Shanghai. December 24. INTERFAX-CHINA - Sina Corp.'s recently announced move to acquire Focus Media's advertising networks will see it become a giant in the online and outdoor advertising sectors, but success next year for the company is far from guaranteed, Interfax learned from a senior official in media services group Optimedia China on Dec. 24.
Sina announced on Dec. 22 that it has entered into an agreement with Focus Media to acquire the company's digital out-of-home advertising networks, including its LCD display network, poster frame network and in-store network, though Focus Media will retain its Internet advertising division and its movie theater advertising network. In return, Sina will issue 47 million shares to the media group, valued at around $1.4 billion, based on Sina's closing share price of $29.24 on Dec. 19.
Charles Chao, president and CEO of Sina was quoted as saying in the press release on Dec. 22 that he believed the acquisition will help the company extend its media reach and influence significantly, reinforcing Sina's position in the Chinese new media advertising sector.
"Sina's success in attracting advertisers in 2009 will depend on how well Sina integrates its advertising space marketing model with Focus Media's resources," Steven Chang, CEO of Optimedia China, a subsidiary of global media services giant ZenithOptimedia, said. Integrating the two different advertising strategies from the two media groups will be a challenge for Sina, he said, noting that while Sina's traditional focus on online advertising targets specific demographics through selection of related Web sites, Focus Media's outdoor advertising reaches wider audiences but with less focus.
However, according to Chang, the cooperation between Sina, one of the largest Chinese Internet portals, and Focus Media, China's largest outdoor media firm, means that there is a danger that Sina will hold a monopoly over digital advertising and may start raising its advertising fees. "This would make Sina a less enticing prospect for advertisers, at a time when cash flow is restricted," Chang said.
Furthermore, Chang suggested that the global economic slowdown and staff layoffs will mean less out-of-home entertainment activities, and declining audiences for outdoor media, while TV and online media will be more favored.
Consulting firm Media Partners Asia Ltd. (MPA) estimated in a report released on Dec. 23 that the enlarged Sina could generate sales of around $880 million in 2009.
Sina generated an advertising revenue of $76.2 million in the third quarter of 2008 while Focus Media's digital out-of-home advertising revenue over the same period came to $153.8 million.
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