Marvels ancient and modern will greet visitors to the Olympics in Beijing this summer: the Great Wall, the Forbidden City...the constant barrage of digital advertising. No matter where you go in urban China these days—elevators, airports, karaoke bars, hospitals—it's hard to avoid video screens selling the latest product from Pepsi, Motorola (MOT), KFC (YUM), and so on.
The company most responsible for this sensory assault is Focus Media Holding. And the man behind Focus is Jason Jiang, a 35-year-old entrepreneur who in five years has built his advertising network into a Nasdaq-listed company worth $6 billion-plus. In the process, Jiang has become very rich (estimated net worth: $1.8 billion) and, in the words of Procter & Gamble (PG) brand manager Alfonso de Dios, has "transformed China's advertising landscape." In a nation where targeting niches and measuring eyeballs remain a grope in the dark, advertisers increasingly see Focus' 190,000 screens in 90 cities as their best chance to reach upscale urbanites.
Focus was born of a simple observation. In 2002, Jiang was waiting for an elevator at a Shanghai shopping mall and found himself staring at a poster featuring sultry Taiwanese actress Shu Qi pushing Red Earth cosmetics. Jiang figured he'd make buckets of money by replacing such posters with video screens. His hunch was that people would be grateful for something to watch—yes, even ads—while they waited for the ride up to their office or apartment. (In China, it's not uncommon to wait several minutes for an elevator.)
Jiang scraped together savings from 10 years as a successful ad executive at a Shanghai agency, and in 2003 won deals to install advertising screens in the lobbies of 50 of the city's best commercial addresses. His timing was auspicious. Global companies, eager to reach urban Chinese, had limited ways of getting their messages out. As in the U.S., a big chunk of ad budgets go to TV, in this case China Central Television, the state-owned broadcaster. But while CCTV reaches 450 million households, it skews lowbrow and is better at selling toothpaste than Prada. "The problem with media is delivery," says Tom Doctoroff, CEO of ad giant WPP's Greater China operation. "And it's difficult to segment the population."
That's why many companies have adopted Focus' more-is-more approach: Put an ad everywhere a yuppie may see it. "In a media-cluttered environment you want to reach people at every point," says Harry Hui, chief marketing officer for PepsiCo (PEP) in China. "If the last creative impression I make on a consumer is a Pepsi, hopefully that's the first thing they grab when they go into an office, restaurant, or supermarket." Ads in the lobby of one's building may be anathema to North Americans and Europeans. But so far, Chinese consumers seem not to mind, seeing them as a welcome diversion, just as Jiang intended.
Despite Focus' cutting-edge LCD screens, the operation remains low-tech. The company doesn't beam ads—mostly reedited television commercials—to the screens: A fleet of cyclists swap out memory cards containing the video. Primitive, yes, but at least Jiang doesn't need a media license, which would mean intrusive official oversight.
Focus also remains something of a blunt instrument. "The question is, how do we measure the effectiveness of our investment?" asks Zhang Tao, brand director for Armani Cosmetics and Fragrances in Shanghai, which is running a suggestive ad—a hand caressing a woman's back—that would never appear on CCTV. Jiang's answer is to offer six demographic "channels," including commercial buildings, residential towers, and golf clubs.
Lenovo placed ads at buildings where many small and medium-size businesses are based and says new customers began asking for machines featured on Focus. Motorola targeted big spenders by advertising the launch of its Razr 2 phone in tony apartment buildings in Beijing and Shanghai. And P&G is running ads for Pantene shampoo on the so-called fashion channel, which appears in fitness clubs and hair salons around the country. "It fits our key principles of connecting with consumers when and where they are receptive," says P&G's de Dios.
Today, Focus has gobbled up most of its direct rivals and enjoys a near-monopoly in urban commercial and residential buildings. When you're the main game in town, it's easy to jack up ad rates. In Shanghai, Focus charges $41,000 for a week of 15-second commercials that air 60 times a day on some 8,000 screens. That's twice what it was charging two years ago. Morgan Stanley (MS) analyst Richard Ji expects fiscal 2007 sales to surge 131%, to $489 million, and net earnings to jump 90%, to $155 million, the second-largest ad profits in the country after CCTV. The stock is up sixfold, to about $50, since the 2005 listing.
Now, Jiang—a workaholic whose sole diversion is a daily foot massage—is moving into other media. Focus is the No. 2 seller of Web advertising and is expanding into cell phones, movie theaters, digital television, and online computer games. This allows it to sell ads across multiple platforms. Meanwhile, Jiang is spreading his screens around the region, setting up licensing deals in Taiwan, Hong Kong, Vietnam, India, and Singapore. But the main act remains China. "I am very hungry and ambitious," says Jiang, who wants to put screens everywhere. "I see a golden age for advertising."