MAD Displays

- Exploring avenues for growth -

Report prepared for

Prof. Heinrich Greve (Entrepreneurial Field Studies) and Sandra Neo, MAD Displays
by Julian PETRESCU, MBA candidate, class of July 2009

Singapore, June 2009

INSEAD

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Contents:

. Executive summary.........................................................................................................................
2. Research question..........................................................................................................................
2.1 Introduction..............................................................................................................................
2.2 EL technology..........................................................................................................................
2.3 Market structure and value chain; potential competitors and partners....................................
2.4 Options for growth...................................................................................................................
2.5 Research approach...................................................................................................................
3. Findings and conclusions...............................................................................................................
4. Recommendations......................................................................................................................
5. Exhibits..........................................................................................................................................
5.1 List of interviewees......................................................................................................................
5.2 Interviews................................................................................................................................
5.3 Industry research......................................................................................................................
1. Executive summary

This project undertook to study the ways in which the product of a Singapore-based company,

Media Active Displays (MAD), can reach a wider audience and generate higher revenues for its

manufacturer. The product is a refinement of the static advertising billboard, offering animation

and increased visibility. While not as versatile as a fully electronic LED or LCD based display,

the EL (electroluminescent)-based ‘poster’, as produced by MAD, offers ‘good enough’

animation capabilities at a fraction of the price, and is an attractive improvement over the typical

static poster. However, the product is expensive compared to the static poster, and it appears

unsustainable as a replacement for static billboard media.

Following interviews with industry experts, it was determined that the product is a niche offering

that has to be part of a product portfolio – either combined with static posters in a mixed

campaign featuring static and animated posters, or integrated in highly specialized, custom

signage for events.

It appears that the combination of low manufacturing cost and high Singapore quality makes

export a viable option; ownership even of a small part of a large foreign out-of-home market

‘pie’ would yield significant revenues, addressing the limitations of the size of the Singapore

market. However, export should proceed cautiously as the company does not have any expertise

in this area, and successfully managing partnerships with a distant value-added reseller should be

learned by partnering with local or regional companies first.

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2. Research question

2.1 Introduction
MAD Displays is a family-owned enterprise, founded in 2004. It is owned by Mrs. Carolina

Phua and Sandra Neo, with two other passive investors, one private, the other the Government of

Singapore. The company manufactures Electro-Luminescent Displays (EL) for use in advertising

and signage, at a facility located in Batam, Indonesia. Although the investors conducted a

significant amount of research within the local (Singapore) business community, interviewing

potential users, who expressed interest in the technology as a novel medium for carrying the

advertising message to the consumers, once the company was established and began producing

EL-based advertisements, the orders were not as fast to come in as was hoped. MAD's product is

an animated poster, of customizable size, color depth, and animation complexity, with a

thickness comparable to that of a normal poster. To be deployed, it needs a microprocessor-based

controller. After six to twelve months, the materials that the poster is made of dim out and the

poster loses its animation and luminescence qualities, degrading to a static poster; it has to be

replaced, but the controller unit is reusable.

MAD's posters have been deployed in bus shelters and on taxis in Singapore.

The question this study will attempt to answer is what is the best way to generate traction for

MAD's product.
2.2 EL technology
According to www.devicelink.com, "EL displays are emissive. The display emits its own light,

and therefore does not require a backlight or ambient light in order to be viewed. These displays

consist of a luminescent phosphor layer sandwiched between transparent dielectric layers and a

matrix of column and row electrodes (see Figure 1). A voltage applied to row and column

electrodes causes the area of intersection (a pixel) to emit light. The EL structure also allows the

displays to show graphics anywhere on the screen, unlike character displays that allow only for

fixed placement of numbers or text [...] Solid-state EL display architecture creates a flat,

compact, reliable, and inherently rugged display with exceptionally fast response times (< 1

microsecond)."

Image and quote courtesy of http://www.devicelink.com/mem/archive/98/10/011.html

The displays based on EL technology are thin (almost the same thickness as a printed poster).

They provide a clear, crisp image, allowing for a degree of animation:

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This, and more examples of animated EL displays at:
http://www.edmonds.co.uk/electroluminescent-displays.html

There seems to be an obvious potential for using them in outdoors signage and advertising, for

applications similar to those supported by LED-based displays, but at a lower price point, and

with the disadvantage of more limited animation, and a limited life span of the poster itself (due

to the progressive degradation of the phosphor layer in an outdoors environment).

According to Planar, a major manufacturer of a variety of displays, the main characteristics of its

high end EL displays are:

"- Rugged — Planar EL displays are built for demanding conditions: cold, heat, wind, dust,

vibration, sunlight – even g-forces.

- Reliable — Our displays are field-proven to retain more than 75 percent of their original

luminance after more than 100,000 hours of operation.

- Visible — Our proprietary ICEBrite (Integral Contrast and Brightness Enhancement)

technology offers unparalleled image quality in a wide range of challenging visual conditions.

- Flexible — We offer a range of product enhancements, options and value-added services to

help you engineer the best product for your needs.

- Available — Planar offers the broadest EL product line in the world, backed by sophisticated

manufacturing and supply-chain management to ensure that you get the components you need,
when and where you need them."

As a high quality manufacturer, with a significant investment in the manufacturing operations,

MAD should be able to provide products that can successfully compete with those offered by

premium vendors such as Planar, and which exhibit qualities similar to those mentioned above.

Planar also offers some reasons why EL technology is valuable, including availability over all

the temperature spectrum, without a need for heaters/fans and without performance distortion at

unusual temperatures, great quality for color/wide viewing angle (the viewing angle is especially

of concern for LED displays), reduced battery consumption, good legibility (another

shortcoming of LED displays, whose legibility diminishes progressively with the distance - the

closer a viewer is, the 'blockier' the image appears), and resistence to shocks

(http://www.planarembedded.com/pdf/20_Reasons_EL.pdf).

2.3 Market structure and value chain; potential competitors and

partners
Since advertising (out-of-home advertising, especially) is an important potential use of EL

technology, and one on which Media Associated Displays focused its attention on, an

understanding of the industry and its various players is necessary.

The value chain of the advertising industry can be described as follows:

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A more detailed value chain chart can be found in the exhibits. It can be seen that MAD is one of
the 'Printers' along the value chain; a supplier of a commoditized product (albeit a high quality
one), but with a limited power compared to the other actors.

MAD is only one of the players in a changing landscape. According to an IBM research paper
(see section 5.3), advertising is moving towards open exchanges and consumer control.
Obviously MAD is not in a position currently to shape this market, or even to take advantage of
it; it is only one of the suppliers of a media product used by the advertising industry, similar to
what printers offer, and which must also be partnered with billboard operators to provide only
one of the options available for advertisers: out of home displays; hence, MAD offers an
advanced, niche product in only one of the branches of the advertising ecosystem, and one which
isn't growing at a particularly fast rate; at the same time, MAD's product offers a novel, attractive
twist on the traditional poster concept, at a lower price than the LED display medium.

So, while MAD is unlikely to capitalize on the current industry trends, it does offer an innovation

which makes it an attractive proposal in the out-of-home branch; in this context, its failure to

achieve explosive growth in the SG$100m Singapore out of home advertising market seems due

to its low bargaining power compared to the other players in the market, and there could

potentially be options for growth, as discussed next.

2.4 Options for growth
In discussions with MAD representatives, the following options to drive growth were identified:

1. overseas expansion

2. finding alternative usages of the technology (e.g. indoors signage, home art)

3. partnering with a value chain participant, upstream or downstream, to provide an

integrated value added solution

It should be noted that the above options are not mutually exclusive; e.g., overseas expansion

may involve finding alternative uses of the technology and almost certainly will require

partnering with a player in the value chain.

2.5 Research approach

The question the current study attempts to answer is quite typical: a technology-focused

company manufactures a high quality product, but the rest of the market does not seem to take

notice to a large enough extent to allow the manufacturer to thrive; on one hand, existing

technologies are entrenched and seen as 'good enough', on the other hand, the players in the

market are powerful enough to dictate their own terms on any possible new entrants. Given these

facts, how should the company position its product and what is the best way for it to grow (go

international, find alternative uses for the technology, partner with a larger player in the industry

value chain) are the questions that must be answered. Since the theoretical context is established,

the research has attempted to determine the concrete context by interviewing experts with actual

knowledge of the advertising marketplace (from corporate marketing departments to media

buying organizations to media consultancies). Several Internet resources have been used to

complete the picture.

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3. Findings and conclusions
An interviewee with experience in FMCG marketing expressed interest in the product. He has

had exposure to it (EL posters deployed on bus shelters), and remarked that the technology

definitely brought new life to the billboard concept. He also indicated that he would certainly

attempt to commission EL animated posters for product marketing campaigns. Such campaigns

typically run for 4-8 weeks, which actually addresses one of the main shortcomings of EL

products (the limited lifespan of the poster; typical campaigns are shorter, making this a non-

issue).

Confronted with the higher cost of an EL poster (especially given the number of deployed

billboards, 100, used in a typical campaign in a large city such as Sydney, Australia), the

interviewee indicated that he would consider using an 80/20 mix of static and animated posters,

which would keep the cost of the campaign within budgetary constraints. The interviewee

repeatedly indicated that he found the EL poster a very compelling product, which suggests that

similar companies (and their marketing staff) might be similarly interested.

An interviewee from a similar manufacturing company (based in Indonesia, whose out-of-home

advertising market is about half the size, in SG$, of the Singapore market) and offering printed

and animated posters however, indicated reluctance from customers in using EL-based posters.

Some of the reasons include:

1. limited knowledge of the product

2. price
 3. doubts about after sales service

4. substitutes (LCD, LED) with perceived higher appeal

5. absence of local manufacturers which leads to long delivery times as the posters have to

be imported from China

While questions 1, 2 and 4 were raised in the Singapore market as well (according to interviews

with the MAD representatives), MAD should score well on 3, and it does actually its own

manufacturing facility in Batam, Indonesia, which might make the Indonesian market a potential

target.

An interviewee from an alternative out-of-home marketing media provider (in the US) said that

he was familiar with the product, but had difficulty coming up with a creative use for it.

However, this was an initial discussion, and subsequent talks surfaced a few possibilities among

the company's repertoire of non-traditional out-of-home advertising medias: posters in nail

salons, and on mobile vendors' pushcarts. Since the company specializes in integrated 'outdoor

spectaculars'-type of campaigns (e.g., branded booths and umbrellas on high foot traffic areas in

Chicago), EL posters could be a valuable addition to their portfolio - with the same quantitative

limitation as above.

Since MAD used the product successfully on taxis in Singapore, depending on regulations in the

US limiting the amount of animation/lighting that can be used on moving vehicles, this is another

possible area to explore.

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An interviewee with a long track of investing in media companies suggested that the Singapore

market is indeed small, therefore there might be some potential in expanding overseas. This

avenue might be economically feasible since the shipping costs are low, and the product's main

competitors are based in China, whereas a Singapore-branded company might offer a higher

guarantee of quality and after sale service. However, the interviewee cautioned that the product is

only a variation of an existing product (street advertising panel) which must justify its cost. The

value-added proposal must come from the compelling features of the product, which may include

offering a complete, differentiated out of home advertising solution.

 4. Recommendations
The above interviews suggest the following conclusions:

- The product is a niche offering improving an existing technology (static billboards)

without reaching the sophistication (but also, without reaching the cost) of the top of the

line, fully animated LED (or LCD) based displays

- The product is interesting enough to potential advertisers, but its price/features ratio

makes it less attractive on its own; rather, the product seems to be complementary to a

static poster offering

- These facts appear to suggest that the product has a limited but valuable appeal, and

therefore operating in a larger market than Singapore might be a compelling proposal

(owning 1% of the Singapore market will result in a limited potential, but even 0.1%

ownership of the New York out of home market would result in a significant cash

inflows)

- The Singapore brand associated with MAD offers a guarantee that would be difficult to

match by existing Chinese competitors, at an ‘Indonesian’ price level

- There is a certain wow factor’ associated with the product, and a need to revitalize

outdoors and out of home advertising, felt by advertisers worried about the public inured

to ‘boring’ outdoor ads

- Full LED (or LCD) screen advertisements are very expensive proposals, and there is a

limited number of installed screens, available only to few advertisers with the financial

wherewithal in select locations

- Export would have to be done using a two pronged approach:

o ‘wooing’ potential advertisers from among the large corporations, which have the

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 budgets, the needs for a large number of deployed posters, and which can enliven

static presentations with a number of animated posters

o Associating with an existing solution provider (advertising agency) as the

subcontractor for the animated posters; this agency would have the necessary

connections with the media buying houses. While the advertiser solicits the media

mix (print, static, dynamic, etc), it is the media buying hose that does the actual

purchasing depending on its relations with advertising agencies

Hence, the author of this study recommends the following:

- Conduct an in-depth research of the main agencies and potential clients in the targeted

markets (e.g. Australia, the US); the contacts established during this study, including the

Singapore-based venture capital firm with investments in media (whose principal has

extensive experience in the field in Europe) are a good basis for initial explorations

- Develop a few targeted proof of concept projects with some non-traditional media buyers

(such as the New York company contacted for this project) which could be used as

showcases illustrating the value of the product

- Develop collaboration skills with a local VAR/integrator by attempting to partner with the

Indonesian company whose manger was interviewed for the project, who would be

interested in purchasing a product manufactured in Indonesia, for the purpose of reducing

supply times and import complexity. In the process, MAD would test the effectiveness of

having a local partner in a near market

- In Singapore, partner with a manufacturer of event signage systems (such as Euclid

System – http://www.euclidsystem.com) and offer an integrated solution to

 companies needing unusual and special signage needs, and willing to pay a premium for

the highly customized product

- For both export, and the local solution provider, find ways to leverage new media

initiative promoted by the Singapore government, despite the ‘low tech’ product (see 5.3,

"Singapore media blueprint"; this is a very recent initiative whose ramifications have to

be studied for the project).

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5. Exhibits

5.1 List of interviewees

1. Caroline Phua, co-owner, MAD;

2. Sandra Neo, co-owner, MAD;

3. Abhay Varma, marketing manager, FMCG company, Sydney, Australia (INSEAD MBA

student);

4. Evan Topilow, director of marketing for PromoMedia Concepts, specialized in out-of-

home advertising, New York, USA (http://www.promocup.com/);

5. Graham Lean, executive manager at MediaDev Asia/Pembridge

(http://www.pembridge.net), venture capital and management consulting firm with a

focus on marketing and media;

6. Handani Widjaya, owner/manager, PT ProPoster, Jakarta, Indonesia, manufacturer of out

of home advertising products, leader in the Indonesian market.

5.2 Interviews
The individual interviews are attached at the end of this report.
5.3 Industry research

- IBM research paper: "The end of advertising as we know it", http://www-

935.ibm.com/services/us/index.wss.ibvstudy/gbs/a1028798?cntxt=a1000062

- Singapore media blueprint: http://mis-asia.com/news/articles/singapore-media-

powerhouse,-inc.

- Detailed chart of the value chain:

- Companies offering similar products (based abroad):

1. http://www.edmonds.co.uk/electroluminescent-displays.html

2. http://www.el-international.co.uk/

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3. http://www.planarembedded.com/technology/el/