Yesterday, we chided CBS for resorting to financial engineering to pump up its stock price (“returning capital to shareholders” by borrowing from lenders and boosting equity dividends). Today, however, the company has actually added business value–by using its cash flow to buy a growing digital advertising business.
The $72 million all-cash SignStorey acquisition–to be renamed “CBS Outernet”–will boost CBS’s presence in the rapidly growing “place-based advertising” industry (a.k.a., video billboards). SignStorey operates digital video displays in more than 1,400 grocery stores in major markets across the United States. Ads can be customised by region and by daypart, and the company’s satellite-delivery system enables immediate, customised programming to each individual system. SignStorey has long-term exclusive contracts with SuperValu (Acme, Albertsons, Jewel and Shaw’s), Pathmark, ShopRite and Price Chopper, among others, and currently blares video ads in the vicinity of more than 72 million consumers every month. Revenue more than doubled in 2006.
As noted here, the video-billboard industry has become a real business: $6.8 billion a year. Billboards as a whole are also one of the only traditional media businesses that is growing. (See Google Sucks The Life Out of Traditional Media).