Digital media ad revenues grow

Chinese in-taxi interactive media company Touchmedia's interactive screen is seen in this file photo. Touchmedia is becoming a favourite for venture capitalists, helped by the bright prospects of China's digital media industry. File photo

As traditional media outlets like newspapers and television struggle over declining advertising revenues, new digital media advertising platforms are rapidly expanding.

More advertisers are turning to digital out-of-home media platforms displayed on television monitors inside taxis, buses, subways and public transit stations.

After raising 150 million yuan by the end of 2008, Shanghai-based Touchmedia absorbed a third round of investments totaling 100 million yuan in May.

With operations in Beijing, Shanghai, Guangzhou and Shenzhen, Touchmedia is China's largest in-taxi interactive media company.

"Touchmedia has absolutely outperformed our original business target set three years ago," said Gary Rieschel, founder of Qiming Venture Partners.

Qiming invested in Touchmedia in May and made earlier investments in the company in 2006 and 2008.

Touchmedia now is considering an initial public offering, probably next year if the economy recovers, said Michael Fung, the founder and CEO of Touchmedia.

"Our advertising sales have grown 1,000 percent for two consecutive years, and there is no sign of a slowdown in growth," Fung said.

Fast growth

Other digital media companies are growing fast, too.

In February, subway digital media operator Digital Media Group, or DMG, attracted $30 million in investments from the Shanghai-based Gobi Fund and the international investment group Oaktree Capital Management LLC.

In April, ToWoNa, the country's largest bus digital media operator, successfully attracted a third round of investments from private equity firms.

Zenith Optimedia, an international media planning and buying agency, predicts that expenditures on advertising worldwide will drop by 7 percent to $453 billion this year.

However, in China, the advertising market grew by 15 percent in January following double-digit growth in the last quarter of 2008, Chinese market research firm CTR reported.

"The Chinese advertising market has sustained growth, rather than declines, since last November. The momentum is still strong," said Huang Shengmin, director of the Institute of Advertising at Communication University of China.

Cui Bin, vice-president of ToWoNa, said the digital media sector will help drive that growth.

"Newspapers will see continuing declines in their share of the Chinese advertising market, and the new media's share will be growing at high speed," Cui said.

Analysts estimate that the digital media market in China will grow 30 percent to 40 percent during each of the next three years to surpass 300 billion yuan.

Visually attractive

Gan Jianping, general manager of Qiming, said the digital platform has proven especially attractive to makers and retailers of food, beverages, mobile phones and cosmetics.

"Not only are the screens visually attractive, but having them inside the vehicles helps advertisers capture the attention of the right group of consumers," Gan said.

The lower cost of advertising through these digital media platforms is also a driving factor, said Yu Guoming, vice-director of the Institute of Journalism at Renmin University.

"The price is usually 10 percent of the price of traditional media," Ya said.

Since 2008, companies like Coca-Cola, Procter & Gamble (P&G) and China Mobile have been investing more advertising money in digital media advertising platforms, said Zhou Haiquan, a senior analyst with Analysys International.

The trend is being reflected in this year's sales numbers and expectations for digital media operators.

During the first quarter, ToWoNa's sales grew by 20 percent from a year earlier, the company reported.

DMG's sales grew by 70 percent last year, and this year revenues are expected to surpass $100 million.

Touchmedia, which has enjoyed 1,000 percent increases in revenues for each of the past two years, projects that this year's sales will exceed 200 million yuan.

New platforms

The fast-growing public transit sector is creating new digital advertising venues each year.

By the end of 2015, Beijing plans to expand from seven subway lines to 22 lines.

Shanghai, which has eight lines, plans to open 14 new subway lines by 2012.

DMG earlier this year won a five-year contract to operate digital media advertising monitors in 13 Shanghai subway lines.

DMG also operates monitors inside subway lines in Beijing, Hong Kong and Shenzhen.

As part of China's 11th five-year plan covering the years 2006 through 2010, all cities have announced plans to add new buses or renovate old ones.

While larger cities are considered mature markets, ToWoNa is setting its sights on second-tier and third-tier cities in the Yangtze River Delta and Pearl River Delta regions, said ToWoNa Chairman and CEO Zhang Zhenzhong.

Currently, ToWoNa has 120,000 screens operating on 80,000 buses in 35 major cities.

For taxi media operators like Touchmedia, business is also growing.

Shanghai, which will host the 2010 Shanghai World Expo, is renovating 5,000 taxis and adding more than 300 new taxis in advance of the event.

Touchmedia now is in talks with more than 10 other local governments to expand its presence.

"A certain percentage of funds will be used for research and development, too, since this will help us stay competitive," Tina Han, a spokesperson for Touchmedia, said.

(China Daily 08/03/2009 page12)