STRATEGIC PARTNERS
Like the dot-coms and telecommunications companies before them, ATM advertising companies are struggling to stay solvent in tough times.
August 23, 2001
Even the hottest new medium is tough to sell in a cold economy.
The same decimation that reduced the ranks of dot-coms, telecommunications companies and other Internet-related businesses earlier this year has begun to hit ATM advertising, a medium that showed early promise as a possible new revenue stream for deployers.
Since the first of the year, several ATM advertising companies have gone out of business after they were unable to obtain enough financing to support their ambitious business plans.
The most recent is Satmark Media Group, a Raleigh, N.C.-based agency that worked with financial institutions, including such major players as Bank of America.
Shelly Chandler, marketing manager of self-service banking for PNC Bank, which worked on a full-motion video advertising pilot with Satmark earlier this year, said she was told by a contact at Satmark on Aug. 20 that the company had effectively gone out of business, with all of the staff except CEO Jay Ladd released from employment.
Calls to Ladd were not returned.
Chandler believes that Satmark's business plan was on target and would have succeeded if the economy had remained strong. "They hired a really high caliber staff and had all the right pieces in place, but the market was really against them this year," she said. "I think it would have worked if the market hadn't softened so much."
However, a source with NCR's Professional Services Group, one of the ATM manufacturers that had worked with Satmark, said that perhaps the company's approach, which used remote downloads of MPEG video files from a proprietary server, was too complex for many deployers.
"It's hard to see the justification for a model that effectively requires a server at each ATM," he said. "Their approach was MPEG or nothing, and not all machines are candidates for MPEG from a hardware standpoint or from a location standpoint. I think you can get a lot of mileage out of a simple static screen and coupon combination."
Noting that Satmark worked exclusively with financial institutions, he opined that third-party advertising is still a tough sell for branch ATMs, which make up the majority of most bank networks. "They don't want to see ads for Coke or Cheetos at their branches," he said.
Satmark's decision to help bear the expense of technology upgrades also may have contributed to its downfall, said Dick Juenger, vice president of marketing for Secora, a St. Louis ATM advertising company.
"You have to have deep pockets if you're going to do that, and no one in ATM advertising has pockets that deep at this point," Juenger said.
Chandler said Satmark's willingness to share expenses contributed to PNC's decision to try full-motion video advertising. "It was an expensive approach for them, probably, but it helped us get over the hurdle in making the decision to participate," she said.
Chandler said that PNC is currently working on a contingency plan for its 54 machines involved in the Satmark pilot, which are equipped with high-powered processors and other advanced technology. "We'd like to make the best use of them that we can," she said.
Chandler said she hopes that Satmark will be able to make a comeback. "I have a lot of faith in their management team and what they've learned in the process, and I think it may be possible for them to come back. I would definitely support them."
Business has halted at another alternative media company, San Jose, Calif.-based Ten Square, while it attempts to obtain a fourth round of funding, according to a former executive who wished to remain anonymous. While Ten Square hadn't yet launched an ATM advertising program, it had plans to do so after signing a strategic agreement with manufacturer Tidel Technologies in December.
According to the former executive, Ten Square was downloading advertising content to POS screens at gas pumps and was actually making money – though not enough to stay solvent. The cost to upgrade pumps was about $2,000 per site, he said.
"The real issues were with the marketplace, not with our company or our business plan," he said. "We were in revenue, but it wasn't enough to cover the costs of our rollout."
The employee said that Ten Square's plan was to ultimately expand to 24,000 sites and to include ATMs in its program. "We really felt like the combination of those two things was the way to go," he said. "But you can't just do 100 gas stations; you've got to have 1,000 to make the business model work."
Ten Square had raised more than $30 million in previous rounds of financing. Investors included such big names as Marconi Ventures, a wholly-owned venture fund of Marconi plc.
Pointing out that both ATMs and gas pumps have more mainstream acceptance than the Internet, the employee said he believes that Ten Square may have been unfairly positioned with Internet advertising companies. "The (Ten Square) presentation is new, but you're not asking people to go to a new place like the Internet to see it."
Ten Square is currently seeking additional financing and should know within a month whether the money comes through, he said. About 70 percent of the staff, himself included, would return to work for Ten Square if the company becomes solvent again, he estimated.
Two other ATM advertising companies, Calabasas, Calif.-based brandATM and RBuzz USA, apparently ceased operations earlier this summer. On July 19, brandATM informed NetWorld Alliance, the owner of ATMmarketplace.com, that it had gone out of business and could not pay for advertising it had purchased on the site. The company's telephone number was out of service, and letters were returned stamped with "no forwarding address."
RBuzz USA Inc. filed for Chapter 7 bankruptcy protection in Wilmington, Del. on July 11. According to the filing, RBuzz USA has less than $20,000 in assets and an estimated debt of $100,000 to $500,000, with 20 creditors listed.
Signs of financial troubles emerged as early as late 2000, when a planned acquisition with Baltimore-based ATM Advertising Inc. fell through. The acquisition, for an undisclosed amount of stock and cash, was slated to close on Sept. 1. ATM Advertising withdrew on Dec. 1 after it became apparent that RBuzz lacked the capital to close the deal, said ATM Advertising President Mike Szimanski.
One of RBuzz USA's only projects was a spring pilot of ATM toppers at 25 sites in Manhattan with E*Trade ATM. Saul Caprio, director of marketing for E*Trade ATM, said perhaps RBuzz's plans were too broad.
According to RBuzz USA literature distributed at the Advanced ATM Conference 2000 in Orlando, Fla., the company intended to distribute advertising "on electronic indoor and outdoor billboards, LED, LCD and plasma displays, ATMs, kiosks and other digital interfaces."
Noting that new and relatively unproven advertising channels like ATMs have been especially hard hit by the economic downturn, Caprio said, "I think they probably overreached. They were shooting for the stars when they probably should have tried for the clouds first."
