Outdoor media have become the new favorite of advertisers with increased frequency of people's travel and leisure activities and wide application of high technologies. The growth rate of outdoor media advertising is much higher than that of other traditional media including TV, newspaper and magazine. Especially, after NASDAQ-listed Focus Media brushed market value through conducting a series of M&As, "outdoor media" becomes a new hot for VCs.

Air Media - an operator of airport and plane cabin TV advertisement - debuted on NASDAQ in November 2007. One month later, VisionChina Media, an outdoor digital TV advertisement operator with a larger coverage rate, also debuted on NASDAQ. The said three media operators were highly wooed by investors on the first trading day: Focus Media raised US$172M on the first trade day, Air Media and VisionChina Media secured US$180M and US$108M. Notably, the current market value of Focus Media has exceeded US$7B.

 

TMT (Telecom, Media and Technology) industry has been one of the investment spotlights for VCs. Triggered by the said three IPOs, outdoor media operators on the TMT segmented markets have become a favorite for VCs. Against this backdrop, a series of investment events in outdoor media have been reported in the newspaper.

Based on the statistics from Zero2IPO Research Center, nearly 30 outdoor media operators (excluding VC-backed listed companies and those acquired by Focus Media) have secured a combined more than US$600M since 2005. Therefore, the development of outdoor media sector is driven much by capitals.

Market Capacity and Segment Conformity Potential

Outdoor media in other countries have also developed in a robust fashion. The world famous consultancy company Henley Center forecasts that ¡°outdoor advertisement media will become the most potential media in the 21st century¡± on the basis of its survey to six European media markets.

The global outdoor advertising has entered a booming period since 1990. Advertisement fee increased 40% from US$11.7B in 1990 to US$16B in 1999. The US and developed European countries saw their advertisement growth increase nearly 200% from 1990 to 1999. Especially from 1995 to 1999, the advertisement growth increased by 39% from US$6.8B to US$9.5B.

Outdoor media in China have garnered rapid development since the 1990s, with advertisement fee increased by 10 times during 11 years and the average annual increase rate being 26%. The huge market capacity of China outdoor advertisement brought sound revenue for Ad operators. Based on the report of Morgan Stanley, owning to 2008 Olympic Games, China Ad market will see an increase peak, which will increase to US$245B, a 25% growth versus 2007. Given outdoor media account for 15% of the total Ad revenue, we optimistically estimate China¡¯s outdoor Ad scale will increase to RMB34-37B in 2008 from RMB13M in 2003. The average compound increase rate will reach 21%.

There are about ten thousand outdoor media companies in China market. This industry will inevitably encounter a conformity process. Media stars like Focus Media, Air Media, Cgen Media, Tulip Mega Media and China Health Media said in concert that they will expand market shares via M&As. It is believed that operaters with large scale and sound business models will laugh last.   

(To be continued)