Analysis of domestic airport advertising business model

The essence of advertising is to inform a specific group of people about the advertiser's products or services through specific carriers and forms. This involves three key entities: advertisers, advertising operators, and audiences.

The main groups that place advertisements at airports are from industries such as real estate, automobiles, finance, communications, and the automotive industry. Most of them are large advertisers that place advertisements nationwide, supplemented by regional and local large and medium-sized enterprises. In addition to passengers, the audience of airport advertising also includes airport pick-up and drop-off personnel, airport staff and staff of various on-site units. The actual number of people reached by the advertisements is approximately 1.59 times the passenger flow.

Airport advertising is usually operated by the airport's dedicated advertising department or advertising company. There are various ways to operate advertising. From the perspective of domestic practice, there are generally five models.

Model 1: Establish an advertising department and operate as a media agency.

Its main features are: (1) The airport (group) does not set up an advertising company, and the advertising business is handled by the advertising department of the business department; (2) All business is given to various agency companies through bidding or negotiation, and then operated by each agency company.

The airports currently implementing this practice include Qingdao, Sanya, Jinan, etc.

The advantage of this model is that it follows the principle of "the highest bidder wins" through bidding negotiations, and obtains airport advertising agency rights at a price that is most beneficial to the airport; the disadvantage is that the agency's acquisition cost is too high, which can easily lead to operational difficulties, the overall operating risk of the media is relatively high, and the mixed operation of multiple parties can easily destroy the integrity of airport advertising.

Model 2: Establish an advertising department and contract out media management.

Its main features are: (1) The airport (group) does not set up an advertising company, and the advertising business is handled by the advertising department of the business department; (2) The advertising business is contracted to a strong agency for overall operation through bidding or negotiation.

The airports currently implementing this practice include: Wenzhou Airport’s advertising was contracted to Air Media, Hangzhou Airport’s advertising was contracted to Yashiwei Media, etc.

On the one hand, this model is conducive to the overall planning of airport media, and on the other hand, it adheres to the principle of professionals doing professional things, allowing airports to shift from practical experience to supervision and management. The disadvantage is that the value of airport advertising itself is difficult to evaluate, and airport franchise fees are difficult to reasonably design, which may result in damage to the interests of the airport.

Model three: Establish an advertising company and operate the media independently.

Its main feature is that the airport has established an advertising company specializing in the management of media resources.

The airports currently implementing this practice include: Western Airport Group (member airports: Xianyang, Yinchuan, Xining, Yulin, etc.), Sichuan Airport Group (member airports: Chengdu, Dazhou, etc.).

The advantage of this model is that the airport independently operates advertising resources, can form an overall and orderly plan for airport advertising resources, has the opportunity to directly serve customers, and generates multiple sources of revenue such as design and production. The disadvantage is that advertising companies have weak professional capabilities and are restricted by institutional constraints, which restricts their ability to become stronger after they become bigger.

Model 4: Link similar resources, establish joint ventures, and cooperate in media operations.

Its main features: a joint venture company is established with the Capital Airport Group Advertising Company to operate all media of the joint venture airport. The Capital Airport Group Advertising Company shares resources and management outputs with it, and the revenue is divided in proportion.

Cooperation model: The joint venture company jointly operates the airport advertising business, with each party contributing 50%. The airport sent a general manager, and Capital Airport sent a chairman and financial manager. The contract is signed for 10 years. In the first three years, all income will go to the resource-owning airport, and in the next seven years, the income will be divided equally among the two.

The airports currently in practice include: Dalian Airport-Capital Airport Group, Changsha Airport-Capital Airport Group, and Shanxi Airport Group-Capital Airport Group.

The advantages of this model are: first, it can leverage the scale effect of media, form media linkage, and create a national media publishing platform; second, it can leverage the professional management output of Capital Airport Advertising Company to enhance the overall capabilities of the cooperating airport. The disadvantage is that by relying on strong development, the airport's control over the joint venture airport's advertising is weakened.

Model 5: Introduce private capital, establish a joint venture, and engage in media cooperative management.

Its main features are: establishing a joint venture with a private advertising company that has operating advantages in the civil aviation advertising industry, joining the private capital's nationwide advertising and marketing network, accepting advanced management concepts, and distributing dividends in proportion to revenue.

Cooperation model: Mode 1: The airport invests in resource use rights and part of the cash, does not charge the joint venture company for resource use fees, and only participates in dividends. Method 2: The joint venture company pays an annual franchise fee (a prescribed percentage of revenue and a fixed resource usage fee, whichever is higher), and the remainder is distributed as dividends in proportion to the equity.

The airports currently implementing this approach include: Yunnan Airport Group, Fujian Airport Group and Asiaray Media, Shanghai Airport and JCDecaux, etc.

The advantages of this model are: first, it joins the overall media network of private advertising companies, forming full coverage of vertical markets (national airport network) and horizontal markets (regional advertising markets, such as airports + subways + urban media in a certain area), and maximizes media value through media linkage and customer sharing; second, the revenue-sharing model guarantees excess commissions on the basis of basic income for the airport, thereby maximizing shareholder value; third, the introduction of market-oriented decision-making, management, and operation mechanisms will help airport advertising companies achieve stable and sustainable development. The disadvantage is that the airport's ability to make independent decisions on airport advertising is weakened.

As awareness of the scarcity of airport advertising deepens, more airports tend to seek excellent partners for joint ventures. This is in line with the role positioning of management airports while taking into account the maximization of media value and shareholder interests. The first step towards a joint venture is a change in the mindset of airport managers.

Author: Jin Jianchen

Source: Jin Jianchen