Interview with JT VonLunen, President of AllDigitalFrames.com

AllDigitalFrames.com is perhaps the only site on the Internet that focuses exclusively on selling digital picture frames and wireless digital frames. A quick perusal of the site reveals the digital picture frame market to composed of dozens of companies and hundreds of models sporting a wide variety of features.

I recently spoke to JT VonLunen, the co-founder and president of AllDigitalFrames.com, to learn about how the company came to be, whether its sales are growing along with the rest of the industry, and where he sees it all heading.

When did you start AllDigitalFrames.com and what led you to start the business?
We started with the idea in about January 2006. My business partner and I were in business school together and we were interested in doing a site that was built around e-commerce, selling a product in a niche market.

I had bought a couple of digital frames that previous Christmas for my mom and my grandma who were out of state, a couple thousand miles away. We had recently had a little girl, so I wanted to be able to share those pictures with my family.

When I was looking for these frames, we found that (the market) was very fragmented. We really liked the product and what the potential was, so we figured it would be a good space to get into.

We went through the process to figure out what we should name our site, looking through the different domains. We figured, “Let’s just use AllDigitalFrames. We want to do all the brands, have information on all the brands, reviews, and hopefully sell all the brands,” which we found later on wasn’t that easy.

What is the profile of the customers you’re selling to? Are you mostly selling to early adopters or is it more average consumers?
You have a variety of people (with different needs) looking for different solutions. The early adopters bought these frames back in 2001, 2002. Now those people are looking for a better solution and that’s where the wireless frames come in.

You have what I call the “no techs,” and they’re basically not even looking for a frame. It’s people buying for them. They’re sort of the Ceiva frames and the frames that you can pre-load pictures on and send them to somebody.

Then you have the “low-tech” group. (They’re seeking) easy to use frames that have the software built in, very simple to use, easy right out of the box.

On the commercial side, you have someone putting a frame at a point of sale in their business. These are usually larger frames.

Then on the business side, this is where we do a lot of business, because they’re buying more frames, they’re buying keychains, putting pictures on them, pre-loading pictures, putting their logo on frames, putting slideshows, video, that sort of thing. The businesses are using these are a marketing tool.

We’re surprised that the majority of our business is through the commercial and business side.

Do you sell more to one type of business than another? Is there an industry you’re particularly strong in?
I would say that it’s random. Around Christmastime, we had some smaller law firms buying frames as gifts. Some (businesses) were doing a 10th-anniversary present, where they wanted the logo of their business (on the frame). We dealt with Anheuser-Busch, who wanted keychains to give out to their employees as gifts for the Busch Gardens theme park division. I think everyone has recognized that these are a cool way to either give a gift or do pretty effective marketing.

On the consumer side, which of those consumer profiles that you were talking about earlier are you selling to the most right now?
I think it’s probably more of the low techs, (but) I think that’s changing fairly quickly. The wireless frames were pretty expensive. I think as those prices come down you’re going to get a lot more players in that area. From our sales, and what people are searching for to land on our site, (the market is) price sensitive, I would say. You think that (buyers are) low tech, but you don’t really know because it’s also based on price.

In some of our previous interviews, $99 has been talked about as being the magic price point for wireless frames. Do you think that that’s going to be the tipping point price?
Price could be important, but I think ease of use is just as important. I had to calibrate a wireless frame (recently) to try it out. I use computers all the time and it took me a little while to figure out how to get it calibrated right.

Do you think that consumers may be willing to pay a premium for the ease of use and the better user experience?
I definitely think so. I think that the best thing is a solution with the software. I know that Windows Vista has that sidebar, and at least Digital Spectrum is trying to piggyback off of this and push the sidebar and gadget items onto the digital frame. That is a huge benefit. What’s going to happen is I’ll be able to put one of these frames up in my kitchen or my office and I’ll be able to get the weather in the morning, what I have on my Outlook calendar for the day, pictures of my family, a clock, and RSS feeds —without your computer even being there. I think that that is a huge, huge step forward in the wireless offering.

I think it’s a combination of price and you don’t need to buy another computer to do that. So how much are you willing to pay for that? $100 would be great, but I don’t think that the frames are quite there yet. If the software was there, I think people would be wiling to pay a little more.

You touched on search terms getting people to the site. What are you doing to drive traffic to the site right now? Is it pay-per-clicks ads, natural-language SEO, or some other kind of marketing?
We’ve done a couple of different things. The pay-per-click is a good way to brand yourself. You get a lot of impressions, but the clickthrough rate we have is only about 1%. People aren’t really driven by the AdWords, but it does help our branding that when someone does a search they’re going to see our website (name).

We also have been working on the natural search terms. Our idea at first was not to hit the major terms like digital picture frame or digital photo frame head on. We were going to skirt that and come at the niche market. The Tau frame, the Pandigital, the Fuji Labs, that sort of search term. We’ve been ranking on MSN and Yahoo, but Google we’re still working on. I think that has a lot to do with PageRank and linking. Unfortunately there’s not a lot of coverage of these digital frames yet. We’re trying to go out and get links but they’re not coming from (sites with) high enough PageRanks.

It’s very difficult to get in that top one or two or three pages.

Do you think that what’s contributing to the lower clickthrough rate of the pay-per-click ads is that the frame market isn’t developed enough yet?
People come online first for information and then for sales. Just by nature, you see an ad and you’re thinking, “Oh, that’s just someone trying to get me to buy stuff.” The natural (SEO) is where they’re looking for information. So, if you can rank high naturally, you’re going to drive people to your site just looking for the information and then they may want to have a purchase.

Online you have transparent pricing, where people may come to your site, look for the information, and go somewhere else to buy it because the other site has the better price.

The last 6-9 months have seen a big uptick in sales, especially with Pandigital selling 520,000 frames in the fourth quarter. What have your sales trends been like over that period?
The fourth quarter of 2006 was excellent. I’d say in November we did about $15,000 and in December we did about $20,000. So we’re not a huge player. It’s difficult to compete on pricing when you have products listed at the suggested retail price and you buy it from the manufacturer or from the distributor for a price that’s higher than Amazon.com or Buy.com. People are just going to go to Buy.com.

Our retail sales really fell off at the beginning of this year. They’re probably down to about $1,500 a month, but our corporate sales have actually gone up. We did a little bit over the holiday season and then each month we’ve done about $6,000-$8,000 a month in corporate sales.

After the beginning of the year, when there was that lull, we started to shift our focus, realizing that we can’t really compete too well on price. We’re going to be more of the informational clearinghouse for digital frames. We do reviews and information and then obviously we’ll still do the sales on the better margin products.

With digital frames, it’s amazing how quickly they’ve become commoditized. When we started there were about 15 major brands. Now there’s probably 40-45. Each one of them has very similar offerings. The features are all becoming very standard. I think what is going to differentiate (companies) in this market is going to be the software and the ease of use.

With the proliferation of companies, do you try to pursue a direct relationship with the vendors or are you primarily looking for a relationship with distributors?
We went out right away and developed relationships with manufacturers. The manufacturers we’ve been able to develop decent relationships with, either through drop shipping or inventory, we still maintain those relationships. It works well because they are able to source a lot of our corporate sales.

On larger orders where someone is ordering 2,000 picture frames, we send those to the manufacturer and we get a sales commission. People are contacting us because we have the website. We can help them save money by getting them directly in touch with the manufacturer. The manufacturers don’t always offer some of the hands-on service and handholding these corporations may need. That’s where we come in – to bridge that gap.

You mentioned the ease of use and configuration, especially of wireless frames. Do you see other major obstacles to wide adoption?
There’s been a major adoption of digital cameras. What do (people) do with these pictures on their digital cameras? They may use them on their computer, they may go online and have them sent to the local drugstore or retail store to go print these pictures out. I don’t know if everyone has really realized that, hey, I can just take my card out of my camera and put it into my digital frame. I think that there has to be this idea that memory cards equals film. The developers of these pictures have very nice margins that they don’t want to give up, but if they were to put your pictures onto a memory card and then have these digital frames right at the point of sale, that could be a better way for frames to get mass adoption.

Do you think that the increased connectivity from WiFi or Bluetooth is going to play a big role in growing the market?
I really think that when you get into the Bluetooth front, it seems a little higher tech than basic WiFi. If someone has a WiFi router in the house, they can hook up a digital frame, but to go over to Bluetooth, it’s one step further. If they have both, that would be great. But I think just offering a WiFi solution may be just a little bit better way for mass adoption, since there’s not as many Bluetooth users as there are WiFi.

What have you learned from having digital frames in your home and office?
Digital frames are cool, but traditional frames will always have their place. Digital frames require more maintenance than a traditional frame (turning them on or off, loading pictures, plugging them in). I see over time that they will become more than just a picture frame. If you could put a wireless frame in your kitchen or family room and control the type of content that is displayed at certain times, it takes the place of adding an other computer or even TV. They are not only for pictures, but for all types of media content.

What kinds of innovation — in features, style, price — do you foresee in the next 6-12 months?
The price of digital frames has come down significantly in the last year and even more so after the holidays. I see this trend continuing as more and more units are sold. The quality will get better and the price will get cheaper. Like I said earlier, it seems like these frames have already been commoditized. That said, I see a big opportunity for more ancillary features for digital frames in the next year. More software, more content, and digital frames used beyond just showing pictures.

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