While Focus Media (Nasdaq: FMCN) has popularized digital advertising, Beijing-based Take One Media sticks to paper-filled display stands with its belief that advertisers still prefer traditional out-of-home media. Considering Take One's successful second round fundraising of US$13 million in January, and a third round scheduled for April, it seems the company might not be wrong about what clients want.

　　Pacific Epoch recently spoke with industry veteran and Take One Media chairman Cai Xiaoyang to learn more about where his company fits into the out-of-home industry.

　　Pacific Epoch: What's the founding story of Take One Media?

　　Cai Xiaoyang: The company was set up in September, 2006. I previously worked at P&G, Gillette and Amway, and entered the out-of-home advertising industry eight years ago when it was brand new to China. My partner, Chen Lixuan, has worked for more than 20 years in 4A agencies. Chen is good at marketing, while I'm in charge of sales.

　　The two of us agreed that lowering cost is vital to out-of-home media operation. In order to sell at a competitively low price and increase profit margin, you have to purchase inexpensive advertising positions. That's why we chose to use display stands.

　　Our cost is even lower than Framedia, a Focus Media acquired in-elevator poster frame advertising company, because we can cover an entire building with one stand.

　　PE: Do most out-of-home media companies operate under pretty high costs?

　　Cai: Screen operators like DMG and VisionChina (Nasdaq: VISN) have to pay for technology installation. Depending on where they place screens, they may also be spending a lot to compensate their venue. Airports usually take a high premium. AirMedia (Nasdaq: AMCN) may be an exception to this, however, since they have a good relationship with airports.

　　For Take One Media the biggest cost right now is talent.

　　PE: Why have you chosen office buildings to place your stands?

　　Cai: Office buildings provide a much clearer target audience than restaurants and supermarkets. Though Focus Media also puts ads in office buildings we don’t see them as our direct competitor. Not only can buildings agree to place both screens and pamphlets in their buildings, but Focus Media can only offer advertisers a brief video slot. Our advertisements, on the other hand, are always ready to be read and picked up by consumers.

　　PE: Have you ever thought about launching new media, for example video advertising?

　　Cai: We won't do that this year. Advertisers still prefer traditional media regardless of the new media boom. The key to success for media is not creativity, but location and monopolization.

　　PE: How much do you charge for your services?

　　Cai: We charge a minimum of RMB200 for a two-week display with the price varying by number of brochures. Most clients choose to display one brochure for one month. In addition to advertising content, we also place six informational leaflets at the bottom of our shelves to attract consumers. We update the shelves every Thursday.

　　PE: How many clients do you have?

　　Cai: We've worked with more than 100 advertisers so far. Most are in finance, insurance, real estate, mobile phone and education industries. A focus on CPM makes the brochure advertising model applicable to fast moving consumer goods. Though our CPM is not high, it is relatively targeted.

　　PE: Do you design and print brochures for your clients?

　　Cai: No, most advertisers have their brochures already. We only help them with distribution.

　　PE: How many cities do you cover?

　　Cai: We currently cover more than ten cities and plan to expand to 30 cities this year.

　　PE: What's your strategy in Shanghai?

　　Cai: We target high-end buildings. We've installed 500 stands in Shanghai so far, and plan to continue expansion. There are about 900 or 1,000 office buildings in Shanghai, so coverage in 500 buildings is pretty good.

　　PE: What is the response to display stands in smaller cities?

　　Cai: We actually end up earning profit faster in smaller cities because with fewer buildings we don't need to invest as much on stand installation.

　　PE: Could you talk about your competitors?

　　Cai: We hold a 70 percent market share. And because monopolization is more important than technical innovation, it's hard for others to follow us.

　　PE: How many employees do you have?

　　Cai: We have 700 people right now including 200 in Beijing. We plan to expand to more than 1,000 people after Spring Festival.

　　PE: Have you done any capital raising?

　　Cai: We received first round funding from CDH Investments, and just completed our second round with US$13 million from IDG in January. This April, we plan to raise between US$20 million and US$25 million.

　　PE: How do you plan to spend the investment?

　　Cai: We intend to launch a new out-of-home media project in April or May, and release an interactive website offering coupons from our offline advertisers.

　　PE: Can you tell me about your financial results?

　　Cai: Our revenue hit RMB5 million during the last three months of 2007. We started stand installation in September, 2007 after a year of building contract negotiations. We expect to see RMB10 million in monthly revenue beginning in April, and go public in the first quarter of 2009.

　　PE: Do you think the industry will see a post-Olympic downturn?

　　Cai: I don't think there will be a slowdown in advertising growth after the Olympics. The advertising business benefits from overall growth in GDP not merely the Olympics. As long as China's GDP keeps growing, the advertising market will be prosperous.