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Focus Media Expects Revenue To Drop Because It Can't Spam

Weeks after being accused in Chinese media of sending copious amounts of mobile spam, Focus Media (FMCN) now expects its annual revenue to plummet as it revises its guidance for its mobile advertising business for 2008.

CCTV exposed Focus Media's subsidiary Focus Wireless' making and sending of junk short messages at this year's World Consumer Rights Day on March 15. According to CCTV's investigation aired around China, Focus Wireless has merged all the major short message group sending companies in China by purchasing information from them and classifying the mobile phone numbers collected by them, which makes it possible for the company to claim to offer comprehensive advertising services for highly-targeted users.

The company now says due to recent uncertainty in the mobile handset advertising business in China, they expect the full year revenue for their wireless business to be significantly lower than previously announced guidance of US$54 million to US$55.8 million. The company established an internal policy prohibiting its subsidiaries sending SMS messages without receiving mobile user's explicit permission. As a result of recent business developments, Focus Media now expects full year revenue from the mobile handset business in 2008 to be between US$14 million to US$15.8 million, or US$40 million less than the previously announced range. Therefore, the full year 2008 revenue guidance is revised to a range of from US$860 million to US$890 million from previously announced US$900 million to US$930 million, and full year 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions to be between US$260 million and US$280 million, as compared to the original guidance of between US$280 million and US$300 million.

Focus Wireless is said to own information on about half of China's 500 million mobile phone users. The company says it is specialized in nine major businesses that cover various groups of people, including residential complex owners; entrepreneurs; car owners; mobile phone users; civil servants; insurance and banking clients; real estate investors; and editors. Jiang Nanchun, CEO of Focus Media, the parent company of Focus Wireless, once said at a teleconference in 2007 that Focus Wireless might be listed independently due to its rapid growth. However, now local media report that CCTV's exposure of the company's misdeeds might affect the company's listing process potential.

Jason Jiang, executive chairman of the company commented in a press statement: "We believe the mobile phone is changing from a communication device to an important media device covering more than 500 million valuable consumers in China. We have already seen strong growth in our WAP advertising and interactive marketing businesses based on mobile devices. Going forward, we will focus on building a pull-based advertising model for our mobile business and will only send advertising information to consumers in China based on their explicit consent. Meanwhile, all our other businesses, including digital out-of-home and Internet advertising, are performing strongly. In 2008, given that we are strategically well positioned in all our media assets, we will focus on generating free cash flow from our existing media platforms and do not expect making any significant acquisitions. We continue to expect a very exciting year for Focus Media in 2008."

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