Alibaba buys minority stake in Focus Media to engage with shoppers on the move

Alibaba will pay US$1.43 billion (RMB9.63 billion) for a 6.62% share of Shanghai-based Focus Media, known for its outdoor advertising screens on streets, in subways and in elevators across 300 Chinese cities, according to a stock exchange filing.

In addition, Alibaba said it plans to acquire another 5% interest in the Shenzhen-listed Focus Media within the next 12 months.

At the same time, Alibaba will also purchase a 10% stake in an entity controlled by Focus Media founder and chairman Jason Nanchun Jiang for US$504.7 million, by subscribing to newly-issued shares. New Retail Strategic Opportunities Fund, a related party of Alibaba, will acquire a 1.37% interest in Focus Media as well.

All the stakes pieced together will add up to US$2.2 billion, indirectly giving Alibaba a 10.3% stake in Focus Media in total. Once that happens, Alibaba and its subsidiaries will become the second largest shareholder of the outdoor advertising platform, while Jiang's entity (called Media Management Holding Limited or MMHL) remains the biggest shareholder.

Alibaba positioned these investments as a part of its larger 'New Retail' strategy that integrates the best aspects of online and offline commerce to make shopping more engaging and convenient for consumers, while offering enhanced marketing tools and consumer analytics on Alimama to merchants.

Founded in 2003, Focus Media has earlier this year set a medium-term goal of having five million touchpoints in 500 Chinese cities that are said to reach 500 million middle-class consumers, after upgrading its elevator screens in first-tier cities with wifi, iBeacon, face recognition and Apple Pay functions last year. For 2017, elevator video ads had the second-largest growth in adspend (20.4% year-on-year), after movie ads (25.5%), according to CTR data.

Cindy Chen, chief strategy officer and chief information officer of Focus Media, said the company will continue to cooperate with high-volume clients from various verticals in the expansion of their businesses, as well as work with major international and domestic research firms for in-depth data collection and marketing model construction to create a multi-dimensional, open, iterative, evolutionary and intelligent big data ecosystem.