Dow Jones News Service

(Copyright (c) 1999, Dow Jones & Company, Inc.)

NEW YORK (Dow Jones)--Developers of interactive kiosks are betting that Web technology can make their devices as ubiquitous and easy to use as a pay phone.

Ask any industry insider about their growth potential and you will hear only superlatives. But first, manufacturers have to overcome the general public's ignorance of what interactive kiosks are and the challenge of convincing kiosk buyers that the machines can make them money.

Those in the know have a handy comparison always ready: The interactive kiosk is like an ATM, but used for any end other than dispensing cash. Under this definition, a kiosk can come in the form of a listening column at a record store; a stock-trading screen like those planned by an Indian brokerage for deployment in train stations; or a public Web Phone, as seen in Hong Kong's new airport, and developed by New Haven, Conn.-based Lexitech Worldwide.

Growth projections are bullish. Market researchers at Frost & Sullivan estimate the number of kiosks world-wide will grow an average of 27.3% a year between 1998 and 2004, with kiosk revenues of about $1.34 billion in 1998, up 36% from a year earlier.

Still, the industry is at a sort of widespread pilot stage, in which even the larger players are happy to boast about projects with 10 or 20 machines deployed - compare that with the 50,000 ATMs shipped in 1997 world-wide - while wishfully projecting unit shipments in the thousands for 1999. Companies that supply kiosks are as diverse as the industries they serve. Some are veterans in the hardware industry, like International Business Machines Corp. (IBM), or NCR Corp. (NCR), while others concentrate on developing the software, like Lexitech of New Haven, Conn.

"It's a systems-integration industry," says Rufus Connell, a researcher at Frost & Sullivan. "Some companies specialize in developing content software, and purchase enclosures" from firms like Factura Composites, Rochester, N.Y., or MicroTouch Systems Inc. (MTSI), based in Methuen, Mass., he said. The industry has its own crop of upstarts as well: firms like ObjectSoft Corp. ( OSFT ), based in Hackensack, N.J., or Golden Screens Co., based in New York but started in Israel.

Experts attribute what they see as the imminent explosion of the kiosk market to an often-cited buzzword: convergence.

They say that cheaper hardware, widespread familiarity with the Internet, the development of Web protocols and improved touch-screen technology, combined with the need to make a more efficient use of personnel - in some instances do away with personnel completely - come together to paint a rosy picture for the kiosk takeoff.

Kiosks seem to find a warm reception within a handful of sectors: retail, finance, government agencies and tourism and entertainment. For financial companies, kiosks are a natural extension of the ATM that has served them so well.

"The strategy of banks is, 'Please use our ATMs and don't come into the bank, or we'll penalize you,"' says Lexitech President Alexander Richardson. So the more services that can be delegated to the staffless stations, the better, Richardson said. In the entertainment arena, Bob Geistman, vice president for business development at giant entertainment software distributor Ingram Entertainment, based in La Vergne, Tenn., sees Objectsoft's FastTake kiosks as a potential interface for special-order business. FastTake is a sporty-looking kiosk aimed at video stores and allows shoppers to view trailers of up to 500 movies and search information on another 2,500 titles. It does all with the crisp image and sound afforded by DVD technology, and living up to the speed alluded to in the kiosk's name. The FastTake software is based on Microsoft Corp.'s (MSFT) Internet Explorer Web browser, but hides all the scroll bars and layout that designers say make a typical Web page "ugly." Like many other kiosk designs, it also kills the mouse, relying instead on a touch-screen approach. "We're looking at it as possibly a tool to be used for video retailers, as a front end for video sales," said Ingram's Geistman. "And from a first look, it seems it might serve the needs very well. It's a good opportunity on behalf of the retailer."

Geistman envisions FastTake as a way for shop owners to offer a sizable catalog of titles for sale without tying up space or capital.

Once the machine notifies Ingram of the sale and the location that generated it, the video or DVD would be delivered to the customer's home or to the store, which earns a sales commission.

"It works just like the Internet, but allows the retailer to use Ingram's inventory and warehouse," Geistman said.

So what's the difference between a movie Web site and FastTake? Basically speed, image quality and ease of use.

The Web site "is optimized for surfing the Web and FastTake is optimized for general public use at a walk-up site," ObjectSoft co-Chief Executive David Sarna said. "The (Web site) takes forever to download, the trailer is (only) 2-inch by 2-inch, and you have to be an expert in surfing the Internet to use it."

Ease of use seems to be an industry mantra.

"A lot of people don't know what 'file' and 'save' means," said Lexitech's Richardson. Thus, most developers assume a fifth-grade education when choosing vocabulary for the interactive screens. At NCR Corp., director of retail industry market Des Martin also stresses the need for standardizing customer interaction with kiosks, an issue that seems to preoccupy the whole industry.

In government agencies, kiosk companies found a potentially lucrative but also frustrating market. When programs are adopted, such as the recent deployment at post offices all over the country, the rollouts can be massive, but agencies may start out with pilot stages for one or two years, and spend another year deciding on a request for purchasing. CitiAccess, a two-year-old pilot kiosk program in New York City, offers services that range from dispensing tourist information to accepting tax payments. The program, which involves three companies, was deemed successful by the developers, but is still in bureaucratic limbo.

Looking on the bright side, government serves a large segment of the population, "so building a platform with them involves a broader spectrum of applications," says Glen Gruber, marketing V.P. at Golden Screens.

Also, agencies may have access to choice locations, something Golden Screens has seen first-hand in the New York-New Jersey-Connecticut area, where it is working with several agencies to deploy a network of travel-information kiosks. Travelers soon will be checking traffic, road construction and such, as well as sending and receiving e-mail roadside, Gruber said. Experts agree that government agencies pale in comparison with the potential seen in retail for kiosks. And once again, the Web rears its ubiquitous head.

"After you spend millions on your Web site, don't you want to put it outdoors? People are still going to get their rear ends out of the house," says Lexitech's Richardson.

But how to persuade retail chains to give up the required floor space and cough up the rental or purchase fees demanded to make the device self-sustaining, or better yet, a profit generator?

If the kiosk is a point of sale, profits should occur naturally. But if it's used only for information or customer service, benefits are harder to quantify. NCR has been working with Vanderbilt University to arrive at a measure, the so-called return on quality.

"You can put value on the perceived service you get from the devices," assures NCR's Martin, noting that retailers can track conversion rates, or the number of visitors to a store that actually become customers. For example, DaimlerChrysler AG (DCX) should be able to determine the value generated by kiosks in Mercedes-Benz dealerships, where customers can avoid the dreaded salesman by building their dream Mercedes on a touch-screen. And last but not least, kiosks can be advertising devices, both on screen, and on the surrounding enclosure and billboards.

"In an ideal world, kiosks would show different ads to different people at different times," said NCR's Martin. - Margarita Palatnik; 201-938-2226 [email protected]

Newsbit furnished by ObjectSoft..Thanks David!