Earlier this month, Alibaba purchased a stake in China-based out-of-home advertising network, Focus Media, for $1.43 billion, according to Coresight Research. Alibaba will acquire 6.62% equity in the firm and it will have the option to purchase another 5% stake next year. Alibaba’s non-consolidated New Retail Strategic Opportunities Fund will also purchase a 1.37% stake in Focus Media.
Additionally, Alibaba will purchase a 10% stake in Media Management Holding — which is controlled by Focus Media Chairman Jason Jiang — worth $504.7 million. Alibaba’s total investment in Focus Media, excluding the potential additional 5% acquisition, will give Alibaba 10.32% equity in the firm, worth $2.23 billion.
Founded in 2003, Focus Media controls a network of out-of-home advertising screens in offices and apartment buildings in 300 cities throughout China. The company plans to cover 5 million terminals in 500 cities eventually, potentially reaching 500 million urban consumers.
Image: Focus Media
Focus Media said that it will leverage Alibaba’s strengths, including its New Retail infrastructure and big data analytics, to enhance its own marketing capacity. Focus Media can draw large volumes of data from Alibaba’s online and offline platforms to display targeted marketing content to consumers. This includes transaction data from Alibaba’s marketplaces, payment data from Alipay, logistics data from Cainiao Network and data from Alibaba’s media entertainment properties such as the Youku online video hub.
Alibaba said that Focus Media’s dominant position in out-of-home marketing will enhance Alibaba’s offline advertising capacity. Focus Media has 190,000 TVs and posters located in elevators in China, accounting for 95% of the elevator TV market in the country as of June 30, 2016. Alibaba said that this investment also provides synergies with Alimama, Alibaba’s digital marketing platform. With Focus Media, Alibaba can provide new advertising channels for brands and merchants selling on its e-commerce platforms, enabling companies to better connect with consumers.
Coresight’s report goes on to say that Alibaba will also work on intelligent marketing with Focus Media in order to develop the capacity to see the real-time conversion rate generated by each advertisement in a particular venue. For example, Alibaba seeks to measure how ads for products sold through Tmall affects sales of those products.
