Very few companies that have tried to imitate the Focus Media model have succeeded. So what sort of company has the resources and competence to make a buck from indoor media?
The Carrier and the Channel
Most of the outfits that have tried to duplicate the Focus Media model have overlooked the perilous circumstances that Focus Media survived in its early days. They only focus on the successful model that profits by selling people’s attention resources during their spare time to advertisers.
While many of these imitators have come up with some novel ideas, few of them have done enough study on the feasibility to integrate the necessary channels. For instance, while water jugs could be a good advertising media, it is extremely difficult to integrate this market unless the government lays out rules for all water dealers and delivery channels across China. Indoor media requires strong integration of a sparse number of channels-a challenge few new businesses are up to.
Except the mainstream household media like TV and PC, there is still an opportunity for indoor Focus Media LCD. The digital photo frame could be a good carrier. The frame is used to display family photos, but as digital cameras become increasingly popular there is growing demand for digital photo frames. This new market segment has attracted the attention of companies like Philips, ViewSonic, Samsung, Sony and Aigo.
Early on, many digital photo frames were sold through the same channels as monitors. At first, consumers considered the frames novel and vogue. But the astronomical prices were a turnoff. Most consumers were not going to spend RMB2,000 (US$292) on a digital photo frame just for family picture display.
As it turns out, the key to getting indoor media advertising indoors should be providing the digital screens free of charge.
Technology, Content and Advertisements
Possessing channel resources is an important factor in making this type of new media viable. But newcomers must also integrate the content resources and obtain authorization to act as advertising agents. So any vendor that wants to simply duplicate the Focus Media role will be phased out. In Japan, for example, one household appliance vendor that wanted to provide users with TV sets free of charge eventually discovered the strategy was impractical.
In order to use the digital photo frame as a successful advertising media, the characteristics of the places they are placed in and their users must be carefully considered. This is a very different situation from the LCDs that are found in hotels and store lobbies. Once the digital photo frame enters a household, it must be tailored to a clearly defined living scenario and a specific user ID. Like PCs and TVs, it must be controlled and operated by the users, and be able to interact with the users in order to serve their daily lives. All these factors must be analyzed when considering the content or information services required for indoor media, as well as the advertisements they will carry. Without the ability to integrate media content and launch advertisements, interactive technologies and transmission networks, it is hard to be a prosperous indoor media operator.
In contrast, an integrator of lobby LCDs (like Focus Media) does not need to have its own content sources. Moreover, due to the ban on the use of the Internet for lobby LCDs, it is difficult to make such media intelligent. Theoretically, however, broadcasting giants like CCTV and wireline or mobile operators do have the ability to integrate such resources to become indoor media operators.
Since wireline operators need to use the Internet, WiFi and WiMax technologies, end users may find the process rather complicated. For instance, end users would need to use another patch cord to connect the digital photo frame, or install an indoor WiFi router. This would change the original terminal access model of China Netcom and add to the costs since user habits would have to change. But China Mobile already has valuable resources for the effort.
In terms of content, in 2006, China Mobile acquired 19.9% of Phoenix Satellite’s shares from STAR Group Limited for HKD1.27 billion (US$164 million) via China Mobile (Hong Kong) Limited, its wholly-owned subsidiary. It also maintains extensive strategic partnerships with News Corporation and STAR to extend its influence into music, broadband-based interaction, community networks, value-added multimedia products and many other wireless new media areas. Moreover, in terms of information services, Fetion is growing rapidly and is well positioned to provide location-based, family-oriented information services on digital photo frames that is similar to a mobile phone with an enlarged screen.
In terms of its qualifications as an advertising agent, China Mobile announced last year that it had obtained the rights to act as an advertising agent from the state industrial and commercial administration to enter the mobile advertising market. Some investment analysts believe that China Mobile will become a large advertising distributor by taking advantage of China’s rapidly-growing new media advertising market. In that case, China Mobile would be the most likely candidate operator and integrator of household digital photo frame media.
The 3G Choice
In fact, China Mobile has already entered homes via its existing mobile network, mobile phones. But it still lacks a screen that is suitable for indoor advertising displays.
With the approach of 3G applications, it is becoming increasingly difficult for small handset screens to carry the increasingly rich information from broadened channels. The screens need to be larger, and China Mobile thinks it has the answer.
Until recently, Louis Vuitton’s advertising budget has been spent mostly on high-end magazines. This brand exercises strict control over its media placements and is quite choosey about the media it advertises on. It used to consider mobile media rather low-end, but the company has had a change of heart. The reason for the new attitude is the increasing capability of broad band. As the 3G era nears, handsets are becoming capable of carrying flashes, streaming advertisements and high definition pictures. The digital photo frame represents a new media somewhere between the mobile phone and the PC screen, and is highly regarded as the next revenue source in new media.
By controlling the marketing channels, sources of content, the rights to launch advertisements, suitable wireless infrastructure, broader channels, and other core 3G resources, China Mobile has secured the best opportunity to bring LCD advertising into people’s living rooms through the digital photo frame. It believes it can provide the service at a low charge or no charge, or act as a content and information service platform to generate a potentially vast new source of advertising revenue.
