CEO SPOTLIGHT – Dominick Porco, AdSpace Digital Mall Network, New York

This month in the “CEO Spotlight”, we welcome Dominick Porco, Chairman and Chief Executive Officer of AdSpace Digital Mall Network ^[1], New York.

^[2]The Adspace Mall Network is a full motion, audio/video digital network deployed in shopping malls in the top DMAs across the United States. Each mall typically has 12-15 Smart Screens, 8 foot tall enclosures with 65 inch plasma screens in portrait format.

1. What was Adspace Digital Networks doing prior to 2005 when you and other members of a new management team were brought in? What changes did your make and why were they necessary?

   When the new executive team was brought on, Adspace shifted its focus exclusively to the mall environment. The network had previously been spread out in venues like movie theaters, casinos and convenience stores as well as malls, but management saw the biggest opportunity to reach a mass upscale audience in the mall environment. At the time, the company also changed the content approach from digital billboards to a robust digital network with full motion editorial content that encouraged people to watch. We also created a local sales initiative, which was non-existent at the time.

2. What is the company’s current annual revenue and what are its financial goals – in what time frame?

   Adspace is a privately held company, whose investment partners include Doll Capital Management, Steelpoint Capital, Cartesian Capital Group, Walnut Group, and GIC, a fund of the Government of Singapore. As a private company, we do not disclose our revenue or financial goals.

3. Which brands advertise the most with you, do you think, and what is the average advert length and length of campaign?

   Average advertisement length is 15 seconds and the average campaign will run for four weeks on the network. Our most lucrative categories include: entertainment (Hollywood studios/theaters, television networks), retail, consumer packaged goods, telecommunications, education (through local advertisers) and fashion/apparel.

   Some of our advertisers in these categories include Sony, Fox Home Entertainment, New Line Cinema, CBS, MTV, Nickelodeon, Verizon, AT&T, GOLDTOE, Geico, Macy’s, Dillard’s, P&G, and many more.

4. What role do you think can be played by sales channels such as SeeSaw in the performance of Adspace?

   We don’t currently use companies like SeeSaw because we see a conflict between our sales team and aggregators.

5. You stress that all your malls service upscale clients. How do you choose the malls in each city, how do you limit the number, and how do you refuse a mall that would like your screens? How many malls will you be in over the next two years?

   We work with Class-A malls through our partnerships with developers such as Westfield, General Growth Properties, CBL, Macerich and Glimcher. If a mall is looking to install our network we work closely with them to ensure optimal placement. We are currently in 105 malls and hope to be in 200 malls over the next two years. We select malls based on geography and sophistication. We choose to work with malls that make the most strategic sense for our partners and the network.

6. You have already told us that your company is privately-owned. Do have any plans to go public – and, if so, at what stage would you do so?

   We are owned by private equity firms and by definition they have an exit strategy – which may or may not include going public, but that is pretty far in the future. Our current focus is on the continued expansion of our footprint and driving revenue growth.

7. Am I to understand correctly that mall operators and retailers in the malls do not pay to be on your screens, (ie. that both retailers’ and mall operators’ ads are free), but the mall operators get a share of ad sales from local and national advertisers? If more retailers seek ad space and none is available how do you go about selection?

   The Adspace model is similar a fashion magazine in that it combines a unique mix of editorial content and paid advertising. After in-depth research, Adspace determined that the content mall visitors really wanted was information that empowered them to become smarter shoppers. In fact, research indicated that over 80% of mall shoppers wanted information that told them what was on sale that day at the mall and they wanted to save both time and money.

   Out of this research came the network’s unique programming model called “Today’s Top Ten.” The compelling on-air editorial content showcases each mall’s top 10 sale items each week. The program encourages mall retailers to compete for editorial coverage on the screens by submitting their best deals including original prices and total savings. Adspace then chooses the 10 best deals and produces a 12-second spot for each, incorporating the ten spots into its programming which includes paid advertising spots. Because the selected items are editorial content, retailers do not pay for space or production.

   Adspace’s newest editorial program is called ‘Essentials’, a collection of seasonal items selected by Adspace’s Editorial Director Warren Christopher. ‘Essentials’ is an integral part of the network’s editorial content, and is designed to attract mall shoppers with highlights that engage and inform.

   Mall operators treat us as a tenant. We pay rent and give them a share of revenue. We also provide added value for mall operators by displaying mall hours and events on the screens.

   If the demand for editorial content is greater than the space available, we select the content we feel is the most compelling to consumers. If retailers are seeking a guaranteed spot on our network, they can purchase advertising.

8. What do you think about consolidation in the industry? Are there are any acquisitions in the pipeline for you?

   Consolidation is likely in a fragmented industry, but we have no acquisition plans currently.

9. Is your advertising sales done in-house or do you outsource it? Do you sell via media buying agencies or go to brands and clients direct?

   Our advertising sales are done in-house – we sell to both the agencies and to the brands.

10. The digital OOH industry is growing at a phenomenal rate worldwide. What do you see as the biggest challenges – either technically or commercially?

    The biggest challenge is delivering consistent audience metrics that allow agencies and clients to feel comfortable when buying in this category.