International Display Advertising Gets Ready For Emerging Markets With South Africa Entry

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With the exponential rise of mobile devices over the past few years, digital advertising has become an ever-expanding frontier for the marketing industry.

Consider how much attention is given to mobile ad dollars when tech companies such as Google (GOOG) and Facebook (FB) report earnings. The latter in particular just reported on Wednesday that 41 percent of its advertising revenue came from mobile during the second quarter, a significant increase from the first quarter’s 31 percent, and quite impressive considering that the company didn’t make any mobile ad revenue to speak of in 2012.

But social media and internet companies, with all of the app-sales, click-throughs, and data mining involved in creating revenue streams from advertising, are not the only ones who have the opportunity to monetize the increasing use of mobile devices and the tremendous growth in spending that companies and marketers have poured into getting their message out to consumers.

International Display Advertising, Inc. (IDAD) is just such a company. Billing itself as the first “Tabletop Based Digital Advertising Network,” the company has developed a scalable model for using digital media and mobile technology to reach consumers at drinking and dining establishments, who constitute a large and relatively untapped market.

Currently, “out-of-home” advertising, meaning any sort advertising that will be seen in public places, such as billboards, is an industry whose worth is estimated at nearly $10 billion.

Last we spoke with company CEO David Hazzard, he gave us the basics of how table-top advertising works, and told us about why International Display Advertising is uniquely poised to capitalize on this niche market. It has been nearly three months since then, however, and several key developments are in the works that paint a more precise, and persuasive, picture of the company’s future. Equities.com had the pleasure of catching up Mr. Hazzard once more to get the details.

EQ: Just to remind our readers, could you provide us with a brief overview of International Display Advertising and its operations?

Hazzard: International Display Points Advertising is the international research and marketing partner for the Display Points Network system. IDAD vets and recruits various countries or regions to deploy Display Points’ Networks. The company’s primary function is to go out and make sure that each of the component parts of Display Points will be able to operate at full capacity at a given location; a sort of a vetting process. The second step is to make sure that there is infrastructure in place that can support the Display Points network, and also that there’s an ad-base that can support the network in a given country.

For instance, we just signed a Letter Of Intent with a group out of South Africa. That involved making sure that they were qualified, and based on the vetting process we felt that they would be a good partner in that country. They have the necessary ties as well as the advertising space, which is crucial because this is a network that has advertising on it, and our revenue is driven through advertising. We need to make sure that advertising rates are substantial, that there are enough digital-out-of-home (DOOH) revenues that can be generated. We assess all aspects of the operation, from warehousing to installation, in order to make sure that the entire network will be able to operate efficiently, and that’s the function that IDAD performs for Display Points.

EQ: That pre-empted the question I wanted to ask you about the Letter Of Intent with Bamboo Beat Media, which is a digital signage company based in Durban. I was hoping you could tell us a little bit more about the company, what it does, what its target markets are for instance, and what sort of work will you be doing with them?

Hazzard: Bamboo Beat presently operates a number of digital signage networks throughout South Africa. They operate a university network of displays located in bookstores and student centers; they also have digital networks in retail centers, as well as a few informational services arrangements. Once all the necessary groundwork has been done at that level, IDAD hands the ball off to Display Points, who then begins operating the network jointly with Bamboo Beat.

EQ: They work mainly in bars, restaurants, and hospitality in general?

Hazzard: Correct. Presently, we are focusing on the bar and restaurant market, but we do have the ability to go into other forms of hospitality such as hotels, stadiums, and special events. Initially, because of established dwell times of customers it’s simpler to deploy Display Points in bars and restaurants, and as the network grows we expand into some of the other areas.

EQ: Is the anything in particular about South Africa that makes it an ideal country for this?

Hazzard: South Africa was attractive for a number of “underwriting and vetting” reasons.  We are currently negotiating with four other larger countries. Our goal is to launch Display Points in 5 countries by year-end 2014, so we felt that South Africa was a little bit more manageable. Plus, we have background with Bamboo Beat, who has some of the necessary advertising connections on the ground.

EQ: In a press release back in May, the company said it had selected Canada and Mexico for the first rollout of the international marketing plan. Are there any developments in those countries that you could tell us about?

Hazzard: Unfortunately, there’s nothing that I can tell you about right now, because everything is still NDA-restricted, and neither party can discuss specifics. But we’re still in ongoing negotiations with groups in Canada, Mexico, and the UK at this time. We are also in the very early stages of talking to another group in Brazil, though I’m not sure if that will happen in 2013.

EQ: That’s very exciting. The emerging markets hold a lot of potential, given the phenomenon of a growing middle class, and the kind of opportunities that brings with it.

Hazzard: Exactly, and it’s natural for us. We’re finding that a lot of these emerging markets are very receptive to new technologies. They like the tech stuff. We found in Mexico that they’re very, very tech savvy, as far as understanding how all of it works.

EQ: Given the ubiquity of restaurants, bars and hotels, throughout the world really, but especially in emerging market countries, it looks like the sort of niche market in which International Display Advertising operates could end up being quite a large niche market.

Hazzard: Exactly. And there are different components of Display Points that are very attractive. It’s a green technology that eliminates quite a bit of paper. For each 1,000 bar-restaurants in the US, it roughly saves about 3,200 trees a year, so imagine what that number would be if we were in 50,000 bar-restaurants across the world, the number of trees that we would save in that year alone.

The venues really like this because it helps to streamline a lot of the different programs they can do with their customers. Customer loyalty programs, for instance, can be run off of these screens right at the table. You don’t have to have this inconvenience of going back and typing in your name. The other thing that we’re getting a lot of interest from is Near-Field Communications, and again, this is where the international market seems to be a little savvier than we are here in the US. An NFC-enabled smartphone can actually interact with our table screens. Advertisers can push content to smartphones, smartphones can communicate back to advertisers, and they can interact with the venues via their smartphones. It’s pretty interesting how receptive these groups have been, especially in the UK, where we’ve found they’re very up on Near-Field Communication.

EQ: That is very interesting, so you really are on the cusp, at least one of the many cusps, of what is going on in mobile, which is a market that seems like it can and will grow in unpredictable directions.

Hazzard: We see this as almost a hybrid of a lot of applications that you see out there. It’s not just digital out of home advertising, it’s not on-premise marketing and it is not pure mobile marketing. We like to think of it as a consolidation of them all into a synchronized platform that can spider out in a number of different directions from the table-top. The trick is getting it as granular as you possibly can, and that’s the whole magic of Display Points-- you’re one-on-one with that particular consumer and we just create a path to reach them.

Dwell-time is on average anywhere from 45 to 60 minutes, where you’ve got someone sitting at that table. And we’re still working on it because for the marketing agencies out there, this is something that is completely different. We find ourselves having to hold hands quite a bit with them in developing these different programs. We do a lot of one-on-one work with restaurant chains, because they just don’t understand the full extent of what they can do with the technology.

EQ: In other words, by getting into a niche market like this, you’re actually also sort of creating it at the same time, in your own image as it were, and that sounds very promising.

Hazzard: Exactly.

EQ: What should investors be looking out for over the next six to 12 months?

Hazzard: We can’t set up in every bar or restaurant instantly, so there’s a staged growth in each one of these markets. In South Africa, within the first calendar year we would like to at least have 1,000 locations. They’ve already targeted 750 locations, without even having to go out there and look for them. So we already have two chains that are very interested, and we’d like to complete the build-out in within 3 years.

Again, this will be lot easier than what we would encounter in the UK, where there might be 20,000 potential different restaurant sites Display Points could possibly go into. In that case, it may take us 4 to 5 years to complete the UK, but either way it will be a staged growth as we continue to add markets. The whole idea is to saturate a given market within a four year period. That’s our goal.

In terms of revenue, over a five year period IDAD is looking at $18 million from South Africa. We get a percentage of the over-ride that Display Points makes for operating the network. Display Points charges a certain percentage of ad revenue for the turn-key solution, and IDAD receives a percentage of that Display Points revenue.

There will be some interesting announcements over the next two or three weeks domestically, with the domestic group Display Points that are going to have a ripple effect on other countries. These countries tend to follow the US lead when it comes to this type of platform. What works in the US, people like to try in other areas, so not far down the road there will be some important Display Points news. The group that we are working with in the UK is affiliated with an extremely large advertising group, and they like everything that they’ve seen on our end and that should make for some pretty good PR for International Display Advertising.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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