Digital signage networks — found in hotel lobbies and malls across the continent — are among the fastest growing categories for media today, increasing at about 14 percent annually. For RMG Networks, the digital networks opportunity recently grew still larger last year when it acquired Plano, Texas’s Symon Communications, a tech firm specializing in software that connects the sprawling screens. Middle-Market Executive recently spoke to RMG CEO Garry McGuire about the high-growth firm that keeps one foot in media and the other in high tech.
MME: Did RMG start out as a high-tech company that became a media firm or was it the other way around?
McGuire: We really started as a media business here in Silicon Valley that focused on connecting all of the screens that you’ve seen popping up outside the home. You’ve seen them in taxicabs, at the gas pump, in elevators, and on airplane seat backs, and what we saw was a need to connect them all together into large networks. We saw a real need to bring scale and efficiency to this space to help make it a valuable advertising unit, and we knew what was possible, having looked at a company in China called Focus Media that had achieved the same thing in office buildings. They had achieved scale with hundreds of millions of dollars in sales and then gone public. We saw that our business was growing pretty quickly as we aggregated these together out of home digital screens. Last spring we went public through a reverse merger, and then we acquired a 30-year-old technology company that actually writes the software for these types of digital networks. We have this interesting challenge of having this fast-growth Silicon Valley media business buying a 30-year-old Texas software company. We’ve been putting these two companies together during the past eight months, and at the same time catching a tiger by the tale because pretty much every type of business is considering deploying these large-screen networks throughout their enterprise.
MME: Which industries are the biggest adopters and what will set your offerings apart?
McGuire: Well, almost every industry is beginning to use them — and while hospitality and retail are the ones we probably all notice as consumers, walk down Fifth Avenue in Manhattan, and you will find huge video walls in pretty much every window — but you’ll find applications become more data-centric when you get inside the store. For instance, large department stores are now tying their inventory management systems to digital signage systems so that they will display advertising only of inventory that is in stock. This is one of our fortes. Another area we’ve down well in is digital signage for large warehouse and logistic companies like Amazon and FedEx. When you’re in a warehouse extending several acres, the digital signage allows the managers to continue to view data in real time and not have to be at their desks.
MME: What surprises have you had along the way that may have caused you to maneuver or maybe modify your strategy?
McGuire: Well, we sell a lot of advertising media within the U.S. to airlines that use seat back TVs, and if you think back five years or more, the only media inside the airplane was the airline print magazine. About five years ago, TVs started popping up on the back of the seats. We went around and were able to sign long-term contracts with most all of the major airlines within the U.S., so we have 100 percent market share of that media. About two years ago, WiFi on planes became more widely available. Today it’s prevalent, and we saw this as a potential opportunity to make a complementary media sale. We also saw it as a potential threat to our media business. What we did was to quickly sign a deal with the companies that provide the technology that outfits planes with WiFi, and this was something of a reinvention for us.
MME: There was some concern that handheld smart phones could be a threat …
McGuire: Most of the data shows that even though WiFi is prevalent, people are watching the screens even more. We have found that it’s really analogous to today’s home environment, where we have families sitting on the couch watching television, but meanwhile people are multitasking and using iPads and other mobile devices. So it hasn’t been a tradeoff of one for the other.
MME: Where does RMG stack up in this competitive new market?
McGuire: We have a network in shopping malls that reaches something close to 60 million consumers each month, but we are one of four or five competitors currently in the retail space. As you look at other vertical industries, we tend to have the number one market share in industries that are heavily data-driven. When you look at call centers, manufacturing, and business intelligence, we have very high market share, but when you look at hospitality and retail, there are many competitors. Still, when you consider that this industry is only about 10 years old in the U.S., there are probably 300 to 400 competitors.
MME: Being part technology and part media, which type of firm does your workforce most closely resemble?
McGuire: We’re a hybrid. We do talk about ourselves as an ad-tech company because we derive about half of our revenue from advertising sales and half of our revenue from technology-related sales. Our staffing is probably a lot higher than you would see in a typical media business because we have a lot of engineers both here in the U.S. and in China who are developing the software. At the same time, a large percentage of our revenue is out of Manhattan, where our people are selling to ad agencies that represent the top brands. I would say that chief marketing officers and CIOs are spending a lot of time together these days, and in fact they are the two heads to whom we most often sell.