Over a year ago I blogged about PRN, the company responsible for Wal-Mart's in-store television network, and their then-current plans to have an initial public offering (see "PRN: A Digital Signage IPO Story" from May 23, 2004). Well, it suffices to say that despite running the fifth largest television network in the US, PRN is still a private company (partially owned by Wal-Mart itself), and the digital signage industry still lacks a presence on the public markets. Or rather, we did lack one, until July 21st, when Chinese narrowcast network provider Focus Media completed an IPO on the NASDAQ. As Forbes Magazine notes,
Media's IPO opened at 19 USD a share, up from its 17 USD a share offer
price. The stock climbed to 19.96 USD for a gain of 17 pct over its IPO
"In a sign of strength, the IPO was priced above
its 14-16 USD range, as investors lined up behind the first Chinese
firm to list shares in the US since China Techfaith Wireless made its
debut on May 5.
"Focus Media raised about 170 mln USD by
offering 10.1 mln shares with underwriters Goldman Sachs and CSFB. The
Shanghai-based firm's American depositary receipts will trade on Nasdaq" (China's Focus Media gains bullish response in US debut).
It's hard to tell whether US investors were more excited about the digital signage industry,
or their ability to invest in a Chinese-owned firm, since that's
becoming all the rage now. While I can understand investors'
enthusiasm over getting involved in the world's most rapidly growing
economic market, I personally would be even more excited by the
company's claim that, "Focus Media has a presence in more than 10,000
commercial locations and over 400 retail stores in 44 cities throughout
China. Since it commenced commercial operations in May 2003, Focus
Media has placed 21,021 flat-panel television displays in high traffic
areas, such as elevator lobbies of commercial buildings, retail chain
stores, beauty parlors, karaoke parlors and golf country clubs" (Focus Media Announces Pricing of Initial Public Offering of American Depositary Shares).
over 21,000 screens, already bought and paid for, showing advertising
in about 70% of the top commercial buildings in China. Their most recent SEC filings
(PDF format) suggest they're on track to do about $32-36M in ad sales
this year. While this is only a fraction of PRN's revenues, the
breadth and depth of Focus Media's coverage, plus the fact that they've
only been around since 2003, makes them a serious contender in the
digital signage space.
Even more interesting, though, is the
insight that we can get about their business model by looking through
their SEC filings. For example, all of you folks running
ad-supported digital sign networks might be interested in these
paragraphs about Focus's business model:
"[A] nine- or
twelve-minute cycle is broadcast in each building within our network a
total of approximately 80 or 60 times per day, respectively."
calculate the number of time slots available by taking the total
advertising time available on our network during a particular period,
calculated in aggregate seconds, which we then divide by 30 to
determine the number of 30-second equivalent time slots available. We
can increase the number of advertising time slots that we have
available to sell by expanding into additional cities or acquiring our
regional distributors, which provides us with seven minutes of
additional time slots per regional distributor."
we can extrapolate that the network displays approximately 1,440
ads/screen/day (based on a 12 hour broadcasting day). Multiply
that by the 21,000 screens they currently have deployed, and 365 days
in a year, and we find that Focus Media is currently showing about 11,037,600,000 ad impressions across its network every year. Yes, that's eleven billion.
Now, if the firm expects to (conservatively) make about $32M this year,
we can extrapolate that out to about $0.0029 per ad impression.
Consequently, each screen (which does about 43,200 ad impressions per
month) is earning around $125 per month.
Obviously, given the
massively different political and economic structures of the US and
China, we can't expect these numbers to translate directly back into a
model that will work over here (or in other countries, such as the UK
or Australia). But it's very clear that there are big companies
out there who are having great commercial success with digital signage
as an advertising medium. Focus' advertiser list reads like a
who's who of global capitalism, and my guess is that they think Focus'
prices are cheap. I know that I'll be watching their stock price
and press announcements over the coming months to try and glean any
information that I can about the success of their network. And
while I think it's unlikely that we'll see Focus in the states any time
soon, they've demonstrated that even a startup company can make a big
dent in the industry in a very short amount of time.