Popularity of Digital Billboards Not Priced into Data Call

by: Kishore Jethanandani

Digital signage, which in essence is out-of-home TV, brings media content and advertising to viewers—to their retail stores, taxi cabs, buses, trucks, airports, parks and conference centers. The large LED or plasma screens are familiar to buyers at retail stores like Best Buy. Content streaming on these TVs in stores, sports stadiums or conference halls are going to become a lot more familiar. The content does not have to come from a broadcasting station; it can be drawn from video content sites, the Internet or be user-generated.

Narrowcasting, one of the buzzwords in the industry, suggests that the content and the advertisements can be customized to appeal to the specific audience being served.

The users of digital signage technologies can apply them in a variety of creative ways. Imagine somebody window-shopping while waiting for a friend to arrive. He could look at a LED screen at a real-estate broker’s office after hours. The screen could be showing pictures of properties for sale in the neighborhood. If the shopper likes one, he could pull out his mobile phone and use the code on the screen to request detailed information on the listing. Instead of wasting time, this person has completed a chore and the real estate broker did business at home!

Broadcast or cable TV is one of the most expensive means to advertise. According to the 2007 figures from Media Dynamics, the cost of a single impression of an advertisement on TV is $15.20 compared to $5.20 for newspapers. Billboards, on the other hand, cost as low as $2.15. However, outdoor advertising accounts for one of the lowest shares of advertising expenditures. According to figures of TNS Media Intelligence, expenditures on outdoor advertising in the first half of 2007 was $1.9 billion out of a total of $72.5 billion on all types of advertising. By contrast, a total of $31.6 billion were spent on all kinds of TV media.

Outdoor advertising has always been seen as a means to increase awareness of a brand instead as a method of promotion. The inability to measure the impact of outdoor advertising, or out-of-home advertising in general, was the major barrier to higher allocations of ad dollars. Digital signage, combined with GPS technologies or tracking by time-of-day, can help to measure the impact of out-of-home advertising. Retail stores, for example, keep track of the time period over which an advertisement was displayed and correlate it with the subsequent sales at the counter. Citi-mobile, which specializes in truck side advertising, uses GPS devices to keep track of the locations that vehicles pass.

Typically, the advertisements displayed are sponsored by local merchants; the GPS data helps to determine the neighborhoods which responded well to the commercial. The growth of digital signage in USA and throughout the world confirms that outdoor advertising is gaining traction. Expenditures on alternative out-of-home advertising in USA, according to Leo Kivijarv of PQ Media, increased by 25.6% in 2005 and by 27% in 2006. Digital billboards and displays increased by 55.4% in 2006 at $233.2 million.

Out-of-home TV has an edge in the display of short-form content such as breaking news, highlights of sporting events, and local events such as a fire in the vicinity. It also has an edge in context TV. For example, an expo can use digital signage for keeping participants informed about important personalities at the venue.

While sorting potential companies for investment, we came across two types of them. A few, like Focus Media (Nasdaq: FMCN), Lamar Advertising (NasdaqGR: LAMR) and Daktronics (Nadaq:DAKT) are already successful and their stocks fully priced. Focus Media, a Chinese company, which recently floated an ADR, has appreciated 100% at a peak of $60 over the last year. Lamar Advertising peaked at a five year high of $70 dollars in January ‘07 and has been range bound since then and Daktronics appreciated 400% at $40 between December 2005 and December 2006 and has been range bound since then. These companies can be considered if their prices consolidate at lower levels.

The other choices are among a number of penny stocks much harder to figure out. We found Data Call Technologies, a digital signage software company, an attractive possibility. Its 52 week price range has been $0.04 and $1.05. Currently, it trades at about $0.08. Revenue numbers currently are modest at $58,000 in 2006 and are expected to be $162,425 in 2007.

According to an analyst Kris Gupta, the revenues are expected to leap by 460% in 2008. What lends credibility to these estimates is Data Call’s collaboration with 3M (NYSE:MMM), a long-standing leader in static outdoor advertising and NEC Display Solutions which is building a digital signage ecology. In addition, Data Call has tied up with important networks to get access to customers. It has collaboration with Arena Media Networks, a sports and entertainment TV network. With its collaboration with AdTekMedia, it has access to digital signage at gas stations on top of pumps.