned will ever
think of themselves as quot;VARs.quot; 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 quot;bigquot; 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.
2008-01-27 Gil writes:
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?
http://www.wirespring.com/dynamic_digital_signage_and_interactive_kiosks_journal/arti... 28-Feb-08
