Alibaba Group Holding LTD and its affiliates will buy a strategic stake in Focus Media for about 15 billion yuan, according to the company’s announcement on July 18.
The industry is generally optimistic about this marriage, for a time outdoor media rushed to tell each other, have a great liberation of the carefree dripping dripping.
Let’s take a look at focus media’s financial results in recent years. According to the announcement, Focus Media reported a total revenue of 12.021 billion yuan and a net profit of 6.06 billion yuan in 2017 (source: Focus Media’s official website). Obviously, Focus Media, with a profit of up to 50%, is not short of money, so we can’t help asking why focus Media, which is not short of money, is rushing to marry Alibaba.
The business model has encountered great challenges, and the old shareholders may withdraw and cash out unintentionally
According to the deal, Alibaba Group will achieve this through the acquisition of Power Star, Fosun International Glossy City, Carlyle’s Giovanna Investment HK, Fangyuan Capital’s Gio2 (HK) four old shareholders of the equity and capital increase focus media real controller Jiang Nanchun’s personal company.
It can be seen from the announcement that most of the 15 billion yuan will be used for the withdrawal of old shareholders of Focus Media. As a matter of fact, since December 29, 2016, the shares held by the consortium participating in the privatization of Focus Media could be lifted from sale restriction and listed and circulated, major shareholders began to reduce their holdings and cash out. In June 2017, Power Star, the second largest shareholder of Focus Media at the time, and Gio2, the fifth largest shareholder at the time, respectively issued a “liquidated reduction” plan.
Market analysis has said that a large shareholder reduction may be considered with the emergence of mobile advertising, focus media’s business model is facing severe challenges.
According to the 2017 annual report of Focus Media, the revenue of focus media building fell below 80% again, accounting for 78.11%. The gross profit margin of cinema media, another big income of Focus Media, also began to decline. The gross profit margin of cinema media dropped from 60.57% in 2016 to 57.62% in 2017 (source: Comparative analysis of Focus Media’s 2016 and 2017 annual reports).
In addition, from the business data of Focus media, screen number is also facing the pressure of slowing growth. “From 2016 to the first half of 2017, The number of screens in Focus Media entered a low growth, and in the second quarter of 2017, the simultaneous revenue growth was only 14.13%, the lowest growth in three quarters.” (Credit: Tencent Technology)
“New Species” trendy dare to challenge focus, because the new elevator screen is twice as many as focus
At present, there are about 5.6 million elevators in China. According to the data disclosed by both parties, as of July 2018, Focus Media has 313,000 elevator TV screens, while Xinchao controls 95 cities and has 610,000 elevator TV screens, which is about twice the number of Focus Media. Even if Focus Media plus the number of elevators covered by 1.286 million elevator poster media (source: Blushed Financial Report), the total coverage of focus media’s elevator screens and elevator posters is about 500,000 elevators, less than the 610,000 elevators covered by Xinchao.
Early trendy shout out “one of China’s two elevator media group” want not a temporary brain fever, as a new Internet start-ups, fashionable popularity is not as good as the old ladder media focus, but from the trendy in May 2017, shout “offline media” of the first year of digital until April 2018 “fight a billions of grade group”, To the current total resources have been more than the focus, trendy development speed can be said to take a high-speed railway.
At the beginning of the year, it was suspected that Focus Media set up a “new office” (to crack down on trendy offices), and then the bidding price of building and elevator property rent increased by 20%-30% in all places. The new trend made Focus Media feel real pressure, and the stock price of Focus Media (002027.sZ) fell like a waterfall, with its market value reduced by 60 billion yuan in a short period of time (Source: Morgan Stanley). China’s media landscape is like a pool of clear water. The silence of the dominant media for more than ten years has been completely broken this year. No matter how much Focus Media repeatedly denies it, the real market pattern is in front of it.
Focus media is eager to marry Ali, is to grow a new technology legs
As we all know, focus media’s most important income comes from advertising business of building media. In recent years, online traffic has become more and more expensive, and the Internet dividend is no longer so easy to obtain. Brand communication begins to focus on offline media, especially the life circle media with strong scene attributes. Building advertising resources accumulated by Focus media in the early years become very hot for a time. Internet giants and major brand advertisers do not hesitate to spend a lot of money on these resources for a long time to advertise, focus on the building advertising prices naturally rise and rise again, focus on the pot full of money is natural.
However, 15-year-old Focus Media has gradually shown fatigue. The static and single form of the elevator frame advertisement screen cannot attract the attention of the audience spoiled by multimedia content. Most of the LCD outside the elevator is in the elevator waiting hall of commercial buildings, and the communication environment is noisy and the communication time is short. According to the report of IT Times, Focus Media has been stable in the industry for many years, but its customer experience and reputation are gradually declining. “With more resources, we have a higher right to speak. The price is several times higher than that of others, and good resources are mostly direct sold by Focus Media, rather than through media companies. Besides, customers have little choice.
On the contrary, the market demand for outdoor advertising is not static. Advertisers who have been educated by the Internet advertising model for a long time are no longer satisfied with a single form of advertising, and they are in urgent need of an outdoor media containing new technology to solve their advertising, so as to adapt to the changes in the mobile Internet era when consumers receive information. At this time, the emergence of trendy just for the time! Trendy elevator TV is placed in the elevator and adopts the form of multimedia publishing and broadcasting. It is an intelligent hardware, which has the innate characteristics of adapting to mobile Internet and Internet of Things. It makes up for the shortcomings of single form of focus advertising and not being able to be delivered accurately. However, as an Internet unicorn enterprise, trendy holds high and fights too fast and too fiercely. It is still hard to say whether it can succeed. “Ant” trendy challenge “elephant” focus, all to be verified by the market.
Article/Liu Kuang public account, ID: Liukuang110