Finally putting rumors to rest, Focus Media (FMCN) says it is acquiring Allyes Information Technology Company Limited, the largest Internet advertising service company in China.

David Zhu, Chief Executive Officer of Allyes commented, "I believe rich-media advertising will become the dominant form of Internet advertising and Allyes, with our technology strengths and the wide coverage, will be a leader in this market in China. In addition, Internet media differentiates itself from traditional media most significantly by segmentation and interactivity. Allyes' widely-used application technology provides a solid foundation for behavior-based segmentation. By aggregating a wide number and scope of independent web spaces, Allyes has created a large-scale highly interactive media ad network, standing out from individual web operators."

Under the agreement, which is expected to close by the end of March 2007, Focus Media will acquire a 100% equity stake of Allyes for US$70.0 million in cash and US$155.0 million in the form of Focus Media ordinary shares (valued at US$77.62 per ADS, each of which represents 10 Focus Media ordinary shares), and an additional payment of up to US$75.0 million in Focus Media ordinary shares (valued at US$77.62 per ADS) contingent upon Allyes meeting certain earnings targets during the twelve month period from April 1, 2007 to March 31, 2008.

Zhu has signed an employment agreement with Focus Media and will remain as the CEO of Allyes.

Allyes is the largest Internet advertising agency and provider of Internet advertising technology in China. Its proprietary software application suite, 'AdForward', which covers all aspects of online ad publishing, creative production, tracking, targeting, and performance analysis, is used by over 80% of independent commercial websites and ad agencies in China, including Sina and Taobao. Its rich-media Internet technology also leads China's market. Based on the significant number of Internet advertising campaigns it has executed since its inception in 2000, its widely-used Internet application software and its unique tracking technology, Allyes has accumulated a large database of Internet viewers, segmented based on individual behavior. Allyes initiated the performance-based on-line advertising model in China. Its advertising network, 'SmartTrade', allows advertisers to pay by CPA (Cost per Action), and directly links advertising cost with performance. SmartTrade has integrated advertising resources from over 5,000 popular websites, making it the largest pay-for-performance online advertising network in China, and generating over 300 million daily impressions.

Jason Jiang, Chairman and Chief Executive Officer of Focus Media said, "We believe that by combining Allyes' behavior-based advertising solution for Internet audience segmentation with our existing advertising service offerings, Focus Media will deliver more comprehensive media solutions to our advertisers and improve their ROI."

According to iResearch, China Internet advertising will reach CNY 9 billion in 2007 and maintain over 30% annual growth for the next eight years. With this acquisition, Focus Media's life-style media consists of its commercial location network, in-store network, poster frame network, Focus Media wireless, outdoor LED, movie theatre and Internet advertising networks.

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