The Digital Signage Insider

Digital signage firm Focus Media doing well on the public market

Published on: 2005-07-25

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,

"Focus 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 price.

"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).

That's 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."


"We 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."

From that 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.


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