Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
"Going digital" once meant the networked desktop. Today, going digital means something much more. Smartphones, tablets, large flat screens -- all of these are signs of the digital age, no doubt. But what about those digital signs? And what do these mean for the investor?
As it turns out, over the last 15 years a subsector has been brewing that marries content and display on a large scale. According to Markets and Markets, the global digital signage sector is anticipated to reach $13.2 billion in the next two years, equivalent to an estimated CAGR increase of 27.29% from 2011 to 2016. Investors who are looking for global expansion will note that while North American and Europe lead in digital signage investment, the No. 1 and 2 spots are likely to switch as APAC, led by China and India, are projected to takeover. Africa and Arab countries are also growth markets that will continue the global expansion of digital-based signage.
To find the best companies in the sector, investors should seek out firms that invest in and leverage what the sector refers to as "programmatic buying platforms." Programmatic buying platforms are data-driven displays of advertising that provide adaptable content based on users' selections and digital paths, such as: web, mobile, email, and so forth. In short, programmatic buying platforms are coming to a digital sign near you. Translated to investor dollar speak: Anticipated growth represents $17 billion, or 83%, of American display-related digital media spending by 2017, according to Magna Global.
To keep up with the global demand for digital signage, a range of smaller companies, along with large names like Sony (NYSE:SNE) and Cisco (NASDAQ:CSCO), are focused on the customer experience. Such companies include ComQi, which has a foothold in a range of brands, including Carrefour and Credit Lyonnais (in France), H&M/Weekday, Six Flags, AT&T, McDonald's and The Premier League (in the U.K.), CinemaxX (in Germany), and Toys 'R Us (in China).
For anyone who has viewed the digital advertising in restaurants, the partnership between Scala and Hughes Network Systems may very well be on display. Partnerships indeed are key in this sector. C-nario Ltd., which serves retail, corporate, media, education, transportation, healthcare, arts and design, sports, hospitality and accommodations, and entertainment markets; banks and financial institutions; and advertising, government, and public sectors in North America, the Middle East, Europe, Asia, and Africa, has developed strategic partnerships with BlueFox, JCDecaux, Philips, Mitsubishi Digital Electronics America, Inc., T-Systems, TruMedia and others. Meanwhile, late last year and earlier this year, Harris Broadcast announced that company's definitive agreement to purchase Imagine Communications.
As in all sectors, for smaller specialized companies, top-line growth is the imperative. So what smart choice does the investor have? When it comes to digital signage and interactive platform, look for companies that drive customer content. One such firm is Wireless Ronin Technologies (RNIN). RNIN provides its enterprise-based clientele with a software as a solution (SAAS) over wireless for a range of media solutions. With everything from dynamic digital signage, mobile outreach, and the latest in interactive kiosk and social media content, RNIN has helped define the latest in displaying and distributing digital marketing content and messaging.
The company has amassed a marque list of customers for which it flexes its software prowess. Since it first incorporated in March 2000, Wireless Ronin Technologies has helped customers such as Charles Schwab (NYSE:SCHW), Thomson Reuters (NYSE:TRI), Macy's Department Stores (NYSE:M), Staples (NASDAQ:SPLS), Aramark (NYSE:ARMK), Denny's (NASDAQ:DENN), KFC (NYSE:YUM), Nissan (OTCPK:NSANY), Chrysler (FIATY), Ford (NYSE:F), U.S. Bancorp (NYSE:USB), and Indian Motor Cycles (NYSE:PII).
Although the company has an impressive book, we caution investors that the stock has traded between $0.30 and $2.33 and has low volume of 14,499 so far this year. For now, RNIN's beta is .88. But all that could change as new agreements are underway and the sector continues to expand. Companies that lean heavily on RNIN digital display technologies include dealerships, both motorcycles and auto, and for anyone that has driven past or strolled the showroom floor that will not come as a surprise. For instance, there's Indian Motorcycles, which has not only been revived by Polaris but is blowing past the completion in sales with last year's Q4 customer purchases doubling to $68.8 million. Indeed, Polaris has set its sights on selling $750 million worth of bikes in seven years in markets such as Australia, Canada, China, France, Germany, India and New Zealand.
To drive the Indian Motorcycle sale's experience, Wireless Ronin has drawn on its expertise of over 20 years in enhanced showroom marketing that includes dealerships in both Canada and the U.S. for Chrysler, Fiat, Ford, and Nissan. As testament, to achieve the full customer digital experience, Indian Motorcycle called on RNIN to build the digital assets over the RoninCast software wireless solution. With highly targeted audiences the need to turnkey solutions looms large. Services provided include: hardware equipment, software specialization and training, digital content development, 24/7 technical support, implementation and system maintenance.
When cruising the showroom floor, customers pull up to 46" screens with independent streaming video that includes weather and social media. A tablet, from which media content is selected, helps drive the customer-selected, interactive bike-specific information that is digitally displayed. The showroom, or Media Hearth, content is an extension of the digital footprint that complements the Indian Motorcycle customer's online web experience.
A state-of-the-art 21st century showroom, however, is not just for show, as anyone in the digital marketing sector will point out. What is happening across dealerships of all sizes and stripes is a deep dive into customer choices, interests and demographics. Wireless Ronin Technologies' interactive systems are designed to capture just such information, while at the same time helping to keep traditional messaging focused and consistent across brands. What may surprise investors, but dealers and other digital marketers know, is that traditional marketing, such as billboards outside auto dealerships, which have gone electronic -- thanks to firms like RNIN -- actually represent a cost savings.
Dealerships that advertise digitally have discovered that traditional marketing channels -- newspaper, radio and T.V ($3.47, $13.29, and $22.61, respectively) -- do not generate the same cost per ad, per visit. Since digital advertising means that the advertiser is less reliant on traditional forms of marketing (as little as $0.74), once in showroom targeted marketing can and does take place.
Capitalizing on the company's strengths has led to a recent partnership agreement with Frank Mayer and Associates, Inc., a creative manufacturer of branded in-store merchandising and displays. Together, the two companies are set to provide digital marketing solutions for a leading North American truck manufacturer with approximately 800 locations in North America. Wireless Ronin Technologies is supplying the media players, software and content development for the truck manufacture's showroom kiosks and mobile tablets.
Dealerships are not the company's only customers, however. Far from it, RNIN has also recently booked a large national department store's in house digital displays for its eatery. When it comes to leading digital content RNIN demonstrates the risk of such stocks, but the company's potential also clearly indicates what type of investment to look for in digital content providers.
Investors should be aware that each investment carries its own risk. Some equities are more speculative than others. In particular, investors should be aware that additional risks may exist for some smaller-cap and micro-cap stocks, which trade at a discount when compared to stocks in the same sector, as these stocks may have notable company risks that could lead to lower valuations. Stock price manipulation may take place in the case of micro-cap stocks, as both a result of fewer firms trading the equities, or high distress within a specific company or market segment. Furthermore, liquidity risk may be introduced in some instances where small trading floats and low volume creates large spreads and high volatility. Investors should thoroughly investigate any stock by performing due diligence before trading.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.