- Same as provided in Q2 earnings release. See here.
- The company is not seeing any sign of a decline in ad spending.
- 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.
- # 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.