CafeScreen’s win with technology
Wednesday, May 14, 2008/
If you’ve logged on to free WiFi in a cafe recently or passed the time watching a TV screen, chances are you can thank CafeScreen’s entrepreneur Ruwan Weerasooriya. He tells AMANDA GOME how he turned a good idea into a business.
By Amanda Gome
If you’ve logged on to free WiFi in a cafe recently or passed the time watching a TV screen, chances are you can thank CafeScreen’s entrepreneur Ruwan Weerasooriya.
Technology entrepreneur Ruwan Weerasooriya is only 34. But he is in the middle of another start-up – this time with CafeScreen. So far he has invested almost $1 million of his own savings across the group.
But CafeScreen is only one company in his portfolio. Is he a distracted entrepreneur or is he an emerging media entrepreneur?
He talks to Amanda Gome about new media, business models and some harsh lessons he has learnt along the way.
Ruwan is happy to answer your questions. Send to [email protected] before the end of business Monday 19 May.
Amanda Gome: What is CafeScreen?
Ruwan Weerasooriya: We place big digital screens in cafes. The screens carry advertising and information and entertainment, targeting the CBD business professional. We also supply free WiFi internet hotspots in CBD cafes that are a bonus to the customers who increasingly are conducting office meetings, desk research or working on a laptop.
How did you get into that? What was your background?
I was a pharmacy student, dropped out and started an ISP in 1994 at a time when a large user base was 1000 users. I sold that towards the end of 1995 and founded web development company Method + Madness, which was sold in 1999 to Sausage Software.
How much did you get when you sold that?
We sold it for more than $6 million, so I got a few million.
So what then?
I moved to Melbourne and went back to what I love; start-ups. One of the companies I started was Touch Taxis. We put a pilot of 50 into Silvertop taxis. The touch screens were mounted to the headrests and people could surf for news, weather, and information such as what film they might go and see. The screens were connected wirelessly to the computer in the boot.
Did it work?
First it was a very costly exercise, as we had to develop the head rests with a computer in it. And we had to run a computer in a car and updating on a regular basis. The fact that we did it first off was a technological feat.
We were not as good at articulating who the audience was. The business model was that we were relying on advertisers to pay. We were using banner advertising so people scrolled through content from NineMSN and saw ads.
We then tried to sell that to media professionals so they could match it against advertising needs. I learnt, coming from a non-media background, that even though technology is the big equation, you can’t lose sight of who the audience is when dealing with advertisers.
We were good at telling people how it worked, but not how it related to their clients or their campaigns.
It was a big investment taking the vehicles off the road as even half a day to fit the screens was a challenge for them. Also the burn costs were huge. The data cost across a GPRS network was very expensive.
Another issue was the legislation in NSW that precluded advertising in taxis. We thought if we proved the model in other states, they would change it, but it became apparent that NSW wasn’t going to budge. That knocked legs out of model going forward, as if you are not in Sydney it is very niche.
What gave you the idea?
I am actually an angel investor in it. My two partners came up with the idea. I put in the cash, and from the huge incubation team delivered programming and the technological skills, with equity and an executive role to drive it.
How much did it cost to start?
We did it on the smell of an oily rag and bootstrapped it with $150,000.
But you knew that at the start…
We took a calculated risk. We were undercapitalised, but we thought if we can show the technology will work and show commercial success, we will get the support of a large media company.
We had chats with leading digital and advertising companies which was a good experience. But one of the things that came out of that business was establishing a great network (among advertisers).
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What else did you learn?
To tweak the model so it is easier to scale and to operate the business on a much lower burn rate. In a business like that, the timing mixed with technology based innovation is a key to success. The cost of the technology and the ability of the market to adapt it… well it was too early. I have no doubt in five to 10 years time we will have media in all taxis.
So what happened?
I sold out to my partners in 2004.
What gave you the idea for cafe screen?
I travelled extensively and could never find WiFi.
You are a technology company, not a content creator. So where does the content come from?
We have a content relationship with the ABC. We have a straight commercial arrangement where we pay them for an RSS feed for a range of content.
We have a secondary arrangement with AAP. Getting content isn’t a problem; a lot of digital players like Fairfax and News will syndicate content.
How do you make money?
Advertisers like NAB, BT and Telstra, who want to reach the CBD professional. We have applied what we learnt from the other business and have a very clear focus on the business audience and their habits and preferences, so clients see it as relevant to their brands.
Is it profitable? How is it travelling?
We put the first screen in a cafe in August last year. We have months where we are cashflow positive. We now have 71 live screens in Melbourne, Brisbane and Sydney and 131 venues contracted.
So CafeScreen is part of the Huge Digital network. So how does the group work? How big is it?
Huge Digital has three to four operational companies with revenue of around $2 million and staff of eight to 10. It has taken a good three or four years to get the diversified operations set up and running. But there are benefits, such as we can promote our retail business across the media channels and the businesses can take advantage of networks and provide services to the other businesses.
So do you run all the businesses?
No. Now we have a strong network, we need to put the management in to run the businesses. The long term vision for Huge Digital is to keep incubating new concepts and ideas so we are running a portfolio of complimentary businesses.
Isn’t it detracting to run all those businesses?
It can be difficult for people to understand, but I am used to changing gears very fast.
What are the cafe owners reporting back?
Well, it costs the cafe nothing. The free WiFi has been a huge benefit to the cafe owners because most did not have internet before. Now they can do their online banking. They love it and customers love it. It fills the gap in the waiting times.
The fastest barista takes a minute or two minutes and in busy peaks that can extend to seven or eight minutes. So we show them ads from BMW or NAB – premium brands that are relevant to their audience. The cafe owners also make money, as they share the advertising revenue.
Is it hard to hang a screen in a café? How does the technology work?
It includes one or two LCD screens at each location plus a Linux-based media player connected to a dedicated DSL (digital subscriber line) and an off-the-shelf wireless router. The media player receives digital content. So you have to commission the DSL lines and there is a lot of logistics with hanging screens in cafes.
Who are your competitors?
Other companies that talk to the same audience, like AFR, BRW and SmartCompany.
So what’s the next step?
The business has been designed to fit within a larger media group due to the efficiencies that will flow if worked correctly. If we find the right partner it will be a faster path going forward.
If you don’t?
It’s about getting quality advertising, so we could build a sales team or find a partner with existing channels to media buyers that could sell the product for us.