In 2008, Zac Killam and Steve Lowry co-founded Vancouver-based Play Taxi Media, borrowing from an idea that Mr. Killam had seen on a trip to Asia: interactive video screens in the backs of taxi cabs that entertain passengers with a mix of music, news and ads.
Their goal was to install enough of the in-cab touch-screen tablets in Vancouver cabs to corner the city's market, earning revenue by selling advertising on their network, and sharing a portion of that revenue with cab companies.
By the 2010 Winter Olympics, Play Taxi had negotiated deals with taxi companies in Vancouver to deploy 70 tablets. It planned to keep adding more. But the company found that it was not generating enough advertising revenue to merit further investment in the local market.
In the business of in-cab advertising, the company's co-founders realized, you have to go big or go home. Vancouver was not sizeable enough to attract the big national advertisers they needed to make the company a success.
"To start with, we successfully targeted local advertisers like Vancouver restaurants," Mr. Lowry says. "But to expand, we needed to pursue bigger brands, like Telus and Disney. These guys told us that what they were seeing was great, but that we needed to deliver far more ad plays in more geographies for them to advertise with us. We were too small."
Mr. Lowry and Mr. Killam concluded they had to expand their business tenfold to survive and thrive in the long term. Otherwise, they were going to be squeezed out by bigger competitors in Canada and worldwide.
In 2008, Mr. Killam, a corporate lawyer-turned-entrepreneur, decided to transplant the idea for Play Taxi from Asia to Vancouver. He sourced a technology provider for Canada and sought an intellectual property lawyer to help licence it.
He joined forces with Mr. Lowry, an acquaintance who was a former lawyer with a background in technology licencing and an MBA from the Robert H. Lee Graduate School at the University of British Columbia's Sauder School of Business.
Play Taxi Media buys touch screen tablets and negotiates with cab companies to have them installed on the backs of headrests in taxis. Since the average cab ride is 15 minutes long, the company provides a 15-minute mix of entertainment and advertisements,
"The benefit of Play Taxi is that we have a captive audience for much longer than the average print or digital ad," Mr. Lowry says. "Riders engage with our ads, enter contests to win vacations and fill out surveys to win prizes. This, of course, provides advertisers with valuable consumer contact details and market research."
Play Taxi's problem, however, was that it only was serving Vancouver, and, Mr. Lowry says, 80 per cent of advertising budgets are allocated to national buys. Unless Play Taxi grew from being a regional outfit to a national company, it simply wouldn't be able to compete at the level it needed to.
To expand nationally, Play Taxi needed to raise considerable capital. "By early 2011, we were fortunate enough to have secured a number of prominent Vancouver investors, including Ansera Capital Partners, a media-savvy investor which had already enjoyed success with a similar advertising venture in the U.S.," Mr. Lowry says.
He and Mr. Killam decided they needed new technology to succeed on a far larger playing field. They also brought on a new partner, Omar Dhalla, who used his connections from his role as a consultant at McKinsey & Co. to source a senior contact at Shanghai-based Touchmedia, a world leader in the in-cab advertising space, with more than 40,000 taxi screens installed.
Play Taxi Media's principals were welcomed in Shanghai by its leadership and discussed a partnership. "Touchmedia was interested in our traction and potential in the Canadian advertising market," Mr. Lowry says. The two companies agreed to partner on the deployment of a Canadian in-taxi media network.
With financial backing and the ability to offer Touchmedia's technology in place, Play Taxi signed agreements with taxi companies across Canada, covering a total of 4,000 out of the estimated 6,500 cabs on the road in three major cities. As a result, they installed 1,200 screens in taxis in Vancouver, Calgary and Toronto.
The larger network has proved persuasive for the advertisers Play Taxi was originally trying to secure. Since 2011, Play Taxi has attracted 23 big-brand advertisers. "In the last year and a half, we've worked with brands like Toyota, Disney, Starbucks and Canon," Mr. Lowry says.
These Play Taxi screens are now used by two million cab riders a month, a huge jump from the 170,000 riders using the screens in January, 2010. They are watching about five million ad plays. "Play Taxi's system connects to the taxi meter and counts how many passengers ride each month. It also counts how many times a given ad is played. Ads average 2.5 plays in the typical 15 minute taxi ride, so two million people will be watching five million plays of an ad in a month," Mr. Lowry explains.
By the last quarter of 2012, 70 per cent of ad campaigns on the company's network were from big repeat customers; gross revenue was nine times higher than in February, 2010.
The company has also expanded its staffing. "We went from being a five-person outfit in 2010 to a team of 15, with more employees in sales, marketing and content production. Once we were reaching two million cab passengers, we could justify hiring people to create innovative content, like interactive apps for advertisers that would generate even more consumer engagement," Mr. Lowry says.
Play Taxi aims to keep growing its advertiser base and to hit a target of 3,000 in-cab screens in Canada within 18 months.
Special to The Globe and Mail
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.