Focus Media Holding Ltd. (FMCN)
Business Description
Focus Media Holding Limited operates out-of-home advertising network in China using audiovisual television displays. The Company sells advertising time slots on its commercial location, in-store and outdoor LED networks; frame space on its poster frame network; and advertisements on its WAP-based mobile handset advertising network.
Network
The Company’s network includes: commercial locations, which consists of its premier A and B office building, travel, fashion, elite and healthcare channels, each of which can be marketed separately to advertisers; supermarkets, convenience stores and large-scale chain retail stores, which the Company refer to as hypermarkets, comprising its in-store network; its poster frame network of advertising poster frames placed primarily in elevators and public areas of residential complexes and marketed under the brand name Framedia; as of March 2006, its mobile handset advertising network offered on China Mobile’s and China Unicom’s mobile telecommunications networks; and as of April 2006, approximately 75 leased LED digital billboards installed on the street-sides in major shopping districts and other locations with pedestrian traffic in Shanghai.
The Company’s commercial locations network and in-store network use audiovisual flat-panel LCD and plasma displays, while Framedia’s poster frame network consists of advertising poster frames. The Company’s mobile handset advertising services consist of the sale of short message advertisements that are delivered to mobile handset users through the mobile telecommunication networks of China’s mobile telecommunications operators using a WAP-based advertisement delivery platform. The Company’s outdoor LED network uses 5’ x 5’ LED digital billboards that the Company leases from a third-party location provider.
Commercial Location Network
The majority of displays on the Company’s commercial location network are placed in high-traffic areas of commercial office buildings. The locations in its commercial location network also include shopping malls, banks and hotels as well as specialized locations, such as hospitals, beauty parlors and golf country clubs. The Company markets its commercial location network to advertisers of consumer products and services, such as home electronics, mobile communications devices and services, cosmetics, health products and financial services.
As of March 31, 2006, the Company’s commercial location network, including the portions of its commercial location network operated by its regional distributors, was comprised of approximately 75,000 flat-panel displays placed in 86 cities throughout China. The Company operates its commercial location network directly in 50 cities and indirectly through contractual arrangements with regional distributors in an additional 36 cities. The Company has established joint ventures in various cities outside of China, including Hong Kong, Taipei and Singapore through contracts with local operators which operate local commercial locations networks and which license its brand name.
As of March 31, 2006, the Company had established six channels that are marketed as separate focused channels of its commercial location network: its premier office building A and B, travel, fashion, elite and healthcare channels.
Direct Operations: As of March 31, 2006, the Company operated its commercial location network directly in 50 cities throughout China, including Beijing, Shanghai, Guangzhou and Shenzhen, or its Tier I cities. Following its acquisition of Target Media on February 28, 2006, the Company incorporated Target Media’s advertising network, which included a network substantially similar to its commercial location network with a focus on office buildings as well as on convenience stores, into its pre-existing commercial location and in-store networks.
Regional Distributors: As of March 31, 2006, the Company entered into distribution agreements with 36 regional distributors who operate in 36 of the 86 cities covered by its commercial locations network. Under the terms of its contractual relationships with its regional distributors:
The Company provides training, operational and logistical instructions to its regional distributors and allows them to use its brand name; and the Company also sells its flat-panel displays to its regional distributors.
In-store Network
The Company commenced operations of its in-store network in April 2005. As of March 31, 2006, the Company had placed 33,765 flat-panel displays in 809 hypermarkets, 1,126 supermarkets and 3,283 convenience stores throughout China. The Company’s in-store network primarily attracts advertisers of food and beverage products, household, kitchen and bathroom products, and household appliances.
Poster Frame Network
The Company owns and operates a network of advertising poster frames deployed primarily in the elevators and public areas of residential complexes under the brand name ‘Framedia’. The Company places two or three advertising frames in each elevator in which the Company leases space and sells frame space to advertising clients on a per frame per month basis. As of March 31, 2006, the Company had installed approximately 74,000 frames in cities throughout China.
Mobile Handset Advertising Network
The Company, through Focus Media Wireless, operates a WAP-based advertising delivery platform on the mobile telecommunications networks of China Mobile and China Unicom. Focus Media Wireless delivers WAP-based advertisements to mobile handset users accessed through service providers in China. Focus Media Wireless delivers advertisements and pays mobile service providers a fee for accessing their networks. It also sells WAP-based advertising to other WAP service providers and to traditional advertisers. The Company’s WAP-based advertising platform delivers approximately eight million WAP messages per day. Focus Media Wireless’s customer base includes approximately 100 wireless value-added service providers in China. Focus Media Wireless has accumulated a database of approximately 70 million mobile handset users. Focus Media Wireless also delivers advertisements tailored to the users’ consumer preferences based on information in the database such as a user’s historical purchases, handset model and other indicative data.
Outdoor LED Network
In April 2006, the Company commenced operations of an outdoor LED network consisting of 5’ x 5’ LED digital billboards that the Company leases from a third-party location provider and that are installed on the street-sides in major shopping districts and other locations with pedestrian traffic in Shanghai. Full-color audiovisual commercials are displayed on the digital billboards in a repeating six-minute cycle. As of May 1, 2006, the Company’s outdoor LED network consisted of approximately 75 leased 5' x 5' LED digital billboards.
Advertising Clients
As of March 31, 2006, approximately 1,800 advertisers purchased advertising time slots on the Company’s out-of-home television networks. The Company's advertising clients include international and domestic brand name advertisers such as Dong Feng Auto (including joint venture brands with Toyota and Peugeot), China Mobile, Samsung, NEC and Motorola. In addition, approximately 340 advertisers have bought frame space on Framedia’s poster frame network.
Market Research
The Company conducts market research, consumer surveys, demographic analysis and other advertising industry research for internal use to evaluate new and existing advertising channels. It also purchases or commissions studies containing relevant market study data from reputable third-party market research firms, such as Nielsen Media Research, CTR Market Research and Sinomonitor.
Relationships with Location Providers
The Company enters into display placement agreements with individual landlords, property managers, hotels, shopping malls and chain store companies. To secure locations in Shanghai for its outdoor LED network, the Company has entered into a four-year exclusive agreement with Shanghai Yihukuan Media Co., Ltd., which leases the Company's current, and any future developed, LED digital billboard space in Shanghai to the Company.
Competition
The Company competes with other advertising companies in China including companies that operate out-of-home advertising media networks, such as JCDecaux and ClearMedia.
History
Focus Media Holding Limited was founded in 1997.
