Cantech Letter interviews Alex Romanov of iSign Media Solutions

Playing catch up. Here in North America, Proximity Advertising is one this year’s hottest tech trends. The idea, to use the Bluetooth capability of your Smartphone to receive permission based messages from retailers, is already challenging traditional advertising methods in Asia, where the technology has been in use for years.

Toronto’s iSIGN Media (TSXV:ISD) initially got the cold shoulder at home, so the company honed its chops in places like Singapore, where getting a coupon for a half-price hamburger on your iPhone is almost as firmly ensconced as downloading an app. Is North America finally ready for proximity marketing, too? With deals in place with retail giant Couche-Tard and Acer Computers, iSIGN appears more than ready to lead the way. Cantech Letter’s Nick Waddell talked to CEO Alex Romanov about the company’s plans.

Alex, can you take us back to the time iSIGN went public, and why you got involved?

I’ll take you back just a little prior to that, if you don’t mind. iSIGN was originally conceived and incorporated in BC. It was a digital signage company. They had about fifty-two digital signs throughout Vancouver, one or two in Whistler, one in Victoria and a few in Calgary. In 2007, the iSIGN engineers had conceived and developed a method of being able to broadcast the content from the digital sign to mobile phones that came within proximity. This was based on the blue tooth frequency, so it had a range at that time of thirty to three hundred feet. I was introduced to the company having just finished a Bluetooth contract, through some financial people, and I knew they were looking for some money. I became interested in the company and made overtures to purchase it. They actually asked for someone with a few gray hairs and I did have that experience. So I began to negotiate purchasing the company and finally did buy it in November of 2007.

So, then you went public?

Well, prior to going public we had the good fortune of being solicited by IBM. They wanted to make us, as they said “The software solution provider for the anyplace kiosk”. That’s the IBM touch screen kiosks that you see in restaurants, bars and other retail centers. They wanted our solution to be in those kiosks, so the general public could be invited to approach the kiosk by getting an invitation via Bluetooth on their phone. They wanted to enable the public to be able to download information from the kiosk using Bluetooth.

This would be long before Near Field Communications or Proximity Marketing became buzz terms…

Long before. But you know NFC was being used very effectively in 2007 and 2008 in Japan. The East is generally about four to five years ahead of the West with this kind of technology.

You must have been comfortable that you had technology that was ready for the future…

Very comfortable. It all happened in November of 2007. As soon as I bought the company it seemed we had a Letter of Intent to become an IBM partner. We filed a patent for the iSIGN solution, and at the same time a gentleman that owned a large advertising agency in Singapore flew to Vancouver and wanted to make a deal in which he would have the exclusive rights to iSIGN’s software in Asia. In return, he would put our software in nine, two-hundred thousand square foots stores in Singapore. That company was Best Denki, which means “Best Electric” in Japanese. We made that deal, and when I asked the gentleman how he had heard about us, because we were new, he said “My wife is your attorney in Vancouver”. So she was unknowingly our first salesperson. That was a wonderful result because we ended up with all nine stores equipped with our hardware and software, and they were identifying over half-a-million phones per month, with a 23% download rate. That was in 2008.

I guess Asia served as a nice test market for you?

It was a perfect test market because people there are very much attuned to their mobile devices and they’re not afraid of technology, they jump on it. So we had this real nice two year experiment happening in Singapore. We ended up in Shanghai, where we met with a 33% download rate because it was advertised much more aggressively. And it appears that the Chinese in Shanghai were even more voracious about their handhelds.

That deal really gave you a foothold and allowed you to work your way into the North American market, where you have had some success…

Yes. That particular experience in the East gave us the confidence to bring it to North America. What was interesting when we did bring it to North America the one thing we heard from everyone, large retailers, everyone except our partner IBM, was that messaging advertising or couponing wouldn’t work here. That was the stone wall that we hit immediately, because the mindset was that, “this a phone, it’s not a TV, it’s not a device for other purposes.” But about a year later it all loosened up, and in January of 2009 at the Digital Signage Exposition in Las Vegas we won the Best Bluetooth Solution. We were very flattered, there were over 130 exhibitors. So from there we carried on and we encountered people from Acer Computer. One of their divisions is called AOpen. They make the digital engines for media PC’s that drive digital signage. They partnered with us and said they would like to load our software into all of their devices, so that anyone who uses it for digital a signage network can activate the software and start broadcasting the message from their sign to people that pass by within 300 feet.

Now in the meantime, people’s perceptions about being advertised to and the way that they are advertised to has changed. You can see now that targeted ads by Groupon on Facebook, for instance, are kind of a way of life and people accept it. It seems that the market has been catching up to you technology a little bit…

Were getting some great traction, Nick. In 2010 we hired a PR firm called ThinkInk. They’re in England and across the US and Canada. They are very interested in these ideas and started writing up Bluetooth as a solution to messaging phones within proximity. That means you are close to the store, you have your wallet, you have your credit card, you’re in a shopping environment. If you get a message on your phone that you can buy two burgers for the price of one, or some jeans for 40% off, you’ll respond to that. IBM surveys have shown a 72% chance of a person responding to an offer like that. The important thing is that the offer comes to their phone free of charge, there are no carrier charges because we don’t use them to transmit the message. We can send video, rich-media, movies, music or just a plain coupon. And we actually data log how many coupons or messages are sent out, how many phones were identified, how many accepted the messages, and how many redeemed the coupon. And that’s really important information for the advertiser, they love that.

What about privacy concerns, how are you addressing those?

This is all done in a private manner. We don’t use your phone number and we don’t use your email address. We simply identify the Bluetooth MAC address, which is thirteen or fourteen numbers that nobody really knows. What we offer is called Anonymous Mobile Analytics, or AMA.

The advertisers must love the data and the responsiveness. Can they change their ads quickly?

It’s done virtually and they can actually change the campaign every two minutes. That’s how long it takes to go through the system. They can create their own content, their own couponing, free of charge. Coupons can be created in a matter of minutes. If you are selling broccoli and you sell it all you can switch to onions. So you can maintain your inventory , see how the response is to your ads and change them frequently to maximize their effectiveness.

Tell us about your deal with Pinpoint Media.

Pinpoint Media is a signage network which, three years ago, was worth about $20 million. It’s four digital signs per Mac’s store. There are 1,485 Mac’s across the country. It’s owned by Couche-Tard, which is one of the largest convenience store operators in the world, very profitable. They also own Circle K stores in the US, which is a chain of 5700 convenience stores and gas stations. In Canada they also recently purchased Irving Gas, which is 250 stations. They also recently purchased 350 Exxon Stations in California. We help them in two ways; advertisers need one thing; an audience. The 1400 Mac’s stores get 1.5 million people coming through them every day. The signage network is throughout the whole chain. The percentage of impressions runs at approximately 7% when you walk into the store. But with our software in those signs we recognize a much larger number of people who may be around the store, who are within 300 feet. If you multiply that across the chain, you get an audience of about 85 to 100 million people. That is probably one of the largest broadcasting networks in North America. And it’s probably 100 to 200 times cheaper than traditional advertising. We can actually prove how many Cadbury bar offers were sent out, how many Coca-Cola offers. We can prove how many were sent out, how many were downloaded and how many were redeemed. That works extremely well for both the retailer and the advertising brand.

What kind of deals are they advertising right now? What’s working for them?

Right now we’re not fully embedded into all their stores. We just purchased the Pinpoint Network. We just partnered with them in January of this year, and we only actually closed the deal in September. So now that we have closed the deal and have been approved by Couche-Tard as a new partner, we are putting in a brand new software system, which we call our Loyalty Software System. This will not only send you a coupon or an offer to your phone, but it will ask you to become a loyalty member of the store. A loyalty member will be greeted by their name, with offers that they are used to buying. If we notice that you’re coming in and buying Coke, you’ll get a special offer for that. It’s very targeted, very individual. We’re finding people don’t have much of a problem surrendering information as long as it’s voluntary. The best example I can give you of that is if you fly, you can’t buy a sandwich or a drink with cash now, you have to use your credit card. People should realize that the minute they use their card that the airline has just picked up everything known about you for buying a $3 soup. Privacy is no longer something you can protect the way you could before.

I do find there is less concern about privacy. People just don’t seen to mind anymore..

Certainly teenagers have completely abandoned it. As you know they post all kinds of stuff on Facebook and they’re not ashamed to do so. But it’s important to know this: every offer we send to your phone we ask you to opt in, yes or no. If you say no, it’s not sent to you.

Can you tell us about your deal with Selectcore?

That is very interesting. Selectcore is a digital signage agnostic. It’s a combination of 7000 stores that use the same point of sale equipment, which Selectcore owns. They liked the Macs model, and wanted to add our smart antenna to all their point of sale machinery. With 7000 stores, it’s a massive footprint averaging about 1000 people per day. If you do the math of that, it’s staggering. Both these footprints can be united to make one large one, with a huge benefit to advertisers. TV, radio and newspaper are the proven long term, traditional advertising vehicles. But a newspaper ad could cost you $10-20,000 per page that’s only good for one day and it may get circulation of 1.2 million. Then radio is about the same, maybe a million, and will cost you $200-300 bucks a spot. And you have to commit to twenty-eight spots. In the case of TV, it’s anywhere from $50-$250,000 for a one minute spot. None of them are truly measurable. With our solution everybody carries their phone, and that phone is within walking range of our digital broadcast device. The effectiveness our solution is really the new frontier in advertising.

You are rolling out all over now, but you’re still losing money. How do you make money and how are you going to make more of it in the future?

Well we had to go public because of the cost of the hardware and the machinery. We have managed to get some great partners. Acer has the hardware and machinery and now they sell it directly to their signage network. They also load our software in there free of charge. People who run networks only pay us for this software if they activate it. We have to come up with probably 12,000 antennas and pieces of hardware to outfit the entire potential footprint that we have now contracted, and that amounts to some money. Once in place, we have hired a VP, Business Development from the advertising industry, with eleven years experience and a high profile selling for CHUM, CTV, Thomson-Reuters. She’s a good, experienced person in the advertising business and she will be going out to promote and launch our footprint to various brands and ad agencies.

Do you get paid per transaction, is it a royalty agreement, what’s the nature?

No, we have taken what we feel is a fair and simple approach. We charge a flat licensing fee per month, per sign. It averages about $100 per location. So if you have a store of average size, or you’re in a mall, one machine will cover about 300,000 square feet and it will recognize thousands of people every day. It will send out thousands of coupons and messages every day. The value for the retailer is tremendous.