A car door slams. The driver flips on the meter. A screen lights up and the music starts.
Taxi riders in China’s more developed cities are probably familiar with this sequence of events. Small advertising screens, perched on the back of the passenger-side headrest, have become almost ubiquitous in Shanghai, Beijing, Guangzhou and other cities. The tablet-sized screen cycles through ads and videos, offering opportunities for taxi riders to interact. Passengers can play games, take part in surveys or get more information on products, public service announcements and city events.
Shanghai-based company Touchmedia is by far the biggest operator of these screens in China, with 40,000 screens in six cities. The company is expanding fast at home and making a leap overseas; Touchmedia screens can now be found in Canadian taxis in Vancouver, Calgary and Toronto. China Economic Review spoke with founder and executive chairman Micky Fung about Touchmedia’s unique business model and what to expect from the company and the advertising market in the next few years.
Where did the idea for Touchmedia originate?
Touchmedia’s interactive screens were inspired by my three-year-old daughter. In 1998, I was sitting in a cab in Las Vegas, and I found my daughter really engrossed by an in-taxi DVD screen. She tried to touch the screen several times, but it didn’t respond. And then when the car hit a bump, the screen would go black. So the idea was there, but not the execution. I thought about the idea for a few years, and then started testing the model in 2002 and finally launched Touchmedia in 2003.
How many people do your ads typically reach, and what is your user profile?
We reach about 51 million people a month in six cities in China: Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Hong Kong. Our prime user profile is affluent, white-collar urbanites – a huge target audience for brands. This segment is only around 20% of the population, but it’s 80% of people who take taxis.
The Chinese ad market slowed in the first quarter. What are your expectations for future trends, and how does taxi media fit into that?
The ad market is softening a bit now, but in times like this we see advertisers really appreciate our model because they are able to target and measure their ads more effectively. That’s why conventional media is clearly not growing as fast as digital media. Touchmedia has the ability to generate levels of awareness and response several times that of other media, and among an affluent audience. We also constantly introduce more features to involve customers and develop specialized campaigns for our clients. One example is campaigns that involve our database, which has more than 5.7 million unique contacts. We can pull people from the database who have already shown they are interested in a product by specifically looking at ads about that product type recently. The result is more relevance for consumers, which they like, and greater cost-effectiveness for advertisers.
Are you competing more with smartphones and tablet computers for consumers’ attention?
No, we see smartphones and tablets as very complementary to our business. People ask if passengers don’t keep watching something on their iPad, if that’s what they were doing when they got into the cab. Of course they do. But that was also true five years ago, when they might have been listening to their iPod or talking with a friend. There are still plenty of times in the average ride where the passenger sits there for 18 to 24 minutes with nothing to do. Actually the growth of mobile phones has been hugely helpful to us. Mobile phones are not only training people to use interactive programs, they are also now integrated into up to 40% of our campaigns. We’re able to demo app downloads, e-coupons and games on our screen, and then let consumers download them onto their phone.
You’ve said that measurability is an advantage of your model. Explain what that means.
Except for websites, all other forms of media can only estimate the size of their audience. So TV channels, magazines, billboard advertisers and so on typically survey a few hundred or a few thousand people and then multiply that to approximate the population. But they don’t know if you absorb the message. They don’t know if you’re actually paying attention when you have the TV on. They may know you bought a magazine, but they can’t say which of the hundred pages you looked at or which of the articles you read. Touchmedia is different: We’re able to measure exactly how many people look at each video or interactive program, for how long, what pages or items they chose to look at, what they wanted in terms of a download, coupon or an app for their mobile phone, and even where they were in the city at the time.
How does the ad market differ in China and the West? Is there more or less emphasis on TV, the internet or outdoor advertising?
TV is still the biggest medium by far in both the West and China, and the one that reaches most broadly across all groups. Internet is growing fast, as it is in the West. But interestingly there are also a significant number of Chinese that are bypassing computers and going straight to mobile – the proportion is far higher in China than in the West. It always interests me how many young people in our company don’t own a computer now; they just do their at-home computing on their phone. Another key difference is that the population density is so high in China that outdoor advertising becomes dramatically more cost efficient. An ad on a busy street corner in a second-tier US city might be seen by 10,000-20,000 people per day, but in China it could be 200,000-300,000. The total numbers are dramatically higher in China.
You’re planning to expand into 12 new Chinese cities over the next two to three years. What are your criteria for choosing a city?
We look at the population, how many taxis there are and how they are organized, as well as what our clients want. We’re looking at all the main second- and third-tier cities, though we may actually expand into more than 12 cities. In terms of strategy, we use a hub-and-spoke model, with Beijing, Guangzhou and Shanghai acting as hubs supporting a series of regional cities. The content is always a mix of national advertising and local material, both ads and general information for events, dining, shopping and the like.
You recently announced a partnership that will bring your screens to taxis in Calgary and Toronto. Why is Canada your first overseas destination? You’ve said that China is a great market for outdoor advertising because of the sheer number of eyeballs on the street. Doesn’t that differ for Calgary and Toronto?
We received literally hundreds of applications from companies around the world that want to use our technology, and we chose Canada because of the partner we’re working with, Play Taxi Media. We really felt they had the understanding, the planning and the resources to make the business model a success. Canadian markets are different than Chinese markets; the total audience for each of the ad screens every month is a little smaller. But because average incomes are dramatically higher, the value to advertisers is also higher. The overall result is that the usage is almost identical to China. There are also some different passenger preferences. For example, the Canadian audience prefers video to illustration, and Canadians like a less busy look while Chinese like a very busy one. But overall the interactivity, data collection and response rates are very, very similar, so the changes are mostly cosmetic.
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