DOOH Start-up Loop Media Slows Growth, Weighs More Layoffs, Citing “Headwinds” In Ad Market

August 9, 2023 by Dave Haynes

Regulatory requirements require publicly-traded companies to pull the curtain back on their business performance – in this case providing a rare look at the challenges of a land-grab strategy in a hyper-competitive part of the digital OOH landscape.

LA-based Loop Media – which puts set-top box media players into spaces like bars, restaurants and C-stores for free and offers ad-supported streaming infotainment – has issued its financial and operating results for its fiscal third quarter ended June 30, 2023.

The filings show the company had revenue of just south of $6 million in the last quarter, down 47% year on year, and the company is operating at a loss. At the end of June, it had 34,898 play-out nodes in the field and, with (presumably) some driving more than one TV, roughly 37,000 screens running Loop channels.

Loop’s CEO says in an investor relations commentary that layoffs might be on the horizon, and that the pace of expansion has been slowed.

“I am pleased to report that we finished our fiscal third quarter stronger across all metrics than we initially announced in our guidance issued in May,” says Jon Niermann, CEO of Loop Media. “In addition to achieving the forecasted approximate 20% SG&A expense reduction in the June quarter compared to our March quarter, we exceeded our revenue and gross profit margin forecasts. During the June quarter, we continued to focus on cost reductions while maintaining our attention on distribution. We also managed to secure a significant Partner Platform partner at the end of the quarter, which led to expansion in that business in the short-term,” 

“The headwinds we experienced in advertising demand that began in our December quarter and that have continued during calendar 2023 have required us to revisit our cost structure and growth strategy in calendar 2023. To meet the challenges associated with this environment, we’ve continued to strengthen the foundation of our business while looking for ways to reduce costs and increase efficiencies.

In our fiscal third quarter ending in June, we made some headcount cuts that helped strengthen our bottom line. That said, since our beginning, we’ve always taken pride in building a ‘lean’ organization, and we were able to absorb functions of eliminated personnel into existing positions. We had 73 full-time employees as of June 30, 2023. Going forward, we may need to make further tactical employee reductions in certain areas of our business, which may be offset by adding focused headcount in areas where we believe we can grow revenue and distribution.

Network Growth Slowed 

We also were deliberate with a slower pace of growth in QAUs in our O&O Platform business for the June quarter from the prior quarter as we looked to prioritize and incentivize the distribution of Loop Players in key advertising markets and geographies, as well as into more desirable out-of-home location types, like convenience stores, restaurants, bars, and other retail establishments. Thus, our result of a 7% QoQ increase in our third quarter.

We also looked to reduce our presence in less desirable out-of-home locations, which offset and reduced our net distribution growth. This is part of the natural learning and development of our business – better targeting and focusing our time and investment on location types that we now know are more lucrative. We believe the focus on key markets and geographies will help deliver greater returns to us over time. Conversely, we were aggressive with our Partner Platform growth, resulting in a substantial increase of 50%, from 24,000 to 36,000 screens across our Partner Platform, at the end of Q3,” says Niermann.

“While we achieved quarterly revenue growth and an increase of screens in our Partner Platform in the June Q3 quarter compared to the previous March quarter, we are still seeing a challenging macroeconomic environment coupled with continued headwinds in the advertising business. We believe that our business and distribution platforms are well placed to take advantage of any macro-economic market recovery and increase in advertising spend that may occur in 2023 and beyond,” adds Bob Gruters, CRO.

In the 2023 fiscal third quarter, revenue decreased approximately 47% to $5.7 million compared to $10.8 million in the same period in fiscal 2022. The decrease was primarily driven by a material slowdown in digital advertising spend due to the macroeconomic environment.

“We have more clearly learned that there still is an education process involved with many of our advertising partners that Loop is an extension of Connected Television (“CTV”) and digital video budgets as opposed to just digital out-of-home (“DOOH”). We have worked with these partners extensively over the past several months to encourage them to once again open up their budgets to all forms of digital video, which will help us going forward, as it did in previous quarters,” says Neil Watanabe, CFO.

Building out these kinds of networks has always been hard, but costs are a fraction of what they were 20 or more years ago when early Digital OOH companies like NGN and Zoom Media were doing similar rollouts built around a free technology/revenue share model. Back then, companies were putting in PCs and even screens. Now they send out inexpensive set-top boxes that get plugged in the back of TVs without any technician having to come on site.

But the start-up and rollout phases of these projects is still expensive, and companies have to get to a critical mass of location counts and geographic coverage – which takes time. While the hardware is now relatively inexpensive, there is still the cost of acquisition – winning sites over competing companies that have similar models, like Austin-based Atmosphere TV, or Chicago-based UpShow, which targets the same kinds of venues but is much more about on-premise communications than infotainment.

Microsoft Partnership

Separate from the financial reports, Loop has also announced that its ad inventory is now a supply-side programmatic option on Microsoft Advertising, which has created a new category called CTV Out of Home (OOH).

This first of its kind SSP category will provide an additional distribution category to advertisers and DSPs from which they can access and purchase Loop Media advertising impressions. On other DSP and SSP platforms, Loop Media is categorized as DOOH (Digital Out of Home), CTV (Connected TV), Streaming, or other. This new category expands Loop Media’s potential reach in the marketplace for all potential DOOH advertising buyers, including those advertisers looking to distribute ads on CTV Out of Home service platforms.

“With this new category, Loop Media may be seen and purchased by an expanded group of advertisers in the marketplace,” said Bob Gruters, Chief Revenue Officer for Loop Media. “My team and I have been working diligently to get Loop Media positioned well across all revenue advertising categories including Microsoft Advertising’s CTV Out of Home category.”