SAN FRANCISCO (Business 2.0) -
In front of a Macy's entrance at the Westfield Shoppingtown in Paramus, N.J., Sally Russell, a 40-something shopper with bags in one hand and coffee in the other, looks ready to drop.
She plops down on a nearby bench, stares ahead, and notices something new: Amid a forest of clearance-sale placards stands a 5-foot-tall plasma screen, playing commercial after commercial in 15-second spots -- a couple for sneakers and leather jackets, another for the latest Johnny Depp movie -- in a repeating three-minute loop, with a soundtrack you can hear from about 5 feet away.
"Looks like TV," Russell says, seemingly unimpressed -- yet unable to break her gaze, even as the loop of commercials starts anew. "I keep waiting for the program to start," she says, "but it looks like it's just one commercial after another."
Exactly. And as painfully monotonous as it might sound, it's shaping up as an advertiser's dream. This screen and about two dozen like it -- posted throughout this 280-store supermall -- represent a breakthrough product line at AdSpace Networks, a Silicon Valley startup that's getting TV-style advertising closer to the checkout counter than ever before.
AdSpace spent about $270,000 to install 27 plasma screens -- dubbed CoolSigns -- at the Westfield Shoppingtown, and plans to install displays at 20 more Westfield malls by this fall. (That's in addition to the company's other major CoolSign product, a network of small, video-only displays that AdSpace operates in 50 Loews theaters across the country.)
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If AdSpace succeeds in placing displays at all 66 Westfield malls, says Kevin Smaller, a Westfield leasing manager, the CoolSigns network would reach more than 35 million consumers each month -- the vast majority of them very motivated to buy.
That's one reason retailers such as Foot Locker and Macy's are paying AdSpace $6,000 per month to run just one 15-second spot every three minutes in each mall. Multiply that by the 66 malls in the Westfield chain, and the annual revenue potential for just one AdSpace mall tenant exceeds $50 million.
To AdSpace execs, the displays aren't just clever gimmicks: They represent the launch of a new ad medium -- part TV, part billboard, and all Internet in its network sophistication. It's nothing that tourists haven't already seen -- on a much bigger scale -- in Tokyo, New York's Times Square, and Las Vegas.
But as AdSpace co-founder Lou Giacalone Jr. explains, "Only recently have we shrunk it down to the size of the largest commercially available plasma TV and brought it to a mall or a store."
The result is an advertising tool that generated nearly $10 million in sales last year for AdSpace, in part because CoolSigns have been shown to trigger sales spikes of certain products when the ads reach buyers at prime locations.
A study funded by AdSpace and Macy's compared results at a Macy's store outfitted with CoolSign ads with those at the chain's other outlets. Sales of cosmetics nearly doubled when customers were prodded with live-action commercials as opposed to conventional cardboard posters. Swimsuit sales more than doubled, and sales of lingerie quadrupled. Another study, by the research firm Arbitron, found that digital displays outperformed bus signs by 38 percent in ad recall, and beat billboards by 16 percent.
Even the most ad-resistant consumers are considered good CoolSign targets.
"We're genetically programmed to follow motion," Giacalone says. "That goes back to our days in the jungle, when we needed protection from a tiger jumping out at us. We're not running from tigers anymore, but we still can't turn away from good video."
That helps to explain the mass popularity of everything from MTV videos to "blooper" shows. But even something as mundane as a 15-second spot on a glorified TV outside Macy's has big advantages over standard paper-and-glue advertising.
For one thing, advertisers don't need to hire people to canvass public spaces to get the message to the right location. Better yet, any screen can be changed at a moment's notice. Programmed from AdSpace's network facility in Burlingame, Calif., each display is hardwired to a PC that serves up ad content tailored for its location -- spelling out directions to a sale in progress, for example, or giving different prices for the same product on ads at stores in Paramus and Sherman Oaks, Calif.
To Macy's, "a billboard or poster is of no value because those change only once a month," Giacalone says. The digital signs allow ads to be changed immediately.
"Now I have the ability not only to move a sign physically, so I can better catch your eye," explains Macy's senior vice president Brian Preussker, "but catch it every few seconds if I change the message." And if an ad is bombing at the cash register? "We just change it, and I don't have to go through a production of paper."
Digital displays give advertisers something else they crave -- the ability to precision-target different audiences by the hour. At Loews cinemas, one TV network runs trailers of programs targeted for younger audiences until 9 p.m., switching to adult-oriented trailers for the later shows.
AdSpace clients haven't yet pursued that strategy in malls, but, Smaller says, it translates easily: Advertisers could broadcast messages "geared toward mothers during the day, teenagers in the afternoon, and young adults in the evenings."
So far, that added flexibility isn't costing advertisers a premium -- another perk for early adopters like Macy's. Advertising measured by the industry standard of CPM, or cost per 1,000 impressions, ranges between $1 and $3 for conventional billboards. AdSpace says it charges a CPM rate of about $1.25.
AdSpace, of course, isn't the only company making a play to digitize outdoor advertising. Clear Channel Spectacolor -- a joint venture formed in 2000 between media giant Clear Channel Communications (CCU: Research, Estimates) and Spectacolor, the company that runs many of the displays in Times Square -- recently began experimenting with a similar 11-screen ad network at the Fashion Show Mall in Las Vegas.
"AdSpace has pioneered digital coming into the cinemas and malls," says David Matera, CEO at outdoor-advertising buyer OOH Pitch, "but everyone else is coming along right behind."
Like the AdSpace founders, Matera sees the Westfield kiosks as just the beginning. In several years, he says, we'll all inhabit a marketing world not unlike the one Steven Spielberg created in Minority Report -- signs talking to passersby by name and pushing their favorite products.
"Except for the infrared-in-the-eyeballs part," Matera says, "that's how far we're going."
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Michael Forte, CEO at Clear Channel Spectacolor, is more circumspect. The last big innovation in outdoor advertising, he jokes, was the invention of vinyl. "Is the next best model these networks run similar to TV, or something entirely different? I don't know. It's a learning experience."
At the moment, it's a different sort of experience for some shoppers in Paramus, where the displays seem to blend in with the rest of the visual distortion.
"This is supposed to be something new?" asks John Rizzo, a retired optician seated for a break from his morning errands, steadfastly immune to the ads for exotic leather jackets and video games playing in front of him. "Looks like the same junk I've been watching for about 40 years."