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IPO Hopeful 4 – Who are the Real Golden Daddies?
Continuing from the last post, Kevin said, “The golden goose is the tablet. Why can we provide and install it for hotels entirely free? Because we have sponsors—our ‘golden daddies.’”
“And who are these golden daddies?” I asked.
“Advertisers!”
I was skeptical. “What kind of advertisers are willing to spend that much? Is there really a demand for this?”
Kevin chuckled. “Tsk, tsk, tsk. You clearly don’t know this space lol! There are three types of advertisers: Local advertisers, like tours, museums, restaurants, they will pay high prices to be on those billboards in the guestrooms! Also, big brands like luxury goods, travel related brands, banks, anyone trying to catch the attention of the high net-worth guests in these 4 and 5 star properties, they will actually pay the most. Both the local vendors and national brands national brands have to be sold individually, they pay the most, but are not quickly scaleable. The big, foundational money comes from the Ad Exchanges like Google, and many others who sell advertising, then place those ads on their own networks, but also on networks like them. This is by far the biggest part of the ad industry today, and there is huge demand for their ad space, because that high net-worth traveler is a super attractive target group.
The big problem that had to be solved to turn on this ‘money machine’ is getting to enough scale in the hotel industry, i.e. getting into enough rooms. This required a multi year, multi-million dollar investment in winning the Hilton account. Now that we have Hilton, we have the scale and the ads are here, allowing us to deliver the ‘golden goose’ tablets that we can install throughout the industry, free to the hotels, and paid for by ads!”
He continued, “Now that we have locked in Hilton, Marriott is next, and after you’ve got both, other hotels have no choice but to follow suit—even if they’ve never heard of us, they’ll come knocking. We’d already captured the top players in the industry, and what we are seeing is the start of a multi-million room rollout that will change the hotel experience, and ultimately, the way we travel, because that AI concierge you use on the tablet in the room, is the one you will use for all your travel, in their App on your phone, not just in the hotel room!
“And who stays at Hilton and Marriott? Wealthy people. Now think about it—where else can advertisers find such a concentrated audience of affluent individuals, all at the same time? We’re the only company capable of delivering that.”
I was about to argue when it hit me—he’d mentioned the tablet usage rate: a staggering 90%. It suddenly clicked. Of course! Guests use the tablet to order food, check local information, request room service, and more. With such high engagement, it’s natural for them to see ads and local offers too.
Moreover, they don’t target small hotels—only medium and large ones, each typically with 300 to 1,000+ rooms. Based on the industry’s average occupancy rate, each hotel in a major city means thousands of affluent users interacting with the tablet daily, all exposed to ads. For the hotels already installed and in trial runs, the combined audience easily exceeds tens of thousands per day, or at least 100,000 affluent consumers a month. And this is just from trial-run hotels, with conservative usage estimates!
I asked, “So do advertisers only pay for clicks, or do they pay just to run the ads?”
He laughed. “Both! There are plenty of advertisers who pay just to run their ads, though the rate is lower.
“For these national and global brands, they’ll often buy out screen space for their campaigns, rotating ads for their products throughout the day. The most popular category so far? Beverages, both alcoholic and non-alcoholic. Big alcohol brands everyone knows are paying $30 per room, and non-alcoholic brands pay about the same.
“Here’s the kicker—some brands also run sampling campaigns, providing free beverage products for every room. They not only pay us for ad space but also supply free drinks for the guests. Imagine you’re the hotel: a major brand offers free beverages for all your guests, delivered to their rooms, and you don’t even pay for any of it, AND you get part of the advertising profit! Wouldn’t you jump at the chance?”
At this point, my mind was racing. Advertisers not only pay for ad space but also give free products? This is amazing!
Kevin smiled. “And it gets better. Installing each tablet costs us just $5, but even at the lowest tier of ad revenue—$15—we cover that cost easily. That’s why we can afford to install them for free. On top of that, we share ad revenue with the hotels—usually about $5 per room. So do you think it’s hard to get hotels on board? Once they understand the logic, it usually takes 10 minutes to sign the deal. That’s why Hilton has already listed us as an authorized supplier across their entire chain. No additional approvals are needed. Securing the master agreement took nearly 10 years, though. 😂 Only two suppliers have a master agreement with Hilton, and we’re both of them (They are now buying out their major competitor!) .”
I asked, “How much of the revenue do you share with hotels?”
“About $5 per room per month,” he replied.
I did a quick calculation in my head. Basic ad revenue of $15, premium ads adding another $15, plus other fees he mentioned—it’s already $50–$60 in revenue per room. Meanwhile, marginal costs are just around $10 ($5 for installation and $5 for hotel revenue share).
Then I asked, “Wouldn’t the wealthiest advertisers eventually monopolize all the ad slots on the tablets? Doesn’t that go against your goal of offering local information and consumer opportunities to hotel guests? Wouldn’t it just become a rich man’s game with little intrinsic value?”
Kevin laughed again. “Not at all. That’s where the other two types of advertisers come in—local businesses and governments.” Till next time!