Doug Lusted, AdStash

The 16:9 PODCAST IS SPONSORED BY SCREENFEED – DIGITAL SIGNAGE CONTENT

Much has changed through the years in digital signage and digital out of home, but one thing that's been pretty constant is how small businesses like the technology when they find out about it ... but don't want to pay for it.

Doug Lusted has seen and heard that for many years, having founded a Canadian startup that was doing proximity marketing and venue analytics almost a decade ago.

He gradually, with his team, started pulling together the idea and eventually the platform for AdStash - a service that enables small business operators and service providers who target that sector to get digital signage in place, and make money from the screens, instead of paying monthly bills for them.

The core premise of AdStash is small to medium-sized businesses - from one-offs to groups of venues - can tap into advertising dollars from a dozen supply-side ad exchanges and generate incremental revenue. They don't pay any recurring subscription fees, and the only upfront cost is an $80 Raspberry Pi media player.

Based in suburban Toronto, but virtual in most respects, the company is investor-backed and already has a footprint of some 70,000 screens in the U.S. and Canada.

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TRANSCRIPT

Doug, thank you for joining me. We've known each other a little bit for quite some time now, and I would say your company has been on a bit of a journey because when I first ran into it, I believe you were doing proximity marketing, right? 

Doug Lusted: That's right, and we're still doing that. That was our first product and we're heading out to our second one now.

And that was called, Linkett, wasn't it? 

Doug Lusted: Yeah, so to clear it up because branding is often a question. The company name is Weston Expressions. Our first product was Linkett, which is an audience measurement platform that still operates today, and then our second product is AdStash, which we'll get into.

With the first product, what was that all about? That was NFC-based, right? 

Doug Lusted: It started out to be NFC. We were trying to track engagement and impressions, but ultimately that morphed into WiFi. So it's predominantly a WiFi tracking platform today. 

Because every smartphone has WiFi probably turned on or at least available, and not everybody was equipped with NFC and not everybody had it activated, right?

Doug Lusted:  You got it. 

So this was just a better way to go, and now you've launched AdStash. Can you tell me and the listeners what that's all about? 

Doug Lusted: So what AdStash does is provide digital signage networks the technology they need to go programmatic with no monthly fees, and so on a deeper level what that really means is that the core technology we've built is an API that connects your digital signs to multiple programmatic ad exchanges at once. So it saves you all that integration time and money. 

And if you become an AdStash customer, what are you getting and what are you using? 

Doug Lusted: It depends on your network. We're pretty flexible. We've got a bunch of different pieces to the puzzle. 

But basically, an API connection that lists you on all the major SSPs or most of them. Now, if you need a media player, we can provide you that. If you need a content management system, we have a free one. Those are typically used by our smaller networks. And the enterprise users generally stick to the API because they've got all of that in place already. 

Okay, so if I'm already on Brand X CMS, there are hundreds of them. You don't need to back out of that and use your CMS platform or anything like that. The CMS is meant more as something that enables it for smaller businesses?

Doug Lusted: Yeah, exactly, and sometimes what happens is we'll have a customer who's growing their network, and they realize, I can use this CMS that doesn't have any monthly fees. I'm going to switch to that now while I'm deploying. But yeah we can integrate with any CMS. It's a fairly straightforward open API.

I guess it becomes a delicate dance of working with other CMS companies, because if they're hearing that, you don't need to use a commercial or fee-based one, you can just use ours for free they may be thinking, “I don't want to work with you.” 

Doug Lusted: Yeah. It's a good point, and to add a little more color to that, it's a very light, basic CMS, right? We can show videos on full screen, maybe a traditional L-bracket, but that's it. 

It's very light, more kind of aimed towards small and medium-sized businesses. If you're a large enterprise digital signage network that needs some bells and whistles, sticking to your current partner is probably the best bet and we're pretty open about it. 

Is that intentional or is that more a function of, “if I want it to have something that was a lot more robust, that there's a whole bunch more time and dollars that I need to put into it to get to that point”? 

Doug Lusted: So we found that most of our early adopters were small and medium-sized businesses that weren't too picky on what's going on the screen? So it would be hard to give out a content management system that's free that has all the bells and whistles as I said, so I think it was intentional. It's just like a backup plan. 

One thing we noticed in this industry is that there's a massive amount of supply in the market that is just a mom-and-pop shop with the TV turned off. So we're just trying to make it as simple as possible, like “Hey, here's this box. There are no monthly fees, plug it in and you're ready to go.” 

And if they opted for this, let's say I have a nail salon in a strip mall because every strip mall has a nail salon and they want to do this. How does it work? What do they get out of it? How do they use it? 

And in terms of what they get out of it, what kind of revenues would they see? Is it something that just is going to just pay for the TV in a lot of respects? 

Doug Lusted: Yeah, sometimes. So basically if you use our full tech stack, you get the media player, plug it in just to HDMI and power, and then WiFi or Ethernet and then a free content management system that's cloud-based, the nail salon often puts up their own content on the screen, hours of operation, promotions, that good stuff, totally self-serve, and then we, just like almost any programmatic platform, we aim for a 30% fill rate with third-party ads that we're getting from our programmatic partners. 

Given the infancy and where we are with programmatic, some months we hit 30%, some months, we don't, depending on a whole bunch of variables. But the idea is that I think for a small mom and pop nail salon if you look at our data over the past 24 months, minus the closures, due to the pandemic, the average locations making about $50 to $70 a month in revenue that they wouldn't have gotten elsewhere.

And for a lot of businesses, that would be like, you know, who cares? But is that a meaningful number to these people? 

Doug Lusted: It is, and especially with COVID impacting a lot of the revenues of these businesses, they're hungry to figure out any way they can earn a couple extra bucks, and most of our clients aren't necessarily one-offs, they own 10 stores, they own 50 stores, and so when you start scaling it, it becomes a nice little incremental piece of business that doesn't require much work. 

One of the big challenges that I've seen through the years with these kinds of initiatives is, working with small to medium businesses is not terribly efficient. You've got to sell them one by one. You don't just go in and get an enterprise deal for a thousand locations or anything else. 

How do you deal with that side of it and how do you sell it? 

Doug Lusted: Yeah, it's a great point. So in the very early days, our Guinea pigs, we were going door to door on these businesses directly. But now I would say 99% of our business is through the digital signage channels so digital signage distributors, smaller and medium place-based digital networks looking to go programmatic, and if you look at the adoption curve, it's similar to any company, start with the little guys and you start climbing up the chain. So we've taken that route and we're working on the channel right now. 

So using the example of the nail salon again, how would they find you then? Would it be through like a Synnex or Ingram Micro or something like that? I can’t imagine a nail salon knowing what Synnex is. 

Doug Lusted: Yeah, exactly. So we do inbound marketing, right? So they'll probably find us online. But like I said, it's a small portion of our business, but they'd be able to find it through any of our paid campaigns, whether it be through Google ads, Facebook ads, LinkedIn ads, etc. Word of mouth is probably our biggest channel, right? 

Somebody starts making money they didn't before and they want to tell their friends, they want to move it to the other properties they own. So organic's been a big one for the smaller customers. 

Yeah, and if they need it, you provide an $80 media player. So I guess if they make $50 to $70 a month, they pay for that thing pretty quickly. What is that? Is that a little Raspberry Pi or...? 

Doug Lusted: Yeah, it is a Raspberry Pi with our firmware on it. It's got a couple of extra little components to it, like just some USB antennas and things of that nature, but under the hood, it's a Raspberry Pi. 

The analytical side of the business that you started with, is that bundled with this, and would a small business need it/use it? 

Doug Lusted: It is bundled with it, but it's generally hidden from the small businesses.

The reason why we need it is that we need to know what traffic is in front of the screen when ads play so that we know how much to bill these programmatic partners, everything's impression. 

Would a nail salon really need a big data platform to understand its user’s behaviors? Probably not. So we hide it, but it is built in there so that we can gauge traffic levels for our advertisers. 

So if I am the nail salon and I opt in, what am I using to update content and manage the thing? 

Doug Lusted: In terms of our content management system, they're logging in and uploading their own creative. We don't provide a designer tool or any type of creative tool ourselves. They just upload whatever they have. 

Okay, and they do it off the desktop or can they do it off mobile? 

Doug Lusted: They can do it on desktop or mobile. 

Specific app or is it just the web version of the website?

Doug Lusted: We have a specific app as well. So on mobile, we have an AdStash app. You can download and manage your digital signage network just through your phone if you'd like. 

I've always been curious about the mindset particularly of the small to the medium business world. By far, the most active blog post on 16:9 is one that lists all of the free software options out there.

Do you find that generally for small to medium businesses, digital signage is not a major core initiative of what they're doing, it's just something that maybe they can use, that there's a real resistance there to spending any monthly fees? 

Doug Lusted: I think so. We often A/B test this ourselves to test what is the bigger value prop, the ability to make money on programmatic ads or save money on subscriptions? It's really a mix of both, but the smaller players for sure are interested in anything that isn't going to be recurring, and we also have a lot of requests from the digital signage groups that they outsource this to. 

Like I said, our average user has got about a hundred screens. So this is generally something they've outsourced, they've told their digital signage partner, “Hey, you've heard of this free AdStash thing, check it out!”

Okay, and what's your installed base right now? 

Doug Lusted: So across North America, we have 70,000 screens. The US is a lot more dominant than Canada. We've seen some pretty exponential growth there. But in Canada, we've got about 6,000 screens and then the rest of the US.

Okay, and what do you figure you have to be at in terms of footprint to get something akin to critical mass? Or does it not really matter as much when it's programmatic? 

Doug Lusted: It doesn't matter as much when it's programmatic, and I think that's one of the huge attractions to it, especially for the medium size players.

If I've got a hundred screens, maybe 50 in Toronto, 50 in Montreal, that's not really big enough to attract a national campaign, but programmatically, by nature is grouping everybody together to try and attract a national campaign. So I think that's a really big thing. 

Most typically for these small business screen networks, it's hyper-local advertising. It's like the local injury accident lawyers and mortgage brokers and that sort of thing. What kind of advertising are you seeing on the screen? 

Doug Lusted: So given that we only do programmatic advertising, most I would say is national. Now we do have some local, right? The Calgary Stampede brought in a lot of local ads, even though like DoorDash will do a national campaign, they'll have custom creative or calls to action based on each local community. But for the most part, at least for now, we're seeing a majority of it nationally. 

And with the analytics that you're able to generate, what do you see or what are you learning about sites? 

Doug Lusted: Yeah, so traffic data is the most important for sure. Impressions or visits, right? Unique visits, dwell time and frequency are the big three per location. 

It's really interesting to see the dwell times. That's what I'm interested in because, during the pandemic, medical was really one of the only things that were open, and you can see our dwell time doubled so the average person sees twice as many ads. What does that mean? How is that going to affect things? 

So the most important thing right now is traffic. A lot of these exchanges, like HiveStack or BroadSign, have geofencing technology, so they can gather demographics on their own. We have that capability, but most of the time the exchanges say, “Hey, we got that covered.” 

With the rise through the years of computer vision for doing on-premise venue analytics, once in a while, something bubbles up and people get all freaked out about the idea that there's a camera looking at me. 

We've seen that a few times in Canada and it comes up elsewhere. What's the situation with your users when it comes to WiFi. Do they care? Are they alarmed in any way? Like they seem to be well on the camera side? 

Doug Lusted: Some of our bigger customers are, but we've been pretty proactive in being GDPR compliant. So from a consumer perspective, they don't see anything. They don't see a camera being pointed at them. There's a little box behind the TV that no one sees. So we don't really get any questions on the consumer side. 

From the actual kind of business side, yeah, just, are we GDPR compliant? Are we collecting any personally identifiable information, which we're not. 

Where are your servers? We get asked those questions a lot, but after they read through what we're doing with the data and they realize it's very anonymous, high-level traffic counting. We've never had any problems with it, and in fact, It's helped us in a lot of deals. Like we're an airport, and as I said before, we're in medical clinics where you can't put a camera. So we carved out a nice little segment of the market, where we seem to be dominating that market share, at least in Canada, just because of those regulations around those venues. 

Is it easier to compete with some of the other kinds of focused networks out there? Through the years, I've seen bar networks and hair salon networks and nail salon networks, and everything else. Because you're broadly based, you're not saying, “We're the guys for this.” Is it easier to sell into a broader diversity of businesses? 

Doug Lusted: Yeah, it is. But it's also a little confusing because any other place-based digital network, in some sense, if they're on programmatic and not going through us, they're competitors. But on the other side, they're also prospects. So if it gets very confusing, okay, who's a competitor and who's a prospect who should we target? And there's a lot of his “frenemies” in space, and it's getting even more complicated as more and more programmatic platforms come into play.

When your resellers and channel are meeting with a company that has a hundred screens across a network, do they even get into what programmatic is and how it works or do they just say, put this in, we will sell the ads for you and it’ll start showing up within three, four weeks and you should see a check of $50 to $70. 

But I'm guessing they don't really want to understand, is this a demand side platform or supply side or any of that stuff? You're just basically saying it's like Google Adsense, it will just show up. 

Doug Lusted: Exactly. They don't get into all the nitty gritties.

You go into a nail salon and try to explain what a supply side platform and demand side platform are, it's probably not going to work out. 

It's getting more and more confusing as more and more are popping up. But yeah, it's basically, “Hey, we're going to install this new box to your TV, ads are going to show up hopefully and make some revenue”, and another thing is like a lot of our channel partners, they're selling ads directly themselves, not programmatic, just traditional direct sales. So a lot of the time, it's not just us who's responsible for revenue. We're just adding the icing on the cake. 

Okay. So that would be like the guy in your part of the world around Toronto, who's got some medical clinics and he's using your platform, but he would have direct sales as well that he could go to a medical equipment supplier or whatever, and say, “do you want to advertise on these?”

Doug Lusted: Exactly. So our agreement, with our customers, is that we have the exclusive rights over programmatic sales. 

We're going to connect you to all of the SSPs that we're partnered with and we're going to handle that relationship for you. That's the value we bring, but we're not shutting down your existing line of revenue when it comes to traditional sales.

And that's why you're talking about like a 30% fill rate that there should be this broad understanding that, “Hey guys, this isn't your sole answer if you're an ad network, this is part of your answer.” 

Doug Lusted: Exactly, and I think that's where we're at in the programmatic industry is this strange hybrid model, where we're putting a bed on and focusing on that or predicting that more of it will shift the programmatic as adoption increases across the industry. But right now, yeah, this isn't your only source of ad revenue. 

So I'm HiveStack and I'm working with you guys. What visibility do I have? Like what do I see when I'm trying to place an ad of some kind or drive a campaign across your screens? 

Doug Lusted: We try to be as transparent as possible. What you'll see is an address obviously, of where the screen is located, their analytics will tell you the type of audience that's in there. We'll provide you with the traffic counts that are in there. We even require our users, when they install a device to take a picture of the screen, so that you can actually see what the screen looks like and that it exists, and then you'll just obviously see the playback reporting o how many times did your ad play there and whatnot.

And I'm assuming the analytics side of that is increasingly important, even if it isn't to the venue, it is to the programmatic side? 

Doug Lusted: Yeah, exactly, and I think, anybody who's been in this industry for a while understands that that's one of the biggest bottlenecks of programmatic right now. There's not a clear winner of measurement. There are a whole bunch of different vendors, and we ourselves, as the digital signage industry are confused about it, which then makes it almost impossible for these programmatic exchanges to wrap their heads around it, or come up with any standards.

And I don't think that's going to change anytime soon, and one of the reasons why is, I think that we need to understand that there's going to need to be different methodologies and technologies to measure outdoor screens versus indoor screens. These are two very different things, I don't think one solution is going to be able to cover both. So we need to really think, how are we going to frame this, how are we going to put standards around it and take the time to educate these ad exchanges on how it's gonna work? 

Do you get pushback at all from, let's say some of the larger, more established to programmatic platforms saying, I don't know who you are, you're not big enough for me or anything else, or do they all look at this as more inventory and it's properly described and the analytics are available and so on. So, it doesn't bother me that it's a nail salon and it's not a major international airport?

Doug Lusted: So in the early days, we got pushback from programmatic exchanges because we didn't have that many screens, and it's that chicken and egg problem. So we went out and started building our supply base, and I would say now, we're one of the bigger players with 70,000 screens.

So they look at it and say, not necessarily, this is more screens, cause that's not always how they think, but they say, Hey, this more audience profiles. This is more traffic for us. 

And I assume all of your venues are data tagged every which way? 

Doug Lusted: Yeah. So not only just what type of venue it's in and where it's located, but what size is the screen, what things are around it, there's a lot of data that's associated with it, and thankfully we are not tasked with having to have a UI for that, that the advertiser has to see, that's basically our programmatic partners job and that's not an easy one. 

Going back to the nail salon thing, I signed up for it and I'm running a set of nail salons, which is about as bizarre a thought as I can come up with. Who would do the data tagging for that? 

Doug Lusted: Yeah, we do all of that. So once you install the device, you do take a picture of your screen once it's done. We have a list of venues that you can select from a dropdown that is in accordance with the IAB standards. They just find and select a nail salon, which is one of them, and that's basically it. We do everything from there, everything is pretty much automated, 

So it's a free service. The obvious next question coming out of that is how do you make money? 

Doug Lusted: Yeah. So we take a commission only on the programmatic revenue that we bring to the table, that flows through our pipes. The commission depends on volume and how many screens you have, but that's how we make our money.

I think I saw the baseline was like 30%, and it scales down from there with the larger jobs? 

Doug Lusted: It does scale down, yeah. Sometimes it'll actually scale up depending if you're missing core components of technology.

So someone may say, “Hey I don't have this feature in the CMS, can you build it or can I have it?” And they'll say, yeah, but if you don't want to pay for the custom dev time, then the way we'll make our money back on that is maybe 35%. 

Even in that case, it wouldn't be fee-based, it would be built around the commission?

Doug Lusted: We're pretty flexible. Most of our customers have come to us because they don't want to pay fees. So it ultimately ends up being a commission, whether we like it or not. 

Is that just a concession to the realities of working with a small to the medium business world is that they would like to have this, they just don't want to pay for it. So let's work with them as opposed to just saying, “We won't work with you, goodbye!”

Doug Lusted: Yeah, exactly, and I think that's the whole notion of AdStash, and one of our big hypotheses is building this business as there are so many screens that are not being added to programmatic exchanges because they can't afford the technology that's required to do so. 

So whoever activates, all of those screens are going to own a huge portion of the supply in the market, and nobody's pulled up their sleeves and gone after that segment of the market because nobody wants to pay for anything. 

So was AdStash something, going back to 2013-2014, that you were thinking about, or is it just through the years you came to this realization, having worked with a lot of end-users that there's a hole in the market for this, we can build it and get there before somebody else does?

Doug Lusted: It was a bit of both. So when we were really focused on analytics back in 2014, we weren't thinking about it, but we heard rumblings of programmatic and we always thought to ourselves, audience measurement is great, but it's hard to tie return on investment to, especially if you're talking to a digital signage network, like, “why should I invest in in analytics, if I can't guarantee I'm going to get more ads?”

So we always thought, in the online world, advertisers demand it, and then so when we heard of programmatic coming down and we're like, wow, our data is actually going to be very valuable here and mandatory. So this is a good space for us to get into, and then we were just really early adopters of it, we started working with Campsite right when they started in Toronto and Montreal and it just escalated and we rode the wave. 

And how many programmatic platforms are you integrated with now? 

Doug Lusted: So right now we're live on 12. We've got a few contracts signed we're just finishing up integrations with, but as of today, we're on the 12th.

I'm not as close to programmatic as a lot of people seem to think I am. Twelve is what, like half of them out there, or my impression is 12 is like 1% of them. 

Doug Lusted: So it's a little complicated. There are SSPs and DSPs. The DSPs, yeah, there are 80 of them out there, but not all of them are doing digital out-of-home advertising, only a small fraction of them are.

What we're doing is aggregating all of the SSPs into one link, the supply side, the supply-side ones that actually do digital out of home. There are tons of supply-side platforms out there that you can join your website, but for digital out-of-home, there aren't that many out there yet. So I would say, of the active ones right now, we have a large majority of them. 

Tell me about the business. You founded it. Is it completely bootstrapped, self-funded or have you been involved with private equity or VC companies? 

Doug Lusted: Yeah, we're VC-backed. So in 20014 ish, when we were just doing the analytics, we raised a small seed round, and we went through an accelerator in Silicon valley called 500 Startups, and then when we launched AdStash, we raised a second round of funding, a bigger round of funding to help push this product. 

Where are you at in terms of the size of the company? 

Doug Lusted: So right now, we're at 13 and growing. It's been unique for us during the pandemic, we’ve done fully virtual and we were hiring during the pandemic too. So it's been interesting to have a team with some members you've never met before. We were surprised to figure out that some of our employees are like 6’4”. We had no idea they were like these big people, so it's been a unique experience, but a majority of our team is software developers. 

We're not a heavily focused sales and marketing organization because that's what our programmatic partners do for us. They're doing all the sales. So of that 13, the majority of them are software developers.

And we were talking before we turned on the recorder that you moved from downtown Toronto to the burbs. Based on the last year and a half, are you concluding that, hey, we don't really need a physical office or any of those things? Maybe we have a kind of virtual rented office and a mailbox kind of thing and it'll do because so many tech companies have gone that way? 

Doug Lusted: Yeah. Speaking on behalf of our company, I don't think we need an office. We like to do monthly hangouts where we'll all meet somewhere. Just rent an office for a day and talk strategy and whatnot. But when it comes to the day-to-day operations, we don't need an office. Again, software developers, most of the time, are locked away coding, they don't really need an office. 

They don’t want to talk to other humans anyways. 

Doug Lusted: Yeah, exactly. But yeah, as long as they have a kitchen nearby, things are good. So for us, we'll keep doing the virtual way.

That being said, it has presented interesting scenarios in terms of culture. It's very hard to build a company culture virtually, there's only so many things you do. So that's why we really like to implement at least monthly hangouts where the whole team comes together in person and does something to try and build that culture.

That is what's probably important to keeping virtual employees nowadays, because if they can get a new job without having to move and just simply saying yes, you gotta build that company culture to want to entice them to come work for you every day. 

Yeah. It would be pretty easy to leave if you have absolutely no emotional attachment to the people you're working with. You don’t know how tall they are. (Laughter)

This has been great. Just a quick question. If people want to know more, where do they find AdStash? I'm guessing, it's AdStash.com. 

Doug Lusted: Yeah. AdStash.com. Best way to get us. 

All right. Thanks a bunch. 

Doug Lusted: Thanks, I really appreciate you having us on.