In Hospital Advertising Expands in China

HealthMedia (China) Co. Ltd., the Beijing based operator of digital advertising systems in healthcare facilities, has announced that it will soon launch a third funding round with the intent of raising US$60 million. As reported by ChinaVenture.com, the financing will be used to expand the company’s presence in hospitals and pharmacies, and to strengthen internal management in preparation for an overseas IPO.

Founded in 2003 by Pan Xinhua, the company’s initial growth was fueled by venture investments of a reported US$30 million from Morningside Group Hong Kong and Julian Robertson’s Tiger Management LLC. HealthMedia reports an installed base of over 10,000 liquid crystal display [LCD] screens in 20 cities throughout China. The company’s network consists of over 1,000 hospitals and 4,000 pharmacies with a reported weekly audience of 40 million people. Although the company does not release its financials, revenues for 2006 were reported to be roughly RMB 100 million (US$13.5 million) and the company is reported to be profitable.

In addition to spot advertising the company provides customized educational and instructional content for hospitals and healthcare companies including General Electric (NYSE: GE). In the coming year, the company plans to expand to 40 large and medium-sized cities in China and to increase the number of displays to 50,000, either through growth or acquisition. HealthMedia’s ultimate goal is to cover more than 90% of China’s large and medium-sized hospitals and large chain pharmacies and ultimately to expand display counts to 100,000 or more.

HealthMedia’s growth plans place it in square competition with Yanhuang Health Media, particularly in the wake of Focus Media’s (Nasdaq: FMCN) recent investment in Yanhuang. Both companies are benefitting from strong trends emerging in China’s healthcare services sector. China’s hospitals and pharmaceutical companies are under pressure from government efforts to cap drug prices and reduce hospital income from prescriptions. This has resulted in a steady stream of hospitals eager to supplement their income, and healthcare suppliers looking to make a favorable impression on Chinese consumers.

Surveys have shown that the average Chinese urban resident shops at a pharmacy 8.4 times per year, spending slightly over 19 minutes. The same resident will go to a hospital or clinic 6 times per year, with an average waiting time of 122 minutes. This captive audience is becoming increasingly attractive to advertisers. This includes not only hospitals, pharmaceutical companies and medical device makers but other companies looking to connect with urban consumers. For example, insurance advertising is growing at approximately 60% per year, and consumer electronics firms have found success advertising digital cameras to families following the birth of a child.With healthcare trends in their favor and investor dollars flowing into the sector, both HealthMedia and Yanhuang look to be favorably positioned for continued growth. The upcoming IPOs of both are likely to attract significant attention.

Disclosure: none