Digital agencies growing in China

05 August 2009

BEIJING: Chinese ad agencies specialising in digital out-of-home media have seen an upturn in both revenue levels and investor interest this year, while an increasing number of brand owners are also using this medium in an attempt to engage consumers.

It is predicted that the digital media sector in the world's most populous nation will enjoy an annual growth rate of at least 30% in each of the next three years, taking it to a value of 300 billion yuan ($43bn; €30bn; £26m) at the end of this period.

Touchmedia, which runs a network of 15,000 interactive, in-taxi screens in cities such as Beijing, Guangzhou, Shanghai and Shenzhen, is one agency that has attracted a lot of “buzz”.

In May, the firm raised 100 million yuan through its latest investment round, adding to the 150 million yuan received via this route in 2008, and it estimates that total revenues will reach 200 million yuan this year.

Michael Fund, founder of the Shanghai-based company, said "our advertising sales have grown 1,000% for two consecutive years, and there is no sign of a slowdown in growth."

Gary Rieschel, of Qiming Venture Partners, which has supplied financial support to Touchmedia on three separate occasions, added it "has absolutely outperformed our original business target set three years ago."

Earlier this year, the Digital Media Group, which operates digital signage in subways in Beijing, Hong Kong, Shanghai and Shenzhen, secured $30m of investment from the Gobi Fund and Oaktree Capital Management, among others.

Dentsu, the Japanese agency holding company, also backed the specialist shop in 2006, and DMG predicts its sales will cross the $100m barrier in 2009, after an uplift of 70% last year.

ToWoNa, which controls 120,000 digital screens in 80,000 buses across 35 Chinese cities, also saw revenues expand by 20% in Q1 2009.

Cui Bin, its vice-president, predicted that "newspapers will see continuing declines in their share of the Chinese advertising market, and the new media's share will be growing at high speed."

China Mobile, Coca-Cola and Procter & Gamble are among the advertisers that have boosted their digital media budgets in China in recent times.

"Not only are the screens visually attractive, but having them inside the vehicles helps advertisers capture the attention of the right group of consumers," said Gan Jianping, general manager of Qiming.

Cost is another key advantage of this particular channel, as it is "usually 10% of the price of traditional media," said Yu Guoming, vice-director of the Institute of Journalism at Renmin University.

Data sourced from China Daily; additional content by WARC staff