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Business Description
Focus Media Holding Ltd. (Focus Media) is China’s leading multi-platform digital media advertising company. Its business scope includes LCD display advertising and poster frame advertising in residential and commercial buildings, preshow advertising in movie theaters and digital advertising in stores.
The company initially commenced an initial public offering on NASDAQ in 2005 but was later privatized in 2012. In 2016, Focus Media went public again and is now listed on Shenzhen Stock Exchange.
Company History and Corporate Structure
Focus Media’s predecessor company, Shanghai Aiqi Advertisement Co., Ltd., was established by Jason Nanchun Jiang in September 1997 and operated as an advertising agency. In May 2003, the company was renamed Shanghai Focus Media Advertisement Co., Ltd., and commenced operation of its digital advertising network in China. In conjunction with this change in the business model, Focus Media established its offshore holding company, a company registered in the British Virgin Island. In July 13, 2005, the American depositary shares (ADSs) of Focus Media was listed on NASDAQ and on July 19, 2005, Focus Media completed its IPO with sale of 11,615,000 ADSs priced at $17, raising $172 million. In 2012, Focus Media made an announce to privatize its business and completed this privatization process in the following year. In December 2015, Shenzhen-listed Hedy acquired 100% of Focus Media for $6.9 billion, listing Focus Media on the A-share market.
Business Categories
Using digital media devices, Focus Media operates four major product categories including LCD display advertising, poster frame advertising, movie theater advertising and in-store advertising.
- LCD display advertising refers to the network of flat-panel digital displays placed in high-traffic areas of commercial, residential and public buildings, such as malls, hotels and the lobbies of apartment buildings, marketed to advertisers as separate channels targeting different types of consumers, primarily including premier A1 channel, premier A2 channel and LCD 2.0 digital picture screens channel.
- Poster frame advertising refers to the network of traditional graphic and digital advertising poster frames placed mainly in elevators and public areas of commercial or residential buildings.
- Movie theater advertising refers to preshow advertisements on movie screens marketed to movie theater chains in China.
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- In-store advertising refers to the network of flat-panel digital displays placed in specific product areas with high-traffic concentrations, inside supermarkets, retail stores and convenience stores.
Company Strategies
- Extensive Coverage of Everyday Consumer Life: Focus Media’s extensive advertising network reaches out to major settings in everyday urban consumer life, covering their work, entertainment and consumption activities. As of June 30, 2016, Focus Media’s advertising has extended to approximately 270 cities in China, with 192,000 LCD display devices covering over 90 cities and 121,000 poster frames covering 46 cities. The company has contract relationships with over 1,270 movie theaters and covers over 8,300 movie screens around China with its preshow advertisements. The in-store advertising network includes over 2,000 supermarkets and retail stores with approximately 59,000 display devices.
- Lifestyle Targeted Media Penetrating Enclosed Spaces: In the fast-developing era of Internet where information is available to consumers at their fingertips, consumers can acquire abundant information at any time in any place without any cost. However, too much information and too many choices have made it difficult for company to make their advertisements memorable. As traditional advertising through television and newspaper become increasingly ineffective, “passive advertising” is now the more popular choice. Focus media targets the mainstream urban population and penetrates enclosed spaces the target audience pass by in their daily life. The company’s main strategy is to focus on the fragmented and boring time when people are waiting for elevators or waiting for movies to start. The enclosed and plain environment in elevators and movie theaters allow audience to be more concentrated and can significantly help companies achieve higher effectiveness in their advertising.
- Utilizing Technology to Achieve Precise Targeting and Interactive Advertising: In 2015, Focus Media launched its cloud strategy. Through analysis of building information (building age, price, location and occupants etc.) and big data acquired from Baidu and Alibaba, Focus Media can examine consumer needs and preferences and help advertisers achieve more precise targeting in advertising. In addition, by imbedding Wi-Fi or iBeacon devices in digital advertising devices, Focus Media introduced interactive advertising. When people are within the signal range of the devices, they can enjoy interactive services in their WeChat accounts, directly access advertisements on their own mobile phones or download the advertisers’ mobile apps. This “online-to-offline” (O2O) approach
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enables effective connection between companies and consumers and eliminates information asymmetry.
Industry Overview
Expanding Advertising Industry in a Consumption-Driven Economy
The advertising industry is in a secular growth stage in China, underpinned by the growth of the Chinese economy, the increasing urban population and the rising consumer spending. In 2014, the total advertising spending in China reached 903 billion RMB. The advertising industry is expected to continue to expand and develop into an 1160 billion RMB industry by 2017, growing by 8.7% CAGR from 2014. As a leading player in digital media advertising, Focus Media will be able to take advantage of the enlarging market demand for corporate advertising and generate revenue growth in the future.