The following is a story that is not meant to bash a pioneer in our industry, but to offer a lesson on what organizations go through when implementing a digital signage network. Webpavement prides itself in learning and gaining knowledge from now defunct networks such as NGN.
Next Generation Networks (a.k.a. ebillboards or NGN) was a company that was the most hyped digital signage company around the years 1999 through late 2001. NGN was a well-funded company. NGN had raised and burned through $96 million all this by the time they were poised to trigger the IPO. NGN also received about $30 million cash in exchange for a 30% equity position in the company. With plans to go public and UTX as a partner - who happens to own Otis elevators - the future looked bright. NGN also had excellent content partner relationships that captured the main requirements for digital signage for displaying news, weather, sports and entertainment. NGN even capitalized on coveted political advertising budgets.
We are not sure exactly how many screens they had in the field, but the number was realistically between 7,000 - 8,000 flat screen LCD's and CRT's. Many VAR's, Digital Signage Vendors and Analysts in our industry ponder and reference NGN when talking about the importance of being careful and diligent when rolling out digital signage in convenience stores (c-stores) and other retail locations.
So what went wrong? The root of the problem was (1) the high capital expenditures and operational costs and (2) the 7-Eleven digital signage network deal. We'll comment on each of these items briefly so you can get a high-level overview of the importance to work with a knowledgeable digital signage vendor with products that can save you money on operations and total cost of ownership.
High capital expenditures and operational costs: you can run the math yourself, but let us give you an idea on a couple of the components. NGN utilized various sized LCD and CRT displays. Assuming there were 5000 displays @ $500/display = $2.5 million. Assume 5000 computers @ $1000/computer = $5 million. Assume 5000 phone lines - yes they utilized phone lines with direct dialing because VPN technology was not mature and DSL and cable broadband was not available. The telephone expenditures varied from location to location, but they basically dialed out from the Minneapolis datacenter to each location to deliver new content in a push model. Some phone bills were in the thousands per month (no joke) as a result of phone line abuse. We'll assume 5000 phone lines @ 100/month = $6 million/year. NGN had approximately 150 employees. Assume 100 employees @ $4000/month = $4.8 million a year. As you can see, the expense for running a network of this nature was an expensive proposition from 1999 - 2001.
7-Eleven Deal: NGN was desperate to get into the convenience store business and rushed into a contract with 7-Eleven. 7-Eleven is a leader in the c-store space and NGN wanted a big client to attract advertisers with a broad reach that 7-Eleven encompassed. The deal was for NGN to install displays in every store within 3-4 years. A penalty clause was included in the contract where NGN would pay 7-Eleven millions if it didnt meet the rollout schedule. An un-named source tells Webpavement that NGN was behind schedule and DID pay millions in penalties to 7-Eleven.
Next we move into the content strategy. The network basis was completely 3rd party advertiser funded and all advertising revenue would go to NGN. 7-Eleven was entitled to 2 insertions in the ad loop and advertised slurpies and other items on the screens, but NGN received no compensation for this. In hindsite, NGN realized they needed to include 7-Eleven in the revenue model. 7-Eleven was not interested in simply re-directing co-op advertising dollars. This is still a current issue in today's in-store digital media network environment, but we believe there are strategies that can be employed to bypass this issue.
Securing displays from vandalism and theft is important in the c-store environment. NGN experienced theft and vandalism. It is unknown the number of displays that were stolen or vandalized, but the number was significant. An example of this resulted in NGN displays taking gunfire from robbers because they thought the displays were watching them. We could plug a Minority report metaphor here, but think it's over used.
NGN ran into other issues with their ad sales model. You see, NGN sold advertisements themselves and didn't succeed in developing other channels for 3rd party commissioned media buying agencies. The main source for interested advertisers were local mom and pop shops that were in a nearby location of the 7-Eleven. NGN sold to these advertisers in the beginning from their 12 regional sales offices, but were losing money on these tiny media buys. Hungry for greater revenue for the sales labor expended, it was determined by executives at NGN that they would just go after the big advertisers. NGN decided they would not support mom and pop advertisers and the sales team was chartered to secure a few contracts with national advertisers (i.e. Coke, Pepsi etc) at a fee that would build the ROI needed to maintain NGN. We believe you can have a mix of local and national advertisers with the proper planning and partnerships.
Fast forward to November 2000. The roaring 90's were over and the IPO was withdrawn due to incredibly bad stock market timing and the poor overall health of the technology sector. The much hoped for $115 million IPO was nothing more than a fast fading dream. Without the IPO dollars, NGN was forced to seek out other sources of funding. Eventually, an additional $30 million in private financing was promised from Caisse du Depot (CDP). If CDP had followed through with all the promised installments, the total funding committed to NGN would have hit $126 million. Instead, CDP pulled the plug in October 2001, rather than following through with the full amount.
NGN could not maintain their business model and the company liquidated. Regal Cinemedia purchased all of the assets and the proprietary technology from NGN. This is the end of the story. FYI - NGN had proprietary technology that was ahead of its time for the late 90's. The technology met the requirements back then, but probably couldn't compete with the likes of Webpavement and other digital signage vendors that survived the market and are still around today.
We are interested in receiving a copy of Jeff Porter of Scala's workshop on the Top 10 Best (and Worst) Digital Signage Deployments. Jeff will be talking about these at the digital retailing expo.