Notes from Focus Media's Q2 2005 Conference Call (FMCN)

Includes: CMDA, FMCN
by: Ezra Marbach

Focus Media (ticker: FMCN) reported Q2 2005 earnings results late yesterday. Here are a number of key points from management's earning results conference call:

Q3 Guidance

  • Same as provided in Q2 earnings release. See here.

Ad Spending

  • The company is not seeing any sign of a decline in ad spending.

Utilization Rates

  • 100% in top tier cities.


  • 50% of ad budgets typically spent in last 4 months of each year.

Advertisers Focusing on Small Cities

  • Many advertisers are ramping up ad spending in 2nd and 3rd tier cities (i.e. China Mobile).
  • Major growth has until now come from Tier 1 cities -- Beijing, Shanghai, Guangzhou, and Shenzhen.
  • Tier 2 cities are seen as drivers of future growth -- Chengdu, Chongqing etc.
  • Focus Media is focused on cities with populations of at least 1 million people.

Costs of Entering 2nd and 3rd Tier Cities

  • Costs of entering 2nd and 3rd tier cities are low -- real estate prices lower than in 1st tier cities.
  • Costs of entering new cities are largely borne by distributors.


  • Few customers sign long contracts.
  • Many typically sign contracts for 4 - 8 week periods.

Key Metrics

  • # of time slots sold per quarter.
  • Revenue per 30-second time slot.
  • Utilization rates -- though these figures can be somewhat misleading because Focus Media continues to increase capacity.

Advertising in Subways

  • Focus Media not likely to expand into advertising in subway stations and on subways.
  • The Chinese gov't has tremendous bargaining power in subways.
  • There is also heavy competition for subway ad space.

Comment: The fact that Focus Media is not planning on moving into the subway market is good news for China Media1 (ticker: CMDA.ob). China Media1 owns and operates advertising space at both the Guangzhou airport and in 12 Guangzhou subway stations.