Ad giant focus of phone spam backlash
Updated: 2008-03-21 06:35
Focus Media, the advertising giant behind outdoor ads nationwide, has recently found itself the focus of attention instead.
 A mobile phone user shows a spam message. [sina.com] |
Through ads put out in elevators, supermarkets and cell phones, the Shanghai-based, NASDAQ-listed company became a runaway success and has maintained more than 150 percent revenue growth annually.
But media reports recently exposed what many now see as the dark side of the ad agency. Focus Media Wireless, the mobile advertising subsidiary of Focus Media, has sparked a furor for sending more than 100 million spam text messages to cell phone users in the country, every day, without their consent.
In a CCTV television show on March 15 - which also happened to be World Consumer Rights Day - a general manager with the subsidiary told a reporter that the company has in its possession the private information of more than 200 million cell phone users in China, accounting for close to half of the country's mobile phone users. This means it has about 80 percent of the domestic short message advertising market.
 A mobile phone user shows a spam message sent by Focus Media, against the backdrop of the advertising giant's web page. [China Daily]
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The remark infuriated the Chinese public, as most cell phone users have reported horrible experiences from receiving unsolicited ad messages daily, ranging from auto ads to sales promotions.
Many also fear that their private information may have been intentionally leaked or even traded without their consent, amid a lack of laws and regulations for privacy protection in the country's mobile telecoms industry.
The incident comes at a time when the authorities are cracking down on cell phone spam messages, and amid an increase in public complaints over the issue that have subsequently put pressure on regulators.
A survey by the China Internet Society in 2006 showed cell phone users in the country received at least eight spam messages a week. Analysts believe the number is much higher now.
Focus Media's shares plunged more than 25 percent on Monday, after speculations that the company might lose its service provider license spread.
Partly due to the public outcry, China Mobile, the larger of the country's two mobile operators, announced on Wednesday it was shutting down Focus Media's message service port, the major access route for the group to send a large amount of short messages at huge discounts.
That could hit Focus Media's fledging mobile advertising business, which is now seen to be on a roll as it takes advantage of the lack of privacy protection laws for the industry.
In the fourth quarter of last year, Focus Media's mobile ad business hit $16 million, an increase of 356 percent over 2006.
Liu Bin, an analyst from research firm BDA, estimates that China's short message-based ad market last year reached nearly 700 million yuan ($99 million), with Focus Media taking more than half of that pie.
"I think about 60 to 70 percent of Focus Media's mobile advertising revenue last year is coming from spam messages," he said.
Some analysts blame China Mobile for indulging ad firms short text messages, a segment which has become a cash cow for the operator.
According to the Ministry of Information Industry, the country had 547 million mobile phone subscribers by the end of last year, together sending more than 592 billion short messages in that time.
China Mobile also said it had received about 4,000 complaints each day over spam messages before March 15.
A statement from the company reported the number of daily complaints has now decreased to 2,000, but did not provide details on the reduction.
However, many see the lack of regulation and effective measures as major obstacles to effectively curb spam messages. Similarly, there are concerns that ad companies could continue to take advantage of legal loopholes to flood cell phone users with unsolicited messages.
Still, Daniel M. Wu, Focus Media's CFO, said in earnings conference calls on Wednesday that the company's mobile business in the near future will be hit by the incident.
"We expect our mobile handset advertising business to be affected in the next quarter, given that we will put in place very strict control, in terms of what good business conduct we need to carry out for Focus Media," he said.
Established in 2003, Focus Media runs China's largest out-of-home advertising network, with revenue reaching $185 million last year. It entered the mobile advertising market in 2006, helped by a slew of acquisitions.
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