Tuesday, February 15, 2005                                              Section: Technology / Page: 1

Coming soon to an LCD screen near you

Sidney Luk

Advertising companies tap out-of-home market worth about US$1b last year

Mainland engineer David Chan Wing-hei finds it almost impossible to escape advertisements. He sees them on the television at home, on the train on the way to work and in the lifts in many of Shanghai's office buildings.

'When I stay at home, there are commercials on the television,' said the 26-year-old, whose high income makes him an ideal target for advertisers. 'Once I leave home, I encounter more ads, no matter whether I'm going to work or going out on the weekends.'

Competition for Mr Chan's attention is growing fierce.

In first-tier mainland cities such as Shanghai and Beijing, advertising companies are quickly rolling out 'captive audience networks', the new lingo for chains of inexpensive LCD televisions installed in places where consumers cannot escape their message.

Companies such as Target Media and Focus Media are staking a claim to the lifts inside office buildings. Digital Media Group is targeting the trains and subway platforms of metro systems. Captivated Advertising TV is focusing on the interiors of taxis. Beijing Visual Satellite Technologies delivers ads at ATM machines and 150 Sinopec petrol stations in Beijing.

The firms, most of them backed by venture capital from Hong Kong, hope to tap an outdoor advertising market worth an estimated US$1 billion last year.

The market segment, which accounts for roughly 9 per cent of total ad spend on the mainland, is drawing more advertising dollars as companies allocate more of their marketing budgets to innovative out-of-home advertising channels to promote their products.

Quinn Taw, Beijing-based managing director of media buyer Mindshare China, said: 'Out-of-home media is higher in price [compared with traditional television], but advertisers are looking for alternatives to reach high-value customers.'

Operators of captive audience networks - which are vying for venture capital as well as advertising dollars - each claim their advantages over rivals.

Focus Media, which has received roughly US$70 million from venture capitalists, argues that its network is superior because its LCD screens are placed in upscale office buildings where high-income earners are likely to be found. The high traffic in these locations also means a broader reach.

Captivated Advertising TV, a Shanghai-based company founded in 2002, is pitching the quality of interaction with consumers.

It says the typical cab ride is 18 minutes long - providing more time for advertising messages to sink in. In addition, touch-sensitive video screens record viewers responses, giving valuable feedback to advertisers.

'Interactive is what we can deliver,' said Stephen Leong, chief financial officer at Captivated Advertising TV. 'We are the only digital outdoor company with a measuring ability. We think interactive is the one of the more important elements in advertising.'

As if any were needed, studies from Sinomonitor International indicate taxi passengers have little to do during rides, with 76 per cent simply 'looking out the window'.

'In-taxi advertising presents an environment with few alternatives competing for the audience's attention,' Mr Leong said. 'No other medium captures an audience with nothing to do for such a long period of time.'

The company has LCD screens installed in the headrests of 1,000 taxi cabs in Shanghai and an exclusive contract for 10,000. There are roughly 45,000 taxis in the city.

Captivated Advertising TV also claims to target high-income earners, pointing to studies that show the average taxi passenger earns 6,235 yuan a month and frequently travels by plane.

Virgin Atlantic used the platform last summer to promote its flights to Britain. Other advertisers include Nokia and Talk da Talk, a provider of short messaging services.

Operators of captive audience networks are using the incentive of cost savings to lure advertisers away from television. Digital Media Group claims it costs just 31.51 yuan to reach 1,000 viewers on a subway platform compared with 60.99 yuan for 1,000 people watching a prime-time television show.

Digital outdoor media is also seen as a way of reaching the busy professional.

'Television is still important with its broad reach, but outdoor media is important for reaching consumers who are out and about,' Mr Taw said. 'Digital is targeting people of high value. These are the people everyone in China is looking for. These people don't even watch TV.'

Outdoor media are ideal for pitching high-end products, according to Adam Bornstein, a venture capitalist at Ymer Greater China Fund, which is considering investing in Captivated Advertising TV.

'Everything between 3,000 yuan to 5,000 yuan is the perfect target, such as high-end mobile phones,' he said. 'The more locations you have, the more you can charge.'

Another factor favouring digital outdoor media is the increasing fragmentation of China's advertising market. As incomes rise, consumers spend less time on the cheapest form of entertainment - television.

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