Offline building advertising targeted by BAT

Highlights:

1. With the investment of giants, offline advertising scenarios have become a battleground - Focus Media VS Xintiao.

2. Community group buying has become a "hot spot" - the starting point for e-commerce's battle for offline traffic.

3. Who is grabbing offline high-end user traffic resources? ——Highly fragmented and heavily operational market

4. The future development potential of community media industry.

From the financial reports disclosed by major e-commerce companies recently, it can be seen that the incremental Internet traffic is drying up because everyone who needs to go online has already gone online. Although BAT's main businesses are different, they are essentially the same. They are all advertising companies or are highly dependent on advertising revenue. When online incremental traffic tends to dry up, its tentacles will naturally penetrate into the offline market.

Recently, the editor has also contacted several offline building advertising companies. Compared with the digitalization of the Internet advertising system, the gameplay is still too basic and the commercial monetization is also very basic. In other words, Internet giants can enable greater commercial value.

Xinchao vs. Focus Media: Behind the "Hundred-Billion-Level Fight"

• Giants are investing in offline advertising business

In July this year, Alibaba invested 15 billion yuan in Focus Media, becoming the second largest shareholder of Focus Media.

In November, Baidu led an investment of 1.2 billion yuan in Xinchao Media, "challenging" Alibaba and planning offline advertising.

It can be said that in the offline advertising and marketing scenario, two major military alliances have been formed - Alibaba's Focus Media and Baidu's Xinchao. The latter has already declared war in a high-profile manner. What is the strength of both sides? How is the battle going?

Focus Media, the pioneer of the building advertising industry, was founded in 2003 and is the earliest listed company in the industry, with a total market value of US$12.2 billion. Last year, it had revenue of 12 billion yuan and achieved a net profit of 6 billion yuan.

As a younger company, Xinchao Media was founded ten years later than Focus Media and has only gradually developed in the last two or three years. It is still positioned as a start-up company, and its business model and business scope are basically consistent with Focus Media. Xinchao Media's latest round of financing valuation was 12 billion yuan; in 2017, Xinchao Media's revenue exceeded 200 million yuan and its net loss was approximately 100 million yuan.

In terms of point coverage, Focus Media expects that the number of points will reach 2.5-2.7 million by the end of the year, and the number of cities covered by elevator posters has increased from 48 at the end of last year to 220; Xinchao Media has covered more than 100 cities across the country, with nearly 700,000 community elevator TVs, reaching 200 million community people every day.

It seems that the gap between Xinchao Media and Focus Media is still very large, but recently, the "younger generation" has brought more than a little pressure to the "senior generation":

• Xinchao’s “Pursuit” of Focus Media

Due to the different "identities" of the two, Xinchao Media has to bear much less performance pressure than Focus Media. At present, Xinchao "frankly" admits that it is difficult to make a profit, but the main purpose at this stage is not to make a profit, but to snatch the existing market of its "predecessors" and to plunder Focus Media's billion-level customers through price wars. It is said that an internal document entitled "Notice on Comprehensively Seizing Focus Media's Billion-Level Customers" was issued, which adopted a 50% discount to attract Focus Media's billion-level customers. This move directly dragged Focus Media into a "dilemma."

On one hand, it is facing a price war with its rivals, and on the other hand, it is under performance pressure from listed companies. Focus Media's "pain" is directly reflected in the declining performance report in the third quarter of this year. One of the main reasons for the sharp drop in its growth rate is the loss of major customers and the increase in bad debt rate. Judging from the customer churn phenomenon alone, customer loyalty is average, which also means that "latecomers" still have opportunities.

After communicating with people in the industry, I found that offline building advertising is a very special business. There is no so-called monopolist. The prices for high-quality office building and community elevator advertising are basically negotiated once a year. Therefore, it is also an industry that places great emphasis on offline BD operations!

• The "flash" of commercial value behind it

Looking at the development path of this industry, Focus Media first verified the feasibility of this path;

The rapid rise of Xinchao later proved that there was still a lot of room for market penetration and the replicability of the niche business model, but it also reflected the problem - the industry entry barriers were not high;

The powerful "impact" of Xinchao on Focus Media shows that the industry structure is not stable. If there is "external force" to help, latecomers still have great opportunities.

Alibaba and Baidu have invested heavily to enter the market, once again emphasizing the commercial value of community advertising and the key battlefield for future traffic layout.

What has the popularity of community group buying ignited?

The second interesting point is that the current booming social e-commerce has provided community building advertising with greater advertising market opportunities. Because for social e-commerce, community advertising is relatively more accurate.

At present, top e-commerce companies such as Alibaba, JD.com, Pinduoduo, and Suning are vigorously developing community group buying businesses. For e-commerce companies doing community group buying, it is not just an "attack" to suppress competitors, but also a "defense" of "traffic self-rescue" for every e-commerce platform in the e-commerce environment - online traffic has transitioned from the "incremental" era to the "stock" era. If e-commerce companies want to seek new growth, they can only go offline. Community group buying has become an important means for e-commerce companies to expand offline, and it is also the most direct and effective method that has been proven.

The key to community group buying lies in how to effectively obtain community traffic and how to convert community traffic more efficiently: in obtaining community traffic, placing community advertisements, setting up community stores, and setting up community opinion leaders are the main means for e-commerce companies; in community advertising, elevator billboards are naturally the closest and most frequent contact carrier to users.

Of course, social e-commerce is just one of the relatively precise marketing scenarios in building advertising, and many brands also hope to achieve integrated marketing that fully covers online and offline advertising through one platform.

Having said that, it is easy to understand why Alibaba invested 15 billion yuan in Focus Media. But with so many cities and so many buildings in China, can just Focus Media and Xinchao occupy all the “spots”? Difficult to capture all. Not to mention third- and fourth-tier cities, the number of buildings in first- and second-tier cities alone is difficult to swallow up - community advertising, as an emerging blue ocean market, is large enough to accommodate more companies. Just like the e-commerce industry, giants such as Alibaba and JD.com have been so powerful for so many years, but Pinduoduo still emerged.

This is also why there are more second-tier community building advertising companies like YiTou Media. Recently, there was news that YiTou Media had raised RMB 100 million in its B round of financing, with a valuation of RMB 1 billion, and was preparing for its C round of financing. By the end of this year, there are more than 60,000 locations in first- and second-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen. Although the scale of locations is far less than that of Focus Media and Xintiao, their unit location value is higher, the media value is more focused, they have an advantage in high-end traffic scenarios, and their delivery is more accurate, so they still have their own room for survival and development.

Beyond the range, opportunities for new forces

At present, Alibaba and Baidu have entered the offline building advertising market, and their respective agents are also competing fiercely. Xinchao, which was invested by Baidu, is focusing its main firepower on the "rice" in Focus Media's bowl, while Focus Media, which was invested by Alibaba, has to deal with Xinchao's price war while stepping up its own layout rhythm - focusing on strengthening the layout of points in first- and second-tier cities, and gradually penetrating points in third- and fourth-tier cities.

From the perspective of profit value, locations in first- and second-tier cities will still be the most profitable in the next few years. Although the purchasing power and advertising value of third- and fourth-tier cities are currently increasing, and advertisers also have demands for lower-tier cities, locations in third- and fourth-tier cities have not yet achieved good profits.

The focus of Focus Media's subsequent layout precisely reflects an important "opportunity" - although Focus Media entered the market the earliest and Xintiao followed closely behind, the two have not yet "taken full advantage" of advantageous resources in their location layouts in first- and second-tier cities - in other words, although the "net" has been laid out, it is not dense enough. This also proves what we said above. Not to mention third- and fourth-tier cities, the number of buildings in first- and second-tier cities alone is difficult to swallow.

Even in the first- and second-tier cities where Focus Media and Xintiao have long been stationed, there is still considerable "space" for survival for latecomers, and this "space" is enough to give birth to new unicorn companies. But not everyone can enter the game and become a dark horse. One must have a certain industry foundation and be an ambitious player.

There are many players in this market, and YiTou Media is one of them. Even in the fiercely competitive first- and second-tier markets, it only started in 2014 and is not on the same scale as Focus Media and Xintiao, but it is thriving under the "nose" of Focus Media and Xintiao. As of the end of this year, YiTou Media has more than 60,000 media locations, covering more than 2,000 middle- and high-end residential communities in nine core cities including Beijing, Shanghai, Guangzhou, Shenzhen, Nanjing and Hangzhou. Since its founding in 2014, revenue has doubled every year.

Although its location scale is far less than that of Focus Media and Xintiao, its unit location value is higher, its media value is more focused, it has an advantage in high-end traffic scenarios, and its delivery is more accurate.

Its commercial value lies in its focus on influencing the consumer upgrading groups, and it has important marketing value for some e-commerce platforms and brand merchants with consumer upgrading needs.

Of course, for second-tier building advertising companies such as YiTou, this has also entered a critical period. If you don’t have enough money to buy out building advertisements, it is very likely that you will be eliminated by competition in this round of online and offline integration. So it’s not surprising that YiTou Media quickly launched its C round of financing just after receiving 100 million yuan in financing. It is easier to survive the winter if you have money, and the ultimate goal is to cling to someone powerful, which is also an inevitable choice.

It is an indisputable fact that with the integration of online and offline marketing resources, offline marketing scenarios have become a battleground for BAT. Judging from the current track situation, this industry is still a blue ocean area to be developed, but it is impossible for this market to remain highly fragmented forever. The market space is large enough and Focus Media is the leader. What is certain is that more funds will be poured into this field in the future, more giants will enter as "behind-the-scenes operators", and new unicorns will be supported.

Alibaba and Baidu are accelerating their layout, while Tencent has not yet entered the market, so they have the opportunity to cling to all second-tier offline building advertising companies!

Author: Li Chengdong, Kong Tongtong

Source: Dong Ge's Interpretation of E-commerce (ID: dgjdds)