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Captivate gets a lift from acquisition by Gannett

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You can’t TiVo in an elevator.

That’s one of the things that made Westford, Mass.-based Captivate Network, a venture capital-backed company offering TV programming and advertising in office towers across North America, so attractive to Gannett Co. The publisher of USA Today announced last month that it was acquiring Captivate.

While the terms of the deal were not disclosed, its financial implications are clear. Captivate couldn’t generate enough cash flow to grow as quickly as it wanted. Meanwhile, Gannett, using the cash thrown off by its flagship newspaper and 22 TV stations, can provide the financial muscle to expand Captivate’s network.

Captivate, although it hasn’t produced a profit, has posted strong growth. Its revenue increased 32% in 2003, while the total number of advertisements running on the network jumped 41%. Captivate said it enjoyed a 70% renewal rate among advertisers and, at the same time, new brands represented 49% of the company’s total orders last year. Its b-to-b advertisers include IBM Corp., Oracle Corp., Staples and Monster.com.

Despite such strong numbers, Captivate found it difficult to grow beyond about 400 buildings in North America.

"The whole venture capital pool dried up," said Mike DiFranza, Captivate’s president-general manager, who, along with the entire management team, has joined Gannett. "The cost of money was so expensive, we just couldn’t do it." With Gannett’s backing, he expects to nearly double Captivate’s installations in the next 21 months.

What Captivate offers is the rarity of daytime access to affluent business people who are elusive outside prime-time TV viewing. An elevator provides a unique instance of this demographic actually looking to watch something—other than the tops of their shoes or the floors ticking away.

Studies show that 96% of people riding elevators in buildings where Captivate operates watch the programming. The advertisements have a 45% recall rate, according to Nielsen Media Research figures, compared with 15% to 30% recall for other media.

Captivate will also have access to content provided by Gannett, although DiFranza said that it has no plans to abandon current content partners such as CNN, The Wall Street Journal and Weather.com. Additionally, Captivate may be able to take advantage of cross-selling opportunities with other Gannett properties.

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