Kicking off a New Series – Please Let Us Know Your Thoughts!
We are a proptech VC and have always endeavored to define proptech as anything and everything to do with how and where people live and work. This definition is purposely broad in order to capture the reality that significant changes (hopefully improvements) in how we live and work come from unexpected sectors, innovations, or even geopolitical/socioeconomic upheaval. We strive to be more than a fund looking solely to digitize workflows and improve building management systems. We are looking to help entrepreneurs create new categories – this is where meaningful wealth creation can occur.
Consider cryptocurrency for a moment. Putting aside the emotional responses that “crypto” may engender, it may be the greatest example of wealth creation in recent memory. Without hyperbole, a new multi-trillion dollar category was created out of thin air in less than a decade. And while that air is now escaping, the wealth that it created is real – even today.
So, what’s next for Proptech? This is something the team’s been working on and we’d love input from the broader community on several areas that we may begin to hone in on which we will highlight over the coming months in a multi-part series we’re calling “Creating a Category”.
Creating a Category – Property Digital Rights
THE BASICS
This month, we are highlighting the idea of Property Digital Rights (PDR). It’s not a term we can take credit for. It was developed by a UK-based company called Darabase. You can read their whitepaper here.
Essentially it is a new ownership right that any physical property owner would be able to claim in order to monetize digital content that overlays/augments said property – likely through VR/AR applications and hardware like smartphone cameras or AR glasses (entries from Apple, Google, Vuzix). Advertising would be the primary use case with no physical screens, billboards or postering required.
Think of Property Digital Rights as similar to subterranean (e.g. mineral) rights or air rights (to build above a certain physical footprint in a downtown area).
THE IMPROVEMENTS
As VR – and especially AR – technologies become more popular, the advertising experience gets much better for both parties. It’s easier and more flexible for the advertisers due to a lower installation cost. And it’s better for consumers as it is much more interactive/gamified and can be filtered/controlled/targeted.
At the end of the day, this method of advertising will allow for:
Better utility of high traffic spaces (can layer as many ads as you want and put them anywhere)
Greater spatial and technological flexibility in the ads themselves (zero install costs, the only restriction on size is the size of the building)
Greater engagement potential with consumers (speaking directly to a consumer’s preferences)
From a livability perspective, the ability to “turn it off” in the real world and keep cityscapes clean – imagine living across from the billboards in Times Square?
CREATING VALUE FROM THIN AIR (QUITE LITERALLY)
Once these PDRs are appraised (the process for which is becoming standardized), they essentially become a balance sheet asset that can be added to the value of the building and bought and sold with or without the physical asset.
Now imagine, for example, a building in the downtown core that could work with a brand such as Coca-Cola to create an AR-based marketing campaign; a digital billboard. The owner of that building would then be paid for the “space” exactly as a billboard owner would be paid. And billboards are big business. The impact for that property owner could be meaningful. Let’s do the math for a random urban billboard: $4000/month * 12 months = $48,000 per year in brand new revenue. At a 5% cap rate, that’s $960,000 in “found” value.
Now extrapolate that across a portfolio of assets! Now add the fact that you can run multiple ads at once that cater to different segments of customers! The value can truly pile up quickly, and with the right understanding of the value levers, can add significant value to a building transaction.
We would love to hear thoughts and feedback from the community on this idea – please email info@groundbreakventures.com
From your friends at GroundBreak Ventures