Focus Media (A): Building a Chinese Media Giant

In 2003, Focus Media pioneered digital outdoor advertising in China, placing LCD displays in locations in leading commercial buildings that had high traffic and waiting times, such as lobbies and elevator waiting areas. The company leased space from building owners, and sold advertising, running 12 minute loops with 30 second advertisements. This provided advertisers with a targeted way to access middle and high income consumers, and was far more effective than conventional television advertising. Only targeted consumers saw the ads, as low-income people did not come to these buildings, and consumers preferred watching ads while they waited in comparison to having nothing to do (in contrast to television ads, which they felt to be a nuisance). Once a company was established in this market, owning a majority of building contracts, it was difficult to dislodge. Focus Media invested heavily to quickly to gain control of this market. It was soon profitable, and acquired other companies in related businesses. Focus Media went public on Nasdaq in 2005, and began acquiring other advertising businesses. By 2007, it had revenues of more than $500 million, more than $250 million in cash, a market capitalization of $6.5 billion, and was included in the Nasdaq 100 non-financial firms.

In light of this rapid, successful growth, the company looked to the future with optimism. There were suggestions that it might acquire SINA, the leading Chinese Internet portal. Expansion to other countries was also a possibility. In light of this success, the case asks students to consider how the company should best proceed.