How it all began...
Babson College in Wellesley, Massachusetts, is a hot ticket for would-be entrepreneurs today. It has built a reputation as an internationally recognized incubator of entrepreneurial leadership. When Douglas Leeds studied there in the early sixties, this focus on entrepreneurial leadership was unique. Undergraduates were encouraged as part of their education to get out and form a business. Leeds needed little encouragement. By the time his studies were over, he had five different corporations humming along. "My grades got better, the more I did outside," he says.
Not all of Leeds' early endeavours were studies in sophistication. One company he launched sold printed decals at $1.00 apiece or 4 for $3.00 intended for homeowners to display in their windows. The decals, read: "Leeds Security Systems" and were sold by mail-order and designed to simply create the appearance of security. "One does not really need to catch a thief, just create the appearance of security" noted Leeds. I sold over 200,000 decals and still have a check from John D. Rockefeller for $3.00 for 4 decals!" Other businesses begun by Leeds were more substantial. For example, he set up an outfit that manufactured weights to attach to hockey sticks, intended to strengthen young players' wrists. Astonishingly, three of his five enterprises were still prospering four decades later.
A visiting Harvard professor challenged his Babson students to compete for three $100 prizes for ingenuity in drawing up business plans. Leeds pocketed all three awards. When he graduated, the professor called him up: "I want you to come into business with me," he said. As a result, Leeds moved to Vermont, forming a company called Merchant Welcome Service. The plan was to computerize and replace the traditional Welcome Wagon service, under which neighbours greeted newcomers on their doorsteps with gift baskets of local products. Instead Leeds convinced local merchants to sponsor coupons that were printed in a coupon booklet.
"The book had $1,000 worth of coupons, which back then was a lot of money," he says. The theory was that once a newcomer had cashed a coupon at a participating local butcher, or drycleaner, or whatever, he or she would remain loyal to that store. The business was a huge success, though not in the way originally envisaged. In order to identify newcomers' addresses, Leeds needed to know when real estate transactions occurred.
"We hired a person in every town with a registry of deeds to go each month to record all the transactions. Lo and behold, that information became incredibly valuable, because nobody had until then tracked these transactions. We published them and all the agents and appraisers started buying the book throughout New England. They could look up any street and see every home sale there and what it sold for. None of that information had been available before." Today the business is called Auto Data Systems.
Leeds' involvement in these early enterprises ended abruptly when he was persuaded by his father to join the family firm of Thomson-Leeds in New York City. Thus began a career spanning many years during which Leeds steered the company to more creative awards than any other agency in the field. His specialty was in-store and point-of-sale merchandising, and his expertise in wooing consumers at retailers made him widely known and respected. Some of his merchandising concepts were granted patents from the US Patent Office, including a retractable pen he invented for American Express and a suction cup window display holder for Hunter Douglas Inc. "That's the nature of being in the point-of-sale business," he says modestly. "You're always reinventing something. There were actually many more patents, but only 11 had my name on them."
Leeds' stewardship of Thomson-Leeds survived several upheavals. Within a year of his arrival, the firm was sold to Ogilvy & Mather, with Leeds agreeing to stay on as President. He was left to run the company as he saw fit, while also participating in Ogilvy's senior management. A few years later, Thomson-Leeds and Ogilvy were swallowed up by British ad giant WPP, then the world's second largest communications services company. The takeover coincided with a downturn in the ad business and WPP ordered cuts and freezes, even though Thomson-Leeds itself was doing well.
For the first time in his career, Leeds chafed under his lack of direct control. He determined to buy his company back and, against the odds, succeeded in convincing Sir Martin Sorel to sell it back to him. Under his unfettered management, revenues the next year doubled. Then, in 2000, Thomson-Leeds merged with Array Marketing Group. Leeds remained with the company for a further four years. In 2004, then in his late 50s, the company moved out of NYC and Leeds left to embark on a new venture as an in-store marketing and manufacturing consultant.
It was a career change that was to have unforeseen consequences. Not only did it lead to the creation of a new and dramatically successful enterprise, but it also resulted in a personal partnership that has enriched the lives of two masters of their craft, while carving out a unique niche in the world of advertising.
It began when Leeds took a call one day from a stranger in Little Rock, Arkansas who had found him through the Internet. The caller described a company he had formed to sell advertising covers to drape around security pedestals at retail outlets. He had signed contracts with major drug stores, but was having difficulty persuading major advertisers to buy the space. "They hadn't a clue about how to sell advertising," Leeds says. "They were failing. And the retailers with whom they'd signed contracts were upset, because they weren't performing."
The caller knew about Leeds background in in-store advertising and invited him to Little Rock to breathe life into the company. Leeds' entrepreneurial instincts were roused. He jumped at the chance. I said, I love this idea. This is a dream to me. This is one of the greatest things I've seen. Looking back, he says, "It was one of those crazy things like, Why didn't someone think of this before. "
But Leeds knew his limitations. His forte was point-of-sale advertising. His expertise lay in creating innovative in-store displays and signage, and his clients were, not retail stores, but corporate giants such as Philip Morris, Procter & Gamble and Unilever. He realized that to make the pedestal idea work he could not do it alone and was going to need skills he didn't possess.
So he called Jeff McElnea, a friend and competitor, who he had known for 30 years who had a similar background as President of one of the best known promotion companies, Einsen-Freeman, and had also sold his company to WPP. Like Leeds, he ran it for a while under the WPP banner, but in 2003 left to form his own consulting group. Jeff immediately understood Doug's excitement and said he can't do it full time as his new consulting business was doing really well, but would invest and give the new venture at least a couple of days a week. Together they brought in a third friend, Bob Petisi, another promotional and Saatchi & Saatchi agency guy who they both had worked with in the past. Bob also agreed to give the new venture a day of his time a week. Petisi urged Leeds & McElnea to meet someone he knew with savvy in the media buying business. His name was Rick Sirvaitis and while head of GM Media Works which did all the media buying for General Motors was technically the "largest media account in the United States." But it was known that GM was moving media buying and he thought this might be an opportune time to interest a true "media guru" to the business.
Around that time, Rick Sirvaitis had quit the corporate world to launch his own consultancy. A graduate of Michigan State University with both a BA and MA degree in advertising, he began at an agency before joining the sales side in television while earning a law degree at night. In a subsequent stellar career, he had reached the pinnacle of success with stints at NBC, Turner Broadcasting, Fox and the Interpublic Group of Companies, where he ran the media operations for General Motors with a budget of $2.6 billion and a staff of over 120. Leeds' call came at a propitious moment. "I was looking for some new challenges, and this was a great new challenge."
Together they checked out the Little Rock operation and the more they looked the more they liked it. They were invited to invest in the company, and eventually bought it out completely. Sirvaitis at once spotted the fatal flaws in the original operation.
"All of the people that were involved in the company till now were promotions people," noted Sirvaitis. "We realized that they needed to deal with the product as media, not as promotion. But they didn't know media. They had done some fantastic groundwork in terms of signing up retailers. But they couldn't figure out how to sell it. To go out and sell a media property you have to know the terminology, understand how to estimate the impressions and sell on the basis of a cost per thousand. You can't just walk in on a client without giving them a good reason why they should drop something else."
As they surveyed their new territory, Leeds, McElnea, Petisi and Sirvaitis took into account some radical trends reshaping the advertising world. They were keenly aware of the fragmentation rattling the industry. Consumers were showing resistance to traditional media. With the average home accessing as many as 130 TV channels, the reach of each channel had been severely diluted. The ubiquitous use of digital video recorders allowed consumers to avoid commercials entirely. Changing reading habits were eroding the reach of print advertising. Of great significance to the new partners was that out-of-home advertising was now the second fastest growing sector of the industry, behind the Internet. And "out of home," they reckoned, clearly included stores, particularly drug stores, which were fast becoming the new convenience stores of the age. This was where they would position their newly acquired company, which in 2006 they launched as StoreBoard Media LLC, with Leeds as Chief Executive Officer and Sirvaitis as President.
"We changed the whole nature of how they went to market," says Leeds. "They were selling it as an in-store promotion and we said, no, this is a billboard and it's media, and there's a lot more money in media than there is in promotion. More importantly, we thought this was a branding vehicle, and it needed to be very carefully positioned as that. "
Sirvaitis saw the enterprise as opening up a completely new world. "What we wanted to do was bill ourselves as an out-of-home billboard network that just happened to be inside a store, in a great location. We were offering something that delivers a message in a very compelling and vivid manner to people as they go through the normal routine of their daily life. It's truly a mass medium reaching large numbers of people. We have the ability to reach over a billion consumers over a four-week period at a cost per thousand of less than $2.00. We can actually increase a client's reach, give them greater brand awareness and reduce their costs. It's a real value to the client. I just love the fact that we were able to create a new advertising medium."
The partners' game plan of giving individual advertisers exclusive access to the pedestals for month-long campaigns proved attractive, both to the clients themselves and to the stores, who were guaranteed a new source of income to offset their security costs.
StoreBoards typically feature a large brand icon, front and back of each pedestal. Competing in-store media capture far fewer shoppers, due to their dispersed locations in aisles. Fewer than one in 10 shoppers ever goes down all the aisles of a store on any one visit. Pedestal posters are more effective than in-store radio plugs or grocery cart ads. Other out-of-home media, such as billboards, bus shelters and transit signage, are much less efficient. Media buyers discount their quoted audience size, allowing only the percentage of drivers/pedestrians who "noted" the ads to be counted. Because of their location and size a typical store with three to four pedestals will have approximately 60 sq. ft. of exclusive branding space the posters provide an unprecedented opportunity for large ad placement.
StoreBoard Media gives advertisers a cost-effective way to dominate the all-important "front end" of high traffic stores while giving retailers a way to excite their store environment and gain a new revenue source beyond traditional product sales and vendor co-op dollars.
By mid-2009, StoreBoard Media had more than 72,000 advertising panels in more than 12,000 drug stores, including chains like Rite Aid, CVS, Duane Reade, Kerr Drug and Navarro. The company, now operating in all 50 states and the District of Columbia, expected to have exclusive arrangements with more than 20,000 locations as it expands beyond just drug stores. Brands and companies that have advertised with StoreBoard Media include P&G, Cadbury, Coca Cola, Nestle, Kraft, Unilever, Pfizer, Chase, Citibank, CBS Television, Wyeth, L'Oreal, Alberto Culver, Hershey's, American Greetings, Schick and others. The company had quickly become the largest indoor billboard network in the United States. It was ranked by Inc. magazine in September of 2009 as America's 66th fastest-growing private company, and the sixth fastest growing in the advertising and marketing category. The ranking was based on an astonishing revenue growth of 2,025.7% between 2005 and 2008.
Leeds was overjoyed at being recognized on the prestigious Inc. 500 list: "Our rapid growth is testament to our ability to provide advertisers with a powerful mass medium branding tool that reaches consumers in the course of their daily lives as they are about to make purchase decisions."
Sirvaitis still marvels at the sheer simplicity of the concept: "When we went to our first trade show, everything was high-tech and digital. I said, 'You know, we're referring to ourselves as low-tech. In fact, we're no-tech.' That's the beauty of it. You slip the ad over the pedestal and that's it. People coming into and exiting the store cannot miss it. If you can pass your driving test for peripheral vision, you cannot help but see our signs. They're on both sides, and you have to walk between them. We reach everybody."
Sirvaitis recently spoke about StoreBoard to university students: "I pointed out that just when you think everything in media that can be done has been done, that everything must be digital because that's the hot thing, a couple of guys come up with a little concept that's so simple it's frightening. And look at the impact it's had."
The impact was great for a simple reason that it was entirely new to an industry hungry for innovative ways of reaching the consumer, without arousing resentment and a backlash over advertising "clutter". One major retailer that does make use of security pedestals as an advertising tool is Wal-Mart. But they do it in-house, and in a way that is not a competitive threat to StoreBoard.
"Until we came on the scene there were no ads on pedestals," says Leeds. "We still don't think anybody is doing it in the same way we have approached the market. One key measure of the extent to which StoreBoard has dominated this advertising niche is that major advertisers come back for more."
"People aren't buying us because we're cute," says Sirvaitis. "They're not buying us a second time because we're fun. Bringing people to renew is the most difficult thing and we at StoreBoard Media have got 80 percent renewal rates 80 percent of our advertisers have renewed. That's the essence of what we're trying to do here."
StoreBoard's success with drugstores has hinged on the fact that such retailers almost always install security pedestals to counter petty pilfering that can amount to a damaging nine percent of sales. The pedestals "read" price tags on purchases passing through them. Supermarkets selling lower priced goods have not, until recently, found pedestals cost effective. But that is changing, as superstores start selling a wider range of higher-priced items.
"We think there will be growth in other retail outlets going forward for sure," says Leeds. Other potential markets include home improvement stores, with their "fascinating demographics," the 14,000 Dollar stores proliferating across America, and also specialty chains, such as toy stores and video game retailers. There are other possibilities in Europe, where the security pedestal technology is almost identical to that in the U.S. There is every chance that StoreBoard will eventually become an international concern, says Leeds.
After just a handful of years in business, StoreBoard's success has not unexpectedly attracted eager suitors ready to buy the company. But both Leeds and Sirvaitis know that whatever price they might be offered, it would be unlikely to reflect the true value of what they have created. Besides, it's their baby, and they're not done having fun with it yet.
"It's a fun challenge," says Sirvaitis.
"Doug and I, we talk to people who want to talk about investing in us and I point out that I have a couple of issues: 'You may not give us the valuation we want, but, more importantly, we actually have fun together. We take it seriously in terms of how do we grow and how do we attract business, but, at the same time, it's fun. On a personal level, he says, he and Leeds who were previously unknown to one other have become "like brothers, we balance each other perfectly."
At the start-up, says Leeds, three of the four original partners worked without pay for three years. "We came up with a formula that allowed each partner to get a percentage of equity according to the time he put it in. It was a way of financing the business rather than putting up a lot of cash, paying it back to ourselves and then having to pay taxes on it." Adds Sirvaitis: "Literally, for the first few years we didn't take a dime out. If I had to travel, I did it on my own dime; if I had to take clients out, I did it on my own dime. That's how it works. You just deal with it. In my career, I've handled a lot of big clients; but it's different when you put your own money in. You say, OK, we've got to make this thing work. "
Leeds stresses his good fortune in being able to recruit "a great staff, which is easy to do when you're small." At weekly team meetings, everyone in the company shares what they've done during the week and what their plans are for the week ahead. "This way everyone is involved and is aware of everything that goes on in the company," he says. "It allows a big learning curve for all, in every sector of the company, and we plan to continue this for the growth of the company."
Adds Sirvaitis: "After I left my last corporate job, I told myself that moving forward anything I do, I'm going to do because I want to, because I believe in it and because I enjoy it. Too many people in the world are slogging through in a job they despise, or don't like, because they have to. I'm only doing things I believe in and I definitely enjoy doing them."