Sean McCaffrey, GSTV

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

In the early years of digital signage networks - particularly those that were ad-based - operators would often describe how their medium was captive. The proposition was that people stuck doing something - usually waiting - would pass their time looking at a screen.

Then smartphones came along, and there went that notion. Except in places like gas stations, where people still needed to be somewhat focused on the task. A company called GSTV has been running a digital signage channel on the screens of fuel dispensers for almost two decades, and is deployed at more than 25,000 locations.

The company dominates its category, and the mix of programming on the pump screens has 100 million unique viewers.

The pitch to planners is far more sophisticated these days than the captive audience thing - something very obvious in this talk with CEO Sean McCaffrey, who gets into a lot of detail about the benefits for consumer brands and for the gas station and C-store operators who work with GSTV.

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TRANSCRIPT

Sean, thank you for joining me. It's almost weird to think about, but your company and your medium is actually a pretty mature medium now. 

Sean McCaffrey: It is. I still look at it as very new. I've been with the business for five and a half years, and when I describe it to people at a backyard barbecue, and they ask what I do, I say: I run a six-year-old startup that happened and have a one-year proof of concept. So to your point, we've been around for 15+ years as a sector, if you will. 

For people who maybe don't live in the United States, describe what it is that goes on. 

Sean McCaffrey: Yeah, no problem. So GSTV  is a national digital video platform in 205 US markets. Out of 210, we reach about 50% percent of US adults every month, about 116m monthly unique viewers, and we connect with consumers three to five minutes at a time, three to five times a month when they're fueling up their vehicle. So think about it as a very habitual serialized engagement week in and week out when someone stops to fuel up as they're running errands on a road trip, on their way to the ballgame on a Saturday, that sort of thing, and we partner with the fuel and convenience retailers in the US to put in this amenity, provide information, entertainment, that sort of thing, and focus on building value for brands, agencies, retailers, and consumers, and we work with a variety of large chains, small chains middle market, kind of everything in between.

And the nut of it is you've got a screen embedded in the fuel dispenser. 

Sean McCaffrey: Correct. Our screens come embedded in the fuel equipment, which is a long-term hardware purchase decision for fuel retailers. The retailers get it as an amenity, and they get a small amount of promotional time within our show. There are shared economics amongst the parties obviously as well, and then we build a consumer experience that provides value to the retailers, value to consumers, and then brands and agencies can integrate in any number of ways. The way we look at it is we program a show every day. Every station is like an addressable household. The household has more family members, so we could have tens of thousands of different versions of the show on any given day, depending on what content and what advertising is running. 

Now, we don't go probably down to that level of customization just based on how brands use it. But think about urban, suburban, weekday, weekend, all those lake and beach communities, let's say all summer long, that is a very different population from Thursday to Sunday, let's say in July versus January. So lots of ways to customize the entertainment, content, commercials, advertising, and so on.

I have a bit of a past with this stuff going back to the early to mid 2000s when there was a Canadian company also looking at this, and at that time it was extraordinarily challenging to put a piece of electronics on a fuel dispenser that's sitting on top of a reservoir of thousands of gallons of flammable liquid. It was a little nerve-wracking. 

Is it now a standard piece of kit, so to speak, for the fuel dispenser manufacturers like the Gilbarcos of the world?

Sean McCaffrey: It is, and you're right, that era in the early to mid two 2000s, not just in our space, but really in broader digital signage or digital outta home, if you will, in general.

There was a lot bigger hardware literally and figuratively, hardware and software challenges to solve. Now, they're not done today, but all of this has come a long way. So for our business today, yes, it's a very standard part of what our great partners at Dover and Gilbarco both produce. The retailer can make a choice on the equipment that they want to buy and everything comes kitted out for them. There's an upgrade opportunity if they have equipment already. There's a new equipment purchase opportunity, so there are obviously several different SKUs of hardware products they can buy, and then it's all IP addressable, and all enabled that our team runs. And we have a network operating center that it's all built on and enabled programmatically in terms of scheduling as well. 

So it's really come a long way. Anyone that is involved in digital signage or the digital out-of-home space knows that mid two 2000s era, call it 15-20 years ago, there were lots and lots of networks trying to put signage out there in hopes of I think advertising would follow. A lot of it was probably a solution in search of a problem, as they say, and today, we're very focused on our place in the value proposition, so to speak. So our retail partners really care about that 20-foot consumer journey. Someone fueling up and then going in the store and buying anything. The hardware partners, they want a great product and to be able to offer this as an amenity, and then for consumers, our time is precious today While it's not a channel selection, you're not gonna binge watch hours and hours of our programming, let's say, in the way you might Netflix or Peacock. It is an opportunity to provide value to consumers, entertainment information, and that sort of thing. So come a long way in all regards, I think, and not just hardware. 

And so you can retrofit an existing fuel dispenser, right? 

Sean McCaffrey: They're some of the old SKUs of hardware, not necessarily, but yes, for the most part, it's generally an upgrade available. 

And is that something you put on top of it, or you replace the screen that's in there? 

Sean McCaffrey: It replaces the equipment that’s already in there. One of the reasons that the businesses came together in a joint venture in early 2017 was first of all to provide some scale in the space. But second, there was a push from the credit card companies for a payment processing upgrade. So the EMV technology Europay, MasterCard, Visa. There was a requirement from the credit card companies that all the fuel and convenience retailers in the US had to upgrade their credit card technology. So that was an obvious time then for every retailer to decide on a larger upgrade cycle what they wanted to do, and many of them chose to augment it with screens that they didn't have previously. 

So this is not a build it and they will come thing at all where you're incurring the capital cost to put this in, it's the fuel retailer? 

Sean McCaffrey: Correct. That was the earlier generation of the business where some of the predecessor companies you probably know, or the company that you mentioned where there were screens that sat on top of the fuel dispensers of various sizes, and you then incurred every challenge you have beyond CapEx, just the installation, the maintenance, that sort of thing. These are all dispenser-integrated units. So the CapEx is built into the economics amongst the various parties. 

And is the primary motivation to get people into the convenience store, because most few retailers these days seem to have a retail store associated with it, or is it the revenue share that they might see out of it or they do see out of it?

Sean McCaffrey: It's primarily to drive people into the stores. A couple of percentage points of growth in soda and snack sales is I think a lot more interesting to most than the advertising revenue. 

That's not to say the advertising revenue is not substantial or interesting, but there's lots and lots of data that the industry publishes every year here in the US about the volume of consumers that fuel up and just drive away, don't go in store, the volume that does go in store and what they purchase, and so any opportunity to drive sales in-store and raise basket size once somebody is in the store, for example, it gets you to buy a snack instead of just a soda, get you to buy a snack and a soda and a lottery ticket, you name it, is useful, and there's a great deal of sophistication in the space as well. 

I think most consumers in the US are familiar with the largest brands, the 7-Elevens, the Circle Ks, and that sort of thing. But there are a number of what I'll call major and mid-major regional chains anywhere from 800 to 1000 stores down to maybe 50 to 100 stores where they've got a loyalty app, they've got a promotional program, so very sophisticated folks in the space that I think a lot would be surprised about to learn. I think the difference in fuel and convenience in the US to, let's say, grocery or big box or some of the other large physical retail channels, there isn't consolidated ownership that you see in those spaces. So at times, I don't think consumers really understand the size of the sector, but the fuel and convenience space is more than 3% of the US GDP. So it's a huge economic driver, and so back to the retailer, they care about that 20-foot consumer journey and getting more people to come in and then buy more once they go inside.

I'm assuming that in the early days, you were selling the dream that if you do this, people will go into the store, but now the, the, there's analytics, there's the level of sophistication that can give you some data that will prove out that, yeah, this they saw this and then this happened, or how does that work?

Sean McCaffrey: Absolutely. It's a great question. So obviously, the retailers have their own first-party data relative to sales. So they have an understanding most directly if something's being advertised out in the forecourt, and then sales go up in the store, they know. But we work with a number of third-party partners, IRI and Catalina, as two examples to measure sales lift both in the store and then nearby, in adjacent grocery stores, big box retailers, pharmacies, that sort of thing. Because there's an old cliche in advertising, right? That half of my advertising works, I just don’t know which half, and that's not been good enough for a long time. We had 135, I think the number is, research studies in the field last year with clients from upper funnel analytics, brand favorability, and brand recall, down to much lower funnel direct sales and sales lift metrics.

And so we've been at that for 5+ years now, and we start to see to some degree what you would expect, in other words, for CPG products in the fuel and convenience store. For very mature trademark brands and large-scale products, we might see a 1-3% sales lift which is huge for really established, CPG brands. For newer brands, li brand extensions, and things like that, we might see high single-digit, low double-digit sales lift, which is also great, and that's been validated by a number of the CPG brands that we work with as well. Obviously, the larger ones have very sophisticated in-house marketing sciences teams and do all sorts of market mix modeling. So even though we fund studies with IRI and Catalina, which are really well-established partners. The brands also do their own modeling and report good results. 

It's a lot of what you would expect, I think, in that there's an opportunity to drive someone for an impulse convenience purchase when they're 20 feet away, if they're slightly hungry or slightly thirsty or many of the fuel and convenience retailers have pretty sophisticated food service programs these days and so if somebody's grabbing lunch or dinner, they've got a lot of choices. They can go to a grocery store and get a prepared meal. They can go to a drive-through at a QSR next door, or in some cases, they can go inside the field and convenience retailer and get pizzas and sandwiches and other things. We've got hungry consumers and a big opportunity to influence them but from a measurement standpoint, we've got lots of ways to draw a straighter line between the advertising impression and the business outcome.

If you're doing that volume of research that repeatedly suggests that there's still some skepticism among the brands that they go, prove to me that this works.

Sean McCaffrey: I wouldn't characterize it as skepticism as much as I think there's a spectrum depending on the category, and for example, an auto brand, the KPIs that they're looking for are dealer visits or site visits or someone going in and starting to build a vehicle. CPG brands obviously look at sales, and financial services brands look at card usage, card signups, and that sort of thing. So depending on the category, we've commercialized research capability with a couple of household names: Foursquare, Axiom, MasterCard, ISI, Catalina, and plenty of others. So our sales and marketing team can simply say “yes” when a client says, can we measure it?

Some categories are more mature for us, for sure. Auto, CPG, financial services, insurance, you name it. There are some that are earlier adopters to us. Entertainment's one, for example, where we can show the trailer and tell somebody to tune in tonight, binge-watch it this weekend, et cetera, and so we've got a good diversity amongst categories. So in some cases, it's a newer brand, and they want to test and learn and then measure and grow. In other cases, it's brands where measurement is just a part of every single thing they do. 

To my earlier point when I came up in advertising, I worked in a legacy radio business, a legacy billboard business where those are classically regarded as more, upper funnel reach media where we weren't typically asked to measure business outcomes or direct results, and I think today, especially in the current economic environment, particularly over the last decade, advertisers are looking to measure every marketing dollar they spend realizing it doesn't all do the same thing, right? The Super Bowl ad is not the same as a buy-it-now ad on social media or something like that.

But the research that we do is on some well-established clients and some new clients, but I wouldn't say it relates to skepticism more so just that brands today expect everything to be measured, 

And you also, I believe in the last two or three years have introduced capabilities to not only push people into 20 feet across the Forecourt, into the C Store there, but to the grocery store that might be five blocks away, that sort of thing is. Why did that happen, and what are you seeing out of that? 

Sean McCaffrey: So the interesting thing I've learned more than I ever thought I would know about the fuel and convenience space, much less consumer behavior on the day people fuel, so we produced some research about five years ago with MasterCard, and then we did an updated version with a much deeper dive the last year with Affinity Solutions, which has credit card and loyalty card data to basically look at the way people spend money every hour of the day, every day of the week, online, offline, with then one filter, if you will, added: the day people fuel up and is anything different, and it turns out it's really different. Fuel Day is a surrogate for a lot more grocery shopping, a lot more QSR visitation, a lot more pharmacy stops, big box retail, do-it-yourself, that sort of thing.

So Fuel Day is a very differentiated day for consumer behavior and consumer spending. So with the rise of retail media as an investment channel over the last couple of years. In other words, with Walmart starting a media network and Kroger starting a media network, we started having more and more of our CPG partners come to us and say, “Hey, we want to apply this sort of thinking, this retail media, commerce media thinking in the fuel and convenient space. But there isn't anyone with consolidated scale and the way there is in grocery and big box.” So as big as the biggest retailers are in our industry, you put the top five together, they have less than 20% of the sector. So we are the largest consolidated network in US fuel and convenience in terms of ad-supported media.

We launched a product called GSTV Amplify, which is really a parallel path. Number one, it's about driving sales in the fuel and convenience stores, which is critically important, and then number two, it's recognizing that our consumers are 5-7 times more likely and spending that much more on the same day to go next door to a grocery store, QSR, you name it. So the agencies and brands that are spending money across retail media, in grocery, retail media in the big box, they can leverage that data, they can apply that thinking with us. 

I had one Head of Investment at an agency say to me, this is basically the last TV ad someone can watch before they go into the grocery store. And I said if that framework helps you, sure, that's one way to look at it. We're in the solutions business. So from a scale standpoint, I mentioned our business. If you took the food and beverage sales at our stores compared to the largest grocery chains, what is the 10th largest grocer in America? If you added fuel to that like Kroger and Albertsons do when they when counting the numbers, we are the fifth largest behind Walmart, Costco, Kroger, and Albertsons. I'm not selling produce, I'm obviously not building physical retail stores, but I say it just to give an example of consumer purchasing power, right? And that's what brands and agencies are trying to find, the proverbial right place, right time, the right moment to find real attention and impact consumer behavior.

Is there any kind of an audit trail? So if I'm on my big shop day and I stop at a fuel retailer and use my MasterCard to buy 12 gallons or whatever it is, and then I go to Costco, and then if it's me, I'll probably go to the wine store or something. But is that traceable? Is there a way of saying, okay, Dave got fuel at 11, and at 11:30, he bought stuff at Costco and so on? 

Sean McCaffrey: So yes and no. Yes, in the sense that yes, we can do what you're describing. No, we're not tracking Dave specifically, right? We do not collect first-party data.

So often, a question I get is if people are swiping their credit card at the field dispenser, so you know it's me. We do not collect and track that credit card data or any other data. What we have is a naturally data-rich environment. There is that credit card swipe, there is a device ID typically in the vehicle or on the person, and device IDs and credit cards are well-worn ways to connect to household identity graphs, loyalty card data, and other ways. So yes, so what you described, we do with partners. So depending on the category, CPG brand, or auto brand, we can do that walk back to impact to show sales lift, brand lift, or any other KPIs. We do some direct surveys. 

There are companies, obviously, that do mobile location surveys that push advertisers for different things. But we work with well-established privacy-compliant industry partners to track that. As well as work with many of our brand and agency partners directly. Because the big agencies all have their own data operations these days, most of the big brands have an in-house marketing sciences team tracking all this. So what we decided to do when we were launching our approach to data analytics and research is not to build another black box that nobody was asking for, or nobody needed.

What the big agencies and brands said to us is that we just need input. We need to be able to input the GSV exposure into our tools the same way we input a CTV impression or a YouTube impression or you name it, so they can understand the impact on the campaign because it's obviously never one thing. All of these ad impressions combined to provide impact to the brand and agency. But one of the things that were interesting to me when I consider joining the business is that it is much more of a mid to lower-funnel ad exposure opportunity. It's naturally frequency capped, right? We're going to see somebody three to five times a month, not three to five times a day when that banner ad follows you around the internet. So the fact that we do have these data signals that we can use, again, in a privacy-compliant way to track success metrics is important and a differentiator for us.

Is it easier to do all that stuff now because of all the API integrations and AI and everything that's come along as opposed to in the past where yes, we have that data, but we're not sharing it with you? 

Sean McCaffrey: It has, I think for a lot of different reasons, whether it's the rise of retail media, whether it's the acceleration of machine learning, tools, and this sort of stuff, or the big agencies all purchasing their own or building their own data operations, whether it's Epsilon, Axion, Merkel, that sort of thing or others like Omnicom. Everybody understands they need a privacy complaint consumer to opt-in to track this stuff, but then it's also important to have interoperability between all of this to measure. It doesn’t do anyone much good to have a bunch increasing. walled gardens, right? So today, whether it's a cooperation-type environment or an industry-standard environment, it's a lot easier.

At least in the US market, combined with the changes in the advertising market over the last decade. In other words, the value of the living room wall. Is certainly challenging now compared to when I was a kid, and there were three TV channels, and it was, every night was must see tv. Today we spend our time as consumers quite differently. That change was only accelerated with Covid as far as people splintered viewing habits, and then the disruption in signal loss and digital now with device IDs and other things being sunsetted, the deprecation of cookies. It's moving most advertisers into more, I think, middle-of-the-funnel analysis. In other words, not everything is a buy it now button sort of conversion—the proverbial last-click attribution of a decade ago. So for us, GSTV, is what we hear often from our advertising partners anyway. If we have the scale of broadcast, which they like because of most categories, you just still need a lot of people. We've got some level of digital muscle memory for targeting attribution. Then it is this real-world consumer opportunity, which is what people generally get excited about around mobile and out-of-homes.

So it has the sort of DNA of several interesting things to advertisers, and we've built a team around the business on the sales and marketing side that comes from various big firms in the digital and video space. On our retail success team. I have a great team that literally helped build the network going back 10 years plus, and those two teams really parallel paths are commercial relationships and client service. So we have a retail success team that is just as focused on our commercial relationships with our retailers and our hardware partners. As is, our sales and marketing teams focus on the brands and agencies.

The retail success team that's nurturing the footprint that you already have, are you still building that footprint, or is it built out? 

Sean McCaffrey: Yes, we continue to build it. So a natural upgrade cycle still happens every month, every quarter, and every year, where we have retailers deciding to upgrade their equipment and add new sites. And then we have a very high 95+ percent renewal rate from retailers that have us already, and so the network is about a third of the fuel and convenience sector in the US today. At some point, it'll probably get north of half, and then beyond that, there's a point where we've probably ended up getting every retailer who's wanted this as an amenity because it is a different retailer. It's a retailer that is generally a little more focused on the customer experience, a little more focused on Forecourt conversion, a little more focused on end-to-end sort of promotional comms, and so on. 

So there's no mission here to get every fuel and convenience retailer in the US just due to the nature of the space. But yeah, we continue to grow every month, every quarter, every year. 

It's a case where it sounds like you have most of the markets that you'd want to be in any way so once you get to all that number, I forget what you said, it was 240 or something like that, at that point, adding more screens maybe doesn't matter all that much, right?

Sean McCaffrey: Yes, you're right. It's one way to look at it. But I wouldn't say we'll be happy once we feel we've partnered with every fuel and convenience retail in the US who like us, I think their business continues to change. So as they think about forecourt-to-store conversion, integration with their loyalty apps, and promotions, we're talking to some commerce partners, some loyalty partners, and different people like that where can we potentially provide a service and another service and amenity to the retailers? Not everyone has the wherewithal or the financial structure to build that on their own. Can we go into parallel and adjacent spaces? We've typically not gone inside the store. We've not wanted to compete with our retailers in a way.

But several have come to us lately wondering about their own sort of digital consumer experience journey, and there is an opportunity to partner together. So we're talking about that, and then the actual incorporation of the company. We do business with GSTV, but the actual incorporation of the company is destination media. And there's some thought to that in the sense that. We are a national digital video platform consumer, the literal consumer journey. There might be other places and spaces, high dwell time environments where it's somewhat similar to what we do today, where there's a premium audience we can define an entertainment and information amenity, and so are there opportunities to continue diversifying our consumer touchpoints, Channels within a platform-type environment where we can provide some additional value to the people we think about today, which is a long way of saying we're not going to build more screens or buy more screens just to get more screens. But I think there's some natural one plus one equals three or four or five with other potentially parallel channels or spaces beyond the fuel and convenience store. 

Yeah, you would think that. My experience is that end-user customers are not looking for more technology vendors. They'd like to slim out the number that they have. So if you have enabling technology that could do the video marketing inside the stores they'd probably be pretty motivated to go that way as opposed to sourcing some other vendor. 

Sean McCaffrey: We agree. I think there's a moment in time right now that to me feels a bit like that era you referenced earlier. In other words, in the mid 2000s where I think there are a lot of people, at least at this moment in time, running around suggesting hang screens anywhere you can hang screens, create experiences, sell ads and there's almost a suggestion that it's just that simple or just that easy, and anybody that's done it knows it's not, and it's really hard.

And also, it needs to be there for a reason. In the mid two 2000s, there were a lot of networks that were well-funded and had great management. And, 2008’s, recession aside, never really got off the ground because they were building a solution that really no one was looking for, vs. today, I think whether you're building a commercial real estate project and you're considering digital signage or you're doing something like we are, you have to think about how are you providing value? 

And for us, we're doing something that would otherwise be overhead for the retailers and difficult to do at scale, and it was challenging when five or six companies were doing what we're doing, and they all were pretty small. It was tough to get the attention of larger brands and agencies. So yeah, whether it's the hardware and software capability, or the sales and marketing engine, or the combination thereof, we're happy with what we've built so far. By no means do we think we're done, but we're looking to be a solutions provider to partners and if somebody has a network or is considering building a network and we think we can provide value, we're certainly going to talk to them. 

Do you have competition? 

Sean McCaffrey: There is one small provider in our space that I believe has a couple of hundred locations right now.

They work with a different hardware provider that we're contractually unable to work with. We're very focused on the fuel and convenience space from a retail partner standpoint, but from an advertising standpoint, I often get, who's your competition? Is it people in the movie theaters, or is it people in the airport or the malls? And no, we don't sell screens. We don't charge $100 a screen or $200 a location. We sell an audience, and you can slice and dice that audience in several different ways.

So when we talk to advertising partners, it might be a major national CPG this morning, and they're launching a new product in the southeast this summer, and we're talking about that. We might have lunch with a television team at a big agency that's trying to find people who buy reach curves and things like that. And then late afternoon, it might be a digital auto home team at an agency looking for proximity to a QSR, and they want everything within five miles of a particular QSR. 

We're competing for ad dollars in the television space, the digital video space, the retail media space, and the digital out-of-home space. And we don't have the luxury to say we're only one of those things, but I think we've got the opportunity to compete and take share across that spectrum, and that's really how we've grown. So the business has more than doubled in size in the last couple of years, both in employees and revenue. And it's mostly because our sources of advertising revenue have come from just a wider and wider part of the advertising landscape. 

Does the business runway have an end to it because of the rise of EVs and EV charging stations and so on? I would imagine it does, but I think it's probably like 15-20 years out.

Sean McCaffrey: We don't think of it as an end as much as an evolution, right? No one is debating the emergence of EV vehicles, no one is debating the eventual roadmap of electric vehicle charging. I think everyone, at least in the US anyway, is debating how long it's going to take, number one and number two. Number two, perhaps most importantly, is how's it gonna be paid for. There's never going to be enough tax subsidies to support all of it. So there we announced last year, we announced a partnership with our labs in ChargePoint to build an ad supporter network with ChargePoint, who's currently the largest large provider by a long stretch by probably a factor of five, the largest EV charging infrastructure provider where just like our business today, we think there's an opportunity for an ad-supported amenity to build out that infrastructure, and there's a bunch of advertising-supported models that have helped build out critical infrastructure going back to the early days of television and radio and everything since. Ad supported models help build us out. So we're excited about the relationship with ChargePoint and a number of their partners, and we think the journey for consumer behavior is going to be a long time, still a multi-decade transition, and as I alluded to earlier, the way we think about our business and the broader destination media sense is the platform and foundation we built in fuel and convenience is hugely important and hugely critical infrastructure today.

But whether it's the EV platform, that's really our second network or a third, fourth, and fifth one to follow. We think time spent outside the home is going to continue to grow and add supported opportunities to identify those consumers, and serve them something relevant, measuring the success on the campaign is going to continue to be critical.

So we remain pretty excited about the future, both the business we have today and the evolution it can drive for us. 

That was super interesting, and time just flew by. I had many other questions to ask, but we'll have to do this again if you're willing. 

Sean McCaffrey: Yeah, I'd be happy to. I really enjoyed the conversation. Thank you for having me.